UBS Group AG
Annual Report 2020
Our external reporting approach
The scope and content of our external reports are
determined by Swiss legal and regulatory requirements,
accounting standards, relevant stock and debt listing rules,
including regulations promulgated by FINMA, the SIX Swiss
Exchange, the US Securities and Exchange Commission (the
SEC) and other regulatory requirements, as well as by our
financial reporting policies.
At the center of our external reporting approach is the
annual report of UBS Group AG, which consists of
disclosures for UBS Group AG and
its consolidated
subsidiaries. We also provide a combined annual report for
UBS Group AG and UBS AG consolidated, which additionally
includes the consolidated financial statements of UBS AG as
well as supplemental disclosures required under SEC
regulations and is the basis for our SEC Form 20-F filing.
Annual reporting
include
financial
the consolidated
UBS Annual Reports
The 2020 Annual Reports (the UBS Group AG Annual Report 2020
and the combined UBS Group AG and UBS AG Annual Report
statements of
2020)
UBS Group AG and UBS AG, respectively, and provide comprehen-
sive information about our firm, including our strategy and busi-
nesses and financial and operating performance, and other key in-
formation. The reports are presented in US dollars, our presentation
currency. The UBS Group AG Annual Report 2020 is partly trans-
lated into German, with the German translation available as of
12 March 2021 under “Annual reporting” at ubs.com/investors.
The consolidated financial statements of UBS Group AG and
UBS AG have been prepared in accordance with International
Financial Reporting Standards (IFRS). The sections within “Risk, cap-
ital, liquidity and funding, and balance sheet“ include certain
audited financial information, which forms part of the consolidated
financial statements. The Annual Reports also include the statutory
financial statements of UBS Group AG, which are the basis for our
Swiss tax return, our appropriation of retained earnings and a po-
tential distribution of dividends, subject to shareholder approval at
the Annual General Meeting.
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31 December 2
020
Pillar 3 repor t
UBS Group and significant regulated subsidiaries and sub-groups
UBS AG
Standalone financial statements and regulator y informat ion
for the year ended 31 December 2020
Sustainability Repor t 20
20
Based on GRI Standards
Pillar 3 report
The Pillar 3 report provides detailed
quantitative and qualitative information
about risk, capital, leverage and liquidity
for the UBS Group and prudential key
figures and regulatory information for
UBS AG standalone, UBS Switzerland AG
standalone, UBS Europe SE consoli-
dated and UBS Americas Holding LLC
consolidated.
reports
Standalone legal entity reports
We publish separate standalone legal
entity
for UBS AG and
UBS Switzerland AG. Selected financial
and regulatory key figures for these enti-
ties, as well as for UBS Europe SE and
UBS Americas Holding LLC, are also
included in our annual reports.
Sustainability report
The sustainability report
(formerly
called the GRI Document), which will
be available from 11 March 2021, pro-
vides disclosures on environmental,
social and governance factors for the
UBS Group and includes the disclo-
sures of non-financial information re-
quired by the German law implement-
ing EU Directive 2014 / 95 (CSR-Richtli-
nie-Umsetzungsgesetz, CSR-RUG).
We provide our combined Annual Report, the Pillar 3 report, the standalone legal entity reports and
the sustainability report as web disclosures at ubs.com/investors. We also provide the QR code on the
right for rapid access to the above-mentioned reports and further information on investor relations-
related topics.
Our external reporting approach
The scope and content of our external reports are
At the center of our external reporting approach is the
determined by Swiss legal and regulatory requirements,
annual report of UBS Group AG, which consists of
accounting standards, relevant stock and debt listing rules,
disclosures for UBS Group AG and
its consolidated
including regulations promulgated by FINMA, the SIX Swiss
subsidiaries. We also provide a combined annual report for
Exchange, the US Securities and Exchange Commission (the
UBS Group AG and UBS AG consolidated, which additionally
SEC) and other regulatory requirements, as well as by our
includes the consolidated financial statements of UBS AG as
financial reporting policies.
well as supplemental disclosures required under SEC
regulations and is the basis for our SEC Form 20-F filing.
Our Pillars are the
foundation for
everything we do.
Capital strength
Effi ciency and effectiveness
Risk management
Our Principles are
what we stand for
as a fi rm.
Client focus
Excellence
Sustainable performance
Our Behaviors are
what we stand for
individually.
Integrity
Collaboration
Challenge
Our approach to long-term value creation
As of or for the year ended 31 December 2020
What is put into the equation
Input
Financial capital
• 13.8% common equity tier 1 (CET1) capital ratio
• 3.85% CET1 leverage ratio
• 5.4% going concern leverage ratio
• USD 101.7 billion total loss-absorbing capacity
• USD 39.9 billion CET1 capital
Relationships and intellectual capital
• Nearly 160 years of experience in banking
• Presence in major financial centers worldwide
• >10% of our revenue (~USD 3.5 billion) spent on technology in 2020
• Dedicated research, differentiated insight and content offering, and bespoke solutions
Human capital
• 71,551 employees (FTE) in ~50 countries
• 9,296 new hires in 2020 (>1,700 in junior talent programs)
• 61% men, 39% women, with an aspiration for women to fill 30% of
Director level and above positions by 2025
• A positive, inclusive work environment and a collaborative culture
• Training and career development aim to ensure employees are future-ready
Social and natural capital
• 170 employees globally work for UBS in Society
• UBS Optimus Foundation: a client-driven foundation linked to a global
wealth manager and staffed for philanthropy
• Doubled our paid employee volunteering allowance (to four days p.a.)
to enable employees to support COVID-19 relief efforts in their communities
• Environmental and social risks standards governing client and vendor
relationships worldwide
• ISO 14001-certified environmental management system
What we do
Business activities
The results we deliver
How our stakeholders benefit
The impact we create
M a n
Wealth
Pillars
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• USD 6.6 billion net profit attributable to shareholders
• USD 0.37 proposed dividend per share for the 2020 financial year
• An increased value for our investors through attractive risk-adjusted returns
• USD 2.0 billion capital reserve for potential share repurchases
and sustainable performance, targeting cost- and capital-efficient growth
Investors
• USD 1.77 diluted earnings per share
• 17.4% return on CET1 capital
• USD 4,187 billion invested assets
• 73.3% cost / income ratio
Clients
their businesses
their lives
Employees
and commitment
in leadership
and skills
Society and environment
s
Asset
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C orporate
Integri t y
Collabora t i o n
Challen g e
Behavio r s
a l &
n
o
s
r
P e
• Streamlined and simplified interactions through digital tools and platforms,
• Long-term relationships built on mutual trust and integrity
such as UBS Neo, GWM Platforms, key4 and UBS Atrium
• Access to outstanding, tailored financial advice, solutions and services
• An outstanding value proposition for our clients – understanding their needs
and expectations, and serving their best interest are at the heart of what we do
• A broad range of products and services for clients’ personal wealth and
from around the globe; striving for attractive and risk-adjusted
• Securing a better future – we do this by providing funds to help finance the
investment performance
economic transition toward a more sustainable tomorrow
• Partnership for a seamless client service accompanying clients all through
• Improved satisfaction through the offering of tailored products and
• Bridging between generations – as an organization in constant evolution, we
services and well-perceived and highly appreciated support during the
stay relevant by adapting to the emerging needs of future generations –
pandemic – particularly during times of peak market distress
striving and working toward being their trusted advisor of choice
• Established procedures and policies to handle, process and incorporate
feedback and any potential complaints
• Providing high-quality execution, market access and liquidity, bespoke
financing, global capital markets and portfolio solutions, delivered as
one firm and with selected external partners
• Services accessible across various channels – traditionally through our
branches, but increasingly through our constantly evolving remote
and digital offering
• High engagement scores in employee survey indicate strong staff satisfaction
• 95% employees able to work remotely following our adoption of new
• Holistic support for employees’ well-being, engendering buy-in for
ways of working
post-pandemic flexible working arrangements
• 26% Director and above roles are held by women, increasing diverse views
• Health and well-being initiatives foster resilience and empower
• A collaborative culture where diversity in gender, race, ethnicity and other
employees to thrive amidst uncertainty
factors is valued and appreciated
• 8 years of service (average) enables employees to leverage their experience
• The majority of employees consider their line managers effective
• Employees are sought-after talent as a result of our multi-faceted approach
• >1 million learning activities to build skills and digital and agile capabilities
Switzerland, the US, the UK, Hong Kong and Singapore
• Employees worldwide benefit from working for a high-quality, responsible
• A commitment to equal pay, confirmed by equal salary certifications in
to talent development and learning
• Talent management practices perceived to be above the norm for our
employer
industry
• Wide recognition as an employer of choice
• USD 793.2 billion sustainable investing assets (18.9% of total invested assets)
• 1.9% exposure to carbon-related assets on our banking balance sheet
• Setting standards across the industry, challenging ourselves to raise the
• USD 6.9 billion clients’ assets in SDG-related impact investments
• 79% total reduction of our greenhouse gas footprint from the 2004
bar and inspiring others to join
• Contributing as relevant as a taxpayer and employer
• USD 22.1 million donated to local programs by UBS
• 104,452 hours invested by UBS staff in community projects (58% of hours
are skills-based)
• USD 168 million donations raised by UBS Optimus Foundation in 2020
• 100% of electricity sourced from renewable energy
baseline year
selected programs
Foundation
• 4.5 million young people and entrepreneurs across the regions in
• Within Switzerland, our size, scale and reputation contribute to economic
which we operate benefited from our community investments
stability and reliability
• USD 151 million committed by UBS Optimus Foundation to carefully
• Supporting the transition to a low-carbon world
• 3.7 million vulnerable people received support thanks to UBS Optimus
SDG in our focus
SDGs in our focus
SDGs in our focus
SDGs in our focus
Our approach to long-term value creation
As of or for the year ended 31 December 2020
What is put into the equation
What we do
The results we deliver
How our stakeholders benefit
The impact we create
Financial capital
• 13.8% common equity tier 1 (CET1) capital ratio
• 3.85% CET1 leverage ratio
• 5.4% going concern leverage ratio
• USD 101.7 billion total loss-absorbing capacity
• USD 39.9 billion CET1 capital
Relationships and intellectual capital
• Nearly 160 years of experience in banking
• Presence in major financial centers worldwide
• >10% of our revenue (~USD 3.5 billion) spent on technology in 2020
• Dedicated research, differentiated insight and content offering, and bespoke solutions
Human capital
• 71,551 employees (FTE) in ~50 countries
• 9,296 new hires in 2020 (>1,700 in junior talent programs)
• 61% men, 39% women, with an aspiration for women to fill 30% of
Director level and above positions by 2025
• A positive, inclusive work environment and a collaborative culture
• Training and career development aim to ensure employees are future-ready
Social and natural capital
• 170 employees globally work for UBS in Society
• UBS Optimus Foundation: a client-driven foundation linked to a global
wealth manager and staffed for philanthropy
• Doubled our paid employee volunteering allowance (to four days p.a.)
to enable employees to support COVID-19 relief efforts in their communities
• Environmental and social risks standards governing client and vendor
relationships worldwide
• ISO 14001-certified environmental management system
Wealth
al
b
Glo
Pillars
n t
e m e
g
a
M a n
s
s
e
strength
effectiv e n
nage m e n t
n
d
a
pital
a
C
a
m
k
s
i
R
y
c
n
e
i
c
fi
f
E
I
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v
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s
t
m
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n
t
B
a
nk
Integri t y
Collabora t i o n
Challen g e
Behavio r s
Asset
M
a
n
a
g
e
m
e
n
t
Sustain
C
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C orporate
a l &
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P e
Output
Investors
• USD 6.6 billion net profit attributable to shareholders
• USD 0.37 proposed dividend per share for the 2020 financial year
• An increased value for our investors through attractive risk-adjusted returns
• USD 1.77 diluted earnings per share
• 17.4% return on CET1 capital
• USD 4,187 billion invested assets
• 73.3% cost / income ratio
Clients
• USD 2.0 billion capital reserve for potential share repurchases
and sustainable performance, targeting cost- and capital-efficient growth
• Streamlined and simplified interactions through digital tools and platforms,
• Long-term relationships built on mutual trust and integrity
such as UBS Neo, GWM Platforms, key4 and UBS Atrium
• Access to outstanding, tailored financial advice, solutions and services
• An outstanding value proposition for our clients – understanding their needs
and expectations, and serving their best interest are at the heart of what we do
• A broad range of products and services for clients’ personal wealth and
from around the globe; striving for attractive and risk-adjusted
• Securing a better future – we do this by providing funds to help finance the
their businesses
investment performance
economic transition toward a more sustainable tomorrow
• Partnership for a seamless client service accompanying clients all through
• Improved satisfaction through the offering of tailored products and
• Bridging between generations – as an organization in constant evolution, we
their lives
• Established procedures and policies to handle, process and incorporate
feedback and any potential complaints
• Providing high-quality execution, market access and liquidity, bespoke
financing, global capital markets and portfolio solutions, delivered as
one firm and with selected external partners
Employees
services and well-perceived and highly appreciated support during the
stay relevant by adapting to the emerging needs of future generations –
pandemic – particularly during times of peak market distress
striving and working toward being their trusted advisor of choice
• Services accessible across various channels – traditionally through our
branches, but increasingly through our constantly evolving remote
and digital offering
SDGs in our focus
• High engagement scores in employee survey indicate strong staff satisfaction
• 95% employees able to work remotely following our adoption of new
• Holistic support for employees’ well-being, engendering buy-in for
and commitment
ways of working
post-pandemic flexible working arrangements
• 26% Director and above roles are held by women, increasing diverse views
• Health and well-being initiatives foster resilience and empower
• A collaborative culture where diversity in gender, race, ethnicity and other
in leadership
employees to thrive amidst uncertainty
factors is valued and appreciated
• 8 years of service (average) enables employees to leverage their experience
• The majority of employees consider their line managers effective
• Employees are sought-after talent as a result of our multi-faceted approach
and skills
• A commitment to equal pay, confirmed by equal salary certifications in
to talent development and learning
• >1 million learning activities to build skills and digital and agile capabilities
Switzerland, the US, the UK, Hong Kong and Singapore
• Employees worldwide benefit from working for a high-quality, responsible
• Talent management practices perceived to be above the norm for our
employer
industry
• Wide recognition as an employer of choice
Society and environment
• USD 793.2 billion sustainable investing assets (18.9% of total invested assets)
• 1.9% exposure to carbon-related assets on our banking balance sheet
• Setting standards across the industry, challenging ourselves to raise the
• USD 6.9 billion clients’ assets in SDG-related impact investments
• 79% total reduction of our greenhouse gas footprint from the 2004
• USD 22.1 million donated to local programs by UBS
• 104,452 hours invested by UBS staff in community projects (58% of hours
are skills-based)
• USD 168 million donations raised by UBS Optimus Foundation in 2020
• 100% of electricity sourced from renewable energy
baseline year
selected programs
Foundation
• 4.5 million young people and entrepreneurs across the regions in
• Within Switzerland, our size, scale and reputation contribute to economic
which we operate benefited from our community investments
stability and reliability
• USD 151 million committed by UBS Optimus Foundation to carefully
• Supporting the transition to a low-carbon world
• 3.7 million vulnerable people received support thanks to UBS Optimus
bar and inspiring others to join
• Contributing as relevant as a taxpayer and employer
SDG in our focus
SDGs in our focus
SDGs in our focus
Our approach to long-term value creation
As of or for the year ended 31 December 2020
What is put into the equation
What we do
The results we deliver
How our stakeholders benefit
The impact we create
Outcome
Impact
Financial capital
• 13.8% common equity tier 1 (CET1) capital ratio
• 3.85% CET1 leverage ratio
• 5.4% going concern leverage ratio
• USD 101.7 billion total loss-absorbing capacity
• USD 39.9 billion CET1 capital
Relationships and intellectual capital
• Nearly 160 years of experience in banking
• Presence in major financial centers worldwide
• >10% of our revenue (~USD 3.5 billion) spent on technology in 2020
• Dedicated research, differentiated insight and content offering, and bespoke solutions
Human capital
• 71,551 employees (FTE) in ~50 countries
• 9,296 new hires in 2020 (>1,700 in junior talent programs)
• 61% men, 39% women, with an aspiration for women to fill 30% of
Director level and above positions by 2025
• A positive, inclusive work environment and a collaborative culture
• Training and career development aim to ensure employees are future-ready
Social and natural capital
• 170 employees globally work for UBS in Society
• UBS Optimus Foundation: a client-driven foundation linked to a global
wealth manager and staffed for philanthropy
• Doubled our paid employee volunteering allowance (to four days p.a.)
to enable employees to support COVID-19 relief efforts in their communities
• Environmental and social risks standards governing client and vendor
relationships worldwide
• ISO 14001-certified environmental management system
Wealth
al
b
Glo
Pillars
n t
e m e
g
a
M a n
s
s
e
strength
effectiv e n
nage m e n t
n
d
a
pital
a
C
a
m
k
s
i
R
y
c
n
e
i
c
fi
f
E
I
n
v
e
s
t
m
e
n
t
B
a
nk
Integri t y
Collabora t i o n
Challen g e
Behavio r s
Asset
M
a
n
a
g
e
m
e
n
t
P
r
i
n
Sustain
C
li
e
E
x
a
c
t
n
b
e
l
e
l
l
e
f
o
c
i
p
l
e
s
p
n
e
c
r
f
e
c
u
s
o
r
m
a
n
c
e
g
kin
n
Ba
C orporate
a l &
n
o
s
r
P e
Investors
• USD 1.77 diluted earnings per share
• 17.4% return on CET1 capital
• USD 4,187 billion invested assets
• 73.3% cost / income ratio
Clients
such as UBS Neo, GWM Platforms, key4 and UBS Atrium
• A broad range of products and services for clients’ personal wealth and
their businesses
their lives
• Partnership for a seamless client service accompanying clients all through
• Established procedures and policies to handle, process and incorporate
feedback and any potential complaints
• Providing high-quality execution, market access and liquidity, bespoke
financing, global capital markets and portfolio solutions, delivered as
one firm and with selected external partners
• USD 6.6 billion net profit attributable to shareholders
• USD 0.37 proposed dividend per share for the 2020 financial year
• USD 2.0 billion capital reserve for potential share repurchases
• An increased value for our investors through attractive risk-adjusted returns
and sustainable performance, targeting cost- and capital-efficient growth
• Streamlined and simplified interactions through digital tools and platforms,
• Long-term relationships built on mutual trust and integrity
• Access to outstanding, tailored financial advice, solutions and services
from around the globe; striving for attractive and risk-adjusted
investment performance
SDG in our focus
• An outstanding value proposition for our clients – understanding their needs
and expectations, and serving their best interest are at the heart of what we do
• Securing a better future – we do this by providing funds to help finance the
economic transition toward a more sustainable tomorrow
• Improved satisfaction through the offering of tailored products and
services and well-perceived and highly appreciated support during the
pandemic – particularly during times of peak market distress
• Bridging between generations – as an organization in constant evolution, we
stay relevant by adapting to the emerging needs of future generations –
striving and working toward being their trusted advisor of choice
• Services accessible across various channels – traditionally through our
branches, but increasingly through our constantly evolving remote
and digital offering
SDGs in our focus
Employees
and commitment
in leadership
and skills
• High engagement scores in employee survey indicate strong staff satisfaction
• 95% employees able to work remotely following our adoption of new
• Holistic support for employees’ well-being, engendering buy-in for
ways of working
post-pandemic flexible working arrangements
• 26% Director and above roles are held by women, increasing diverse views
• Health and well-being initiatives foster resilience and empower
• A collaborative culture where diversity in gender, race, ethnicity and other
employees to thrive amidst uncertainty
factors is valued and appreciated
• 8 years of service (average) enables employees to leverage their experience
• The majority of employees consider their line managers effective
• Employees are sought-after talent as a result of our multi-faceted approach
• >1 million learning activities to build skills and digital and agile capabilities
Switzerland, the US, the UK, Hong Kong and Singapore
• Employees worldwide benefit from working for a high-quality, responsible
• A commitment to equal pay, confirmed by equal salary certifications in
to talent development and learning
• Talent management practices perceived to be above the norm for our
employer
industry
• Wide recognition as an employer of choice
SDGs in our focus
Society and environment
• USD 22.1 million donated to local programs by UBS
• 104,452 hours invested by UBS staff in community projects (58% of hours
are skills-based)
• USD 168 million donations raised by UBS Optimus Foundation in 2020
• 100% of electricity sourced from renewable energy
• USD 793.2 billion sustainable investing assets (18.9% of total invested assets)
• 1.9% exposure to carbon-related assets on our banking balance sheet
• Setting standards across the industry, challenging ourselves to raise the
• USD 6.9 billion clients’ assets in SDG-related impact investments
• 79% total reduction of our greenhouse gas footprint from the 2004
baseline year
bar and inspiring others to join
• Contributing as relevant as a taxpayer and employer
• 4.5 million young people and entrepreneurs across the regions in
• Within Switzerland, our size, scale and reputation contribute to economic
which we operate benefited from our community investments
stability and reliability
• USD 151 million committed by UBS Optimus Foundation to carefully
• Supporting the transition to a low-carbon world
selected programs
• 3.7 million vulnerable people received support thanks to UBS Optimus
Foundation
SDGs in our focus
Contents
Letter to shareholders
2
7 Highlights of the 2020 financial year
8 Our key figures
10 Our Board of Directors
12 Our Group Executive Board
14 Our evolution
4 Corporate governance
and compensation
176 Corporate governance
214 Compensation
1 Our strategy, business model and
environment
5 Financial
statements
261 Consolidated financial statements
405
Standalone financial statements
6 Significant regulated subsidiary and sub-
group information
430
Financial and regulatory key figures for our significant
regulated subsidiaries and sub-groups
Appendix
432 Alternative performance measures
435 Abbreviations frequently used in our financial reports
438
439 Cautionary statement
Information sources
Performance targets and capital guidance
16 Our strategy
18
19 Our businesses
29 Our environment
34 How we create value for our stakeholders
49
Regulation and supervision
Regulatory and legal developments
Risk factors
52
56
2 Financial and
operating performance
68 Accounting and financial reporting
70 Group performance
78 Global Wealth Management
81
84 Asset Management
Investment Bank
86
88 Group Functions
Personal & Corporate Banking
3 Risk, capital, liquidity and funding,
and balance sheet
Risk management and control
90
143 Capital, liquidity and funding, and balance sheet
Annual Report 2020 | Letter to shareholders
Dear shareholders,
For all of us, 2020 was a year like no other. We’d like to share
with you the developments and challenges that faced our firm.
Some shaped our year, some demonstrated our progress, some
highlighted new opportunities – all aim to give you a clear
picture of who we are and where we want to go.
Response Fund. We also introduced a variety of measures to
help our employees adapt
the challenging working
environment, including extra flexibility for childcare, as well as
new tools and resources to support physical, mental, financial
and social well-being. And we doubled the number of paid days
for our employees who volunteer.
to
Throughout the year, our employees had access to various
resources to help them navigate the evolving environment
caused by the pandemic. As a sign of our appreciation for their
and
contributions
this
acknowledging that the pandemic may have resulted
in
unforeseen expenses, we awarded less senior staff a one-time
cash payment equivalent to one week’s salary.
throughout
challenging
year,
Our capital returns today and in the future
Our strong CET1 capital generation in 2020 contributed to
healthy capital ratios and to funding attractive returns to our
shareholders. This robust capital position supports client needs
and business growth, as well as future dividends and buybacks.
We delivered on our USD 2.6 billion dividend commitment for
2019. For 2020, the Board of Directors intends to propose a
dividend of USD 0.37 per share to UBS Group AG shareholders.
Subject to approval by shareholders at the Annual General
Meeting (the AGM) scheduled for 8 April 2021, the dividend will
be paid on 15 April 2021 to shareholders of record on 14 April
2021.
Before restrictions on share repurchases were introduced in
early 2020 in response to COVID-19, we bought back CHF 350
million of our shares and during the second half of 2020 we
established a capital reserve of USD 2 billion for future share
repurchases. In the first quarter of 2021, we repurchased the
remaining CHF 100 million of our 2018–2021 USD 2 billion
share repurchase program, which is now complete and closed.
Looking ahead, we have commenced a new repurchase
program of up to CHF 4 billion and expect to execute up to
USD 1 billion of repurchases under this program by the end of
the first quarter of 2021.
The balance between cash dividends and share repurchases
has been adjusted from 2020 onward, with a greater weight
toward share repurchases as compared with prior years’ returns.
This rebalancing of our capital return profile is a more attractive
way to return capital to shareholders and it allows us to
maintain capital flexibility. Importantly, we remain committed to
returning excess capital to our shareholders.
Our overall performance
In a very challenging year on both a global and a human scale,
our clients put their trust in us. We remained close to them,
helping them navigate uncertainty and offering them tailored
advice and solutions. As a result, our financial performance was
strong, with revenues up 12%, and we generated a return on
CET1 capital of 17.4%, or a 12.8% return on tangible equity.
Invested assets reached record levels and we met or exceeded all
of our growth, return and cost targets.
What we’re particularly proud of is how every business
division and region played a role in our performance. Global
Wealth Management and Asset Management recorded double-
digit profit-before-tax growth, while the Investment Bank
achieved a return on attributed equity of nearly 20%.
Regionally, profit before tax increased by over USD 1 billion in
both the Americas and in Asia Pacific. Our universal bank in
Switzerland benefited from a resilient economy, supported by an
effective government-backed lending program in partnership
with banks. We delivered the best of UBS to our clients and
extended our leadership in sustainability. Our unity and broad-
based strength allowed us to stand together as a team,
alongside our clients, and support those in need throughout a
challenging year.
Supporting clients, employees and society
We continued to deploy resources for our clients, employees and
society throughout 2020, including increasing our lending and
commitments to clients during the year. In our home market of
Switzerland, we supported the government-backed COVID-19
loan program for small and medium-sized entities. We also
contributed to the Paycheck Protection Program in the US and
helped corporate clients raise debt and equity in capital markets.
The pandemic brought increased hardship to communities all
over the world. We felt it was our responsibility to be part of the
solution, and therefore committed USD 30 million to various aid
projects related to COVID-19. Some of the aid has been used to
match the USD 15 million contributed by our clients and
employees through the UBS Optimus Foundation’s COVID-19
2
2
Annual Report 2020 | Letter to shareholders
Dear shareholders,
For all of us, 2020 was a year like no other. We’d like to share
Response Fund. We also introduced a variety of measures to
with you the developments and challenges that faced our firm.
help our employees adapt
to
the challenging working
Some shaped our year, some demonstrated our progress, some
environment, including extra flexibility for childcare, as well as
highlighted new opportunities – all aim to give you a clear
new tools and resources to support physical, mental, financial
picture of who we are and where we want to go.
and social well-being. And we doubled the number of paid days
Our overall performance
for our employees who volunteer.
Throughout the year, our employees had access to various
resources to help them navigate the evolving environment
In a very challenging year on both a global and a human scale,
caused by the pandemic. As a sign of our appreciation for their
our clients put their trust in us. We remained close to them,
contributions
throughout
this
challenging
year,
and
helping them navigate uncertainty and offering them tailored
acknowledging that the pandemic may have resulted
in
advice and solutions. As a result, our financial performance was
unforeseen expenses, we awarded less senior staff a one-time
strong, with revenues up 12%, and we generated a return on
cash payment equivalent to one week’s salary.
CET1 capital of 17.4%, or a 12.8% return on tangible equity.
Invested assets reached record levels and we met or exceeded all
Our capital returns today and in the future
of our growth, return and cost targets.
What we’re particularly proud of is how every business
Our strong CET1 capital generation in 2020 contributed to
division and region played a role in our performance. Global
healthy capital ratios and to funding attractive returns to our
Wealth Management and Asset Management recorded double-
shareholders. This robust capital position supports client needs
digit profit-before-tax growth, while the Investment Bank
and business growth, as well as future dividends and buybacks.
achieved a return on attributed equity of nearly 20%.
We delivered on our USD 2.6 billion dividend commitment for
Regionally, profit before tax increased by over USD 1 billion in
2019. For 2020, the Board of Directors intends to propose a
both the Americas and in Asia Pacific. Our universal bank in
dividend of USD 0.37 per share to UBS Group AG shareholders.
Switzerland benefited from a resilient economy, supported by an
Subject to approval by shareholders at the Annual General
effective government-backed lending program in partnership
Meeting (the AGM) scheduled for 8 April 2021, the dividend will
with banks. We delivered the best of UBS to our clients and
be paid on 15 April 2021 to shareholders of record on 14 April
extended our leadership in sustainability. Our unity and broad-
2021.
based strength allowed us to stand together as a team,
Before restrictions on share repurchases were introduced in
alongside our clients, and support those in need throughout a
early 2020 in response to COVID-19, we bought back CHF 350
challenging year.
Supporting clients, employees and society
million of our shares and during the second half of 2020 we
established a capital reserve of USD 2 billion for future share
repurchases. In the first quarter of 2021, we repurchased the
remaining CHF 100 million of our 2018–2021 USD 2 billion
We continued to deploy resources for our clients, employees and
share repurchase program, which is now complete and closed.
society throughout 2020, including increasing our lending and
Looking ahead, we have commenced a new repurchase
commitments to clients during the year. In our home market of
program of up to CHF 4 billion and expect to execute up to
Switzerland, we supported the government-backed COVID-19
USD 1 billion of repurchases under this program by the end of
loan program for small and medium-sized entities. We also
the first quarter of 2021.
contributed to the Paycheck Protection Program in the US and
The balance between cash dividends and share repurchases
helped corporate clients raise debt and equity in capital markets.
has been adjusted from 2020 onward, with a greater weight
The pandemic brought increased hardship to communities all
toward share repurchases as compared with prior years’ returns.
over the world. We felt it was our responsibility to be part of the
This rebalancing of our capital return profile is a more attractive
solution, and therefore committed USD 30 million to various aid
way to return capital to shareholders and it allows us to
projects related to COVID-19. Some of the aid has been used to
maintain capital flexibility. Importantly, we remain committed to
match the USD 15 million contributed by our clients and
returning excess capital to our shareholders.
employees through the UBS Optimus Foundation’s COVID-19
Axel A. Weber
Chairman of the Board of Directors
Ralph A.J.G. Hamers
Group Chief Executive Officer
Management priorities
Change is constant. Our aim is to be flexible and ensure UBS
remains fit for the future. First and foremost, we’re focused on
serving our clients and building on the positive momentum we
achieved in 2020. That means building on our existing strengths
– namely, our position as the largest truly global wealth
manager, supported by a focused investment bank, strong asset
management capabilities, and a leading personal and corporate
bank in Switzerland.
Having clarity around our purpose is key as we build the UBS
of tomorrow. We’ll focus on six areas in this next phase of our
journey: i) growing our client franchise; ii) strengthening our
high-performance culture to be more purpose-led, more agile
and more
iii) operating ever more efficiently;
iv) enhancing our digital capabilities with technology that
differentiates us; v) building on our edge in sustainability; and
vi) maintaining our balance sheet for all seasons.
inclusive;
diversified portfolios of sustainable investments. Our 100%
sustainable multi-asset portfolio surpassed USD 17 billion in
assets under management in 2020, up from just over USD 1
billion three years ago. In Asset Management, we rolled out our
Climate Aware strategies across additional asset classes, which
will allow more clients to align their investment goals with
environmental goals, and we saw net new money of USD 32
billion flow into sustainability-focused strategies.
Our climate strategy supports an orderly transition to a low-
carbon economy, as defined by the Paris Agreement. Our
exposure to carbon-related assets on our banking balance sheet
is low, at 1.9% or USD 5.4 billion, as of 31 December 2020, a
decrease from 2.3% at the end of 2019 and 2.8% at the end of
2018. We were also a founding member of the Net Zero Asset
Managers initiative, which brings together a group of 30
international asset management firms committed to supporting
investing aligned with the goal of net zero greenhouse gas
emissions by 2050 or sooner.
Leading in sustainability
Key growth opportunities
We have long been committed to creating long-term value for
clients, employees,
investors and society. Last year, our
commitments were again externally recognized: we maintained
the top ranking in the Dow Jones Sustainability Indices for the
sixth year running and were recognized for leadership in
corporate sustainability by the global environmental non-profit
CDP. We’re one of only 5% of the 5,800+ companies scored
that are A-listed for environmental transparency and action to
cut emissions, mitigate climate risks and develop the low-carbon
economy.
In 2020, our sustainable finance activities saw strong
momentum. Our core sustainable investing assets increased
significantly during the year, to USD 793 billion at the end of
2020. We also became the first major global financial institution
to make sustainable investments our preferred solution for
private clients investing globally. Our private clients benefit from
In our
We believe the future of finance belongs to firms that have scale
where it matters and leverage that scale for the benefit of clients
and shareholders.
leading global asset gathering
businesses, we have invested assets exceeding USD 3 trillion in
in asset
wealth management and over USD 1
management. We are a leading bank in Switzerland and the
largest wealth manager in Asia Pacific. In investment banking,
we’re in the top five in the equities business and the top three in
foreign-exchange trading. Our growth objectives capitalize on
our existing strengths, such as business and
regional
diversification, as we continue to build our presence in the
world’s largest and fastest-growing markets.
trillion
We’re also well-positioned to benefit from secular trends,
such as wealth creation and transfer, and the search for yield.
2
3
3
Annual Report 2020 | Letter to shareholders
Bringing the best of UBS to clients
Our global reach and breadth of expertise are sources of
competitive advantage. Our firm-wide thought
leadership
into opportunities for client conversations and
translates
interactions each day. And we still have more potential, as 77%
of our wealth management clients are telling us they want more
contact and ideas.
Building on the best of our Global Wealth Management and
Investment Bank capabilities, we created a unified capital
markets group and global family office segment focus. Asset
Management and Global Wealth Management in the US also
teamed up on separately managed accounts. These examples
demonstrate how UBS works together – across regions,
businesses and fields of expertise – to deliver better, more
streamlined services and comprehensive advice and solutions for
our clients.
Evolution of the financial sector
The move toward digital everything has increased the need to
invest in technology, and the pandemic has accelerated clients’
expectations and adoption rates of digital services, possibly by
several years. Moreover, the divergence of business models into
either niche and advisory firms or firms with global or local scale
has been accelerated. Newer entrants, including large-platform
technology firms, are targeting selected components of the
financial industry’s value chain. While we have not yet seen a
fundamental unbundling of
these processes and client
relationships, the trend of forging partnerships between new
entrants and incumbent banks will likely continue, as technology
and innovation help banks overcome new challenges and offer
new solutions for clients. One thing is clear: financial firms that
have the scale also have the advantage in this area.
Digitalization provides new opportunities and potential for
significant efficiencies. As banks face heightened challenges
from digitalization,
low and
persistently negative interest rates, as well as expectations of
continuing easy monetary policy, there may be further industry
consolidation.
intensified competition, and
Another trend that has been gaining importance – long
before the pandemic, but also accelerated by it – is the shift
toward sustainable finance. In 2020, returns on our sustainable
investing mandates showed that investing for good doesn’t have
to come at the expense of returns. The degree to which firms
are able to establish their sustainable offerings will likely drive
their competitiveness and reputation in coming years.
Digital transformation
Technology allows us to differentiate the services we offer
clients and also provides operational benefits. We aim to enable
our clients and staff to work and interact in a flexible and
productive way. As we transform our infrastructure, we seek to
anticipate and address our clients’ preferences for digital
interactions and services, as well as gain new insights through
effective data management. This will facilitate the development
of responsible artificial intelligence to better tailor our client and
employee experiences. Underpinning all of this, we prioritize
data security, availability and reliability, supporting systems and
application stability.
Continued investments in technology have allowed us to
manage the remote-working challenges caused by the pandemic
very effectively. More than 95% of internal and external staff
were able to work on a remote basis, and we deepened our
client relationships through the use of digital capabilities. For
example, our UBS My Way application offers clients in selected
markets a comprehensive view of their investment portfolio.
Clients can work with their advisors to interactively design their
own portfolio. We also introduced multi-banking for our Swiss
corporate clients, which integrates third-party banks for full
transparency across accounts and convenient payment execution
through a single platform – a unique value proposition in the
Swiss market.
Our Investment Bank strives to be the digital investment bank
of the future. We’ve developed a state-of-the-art foreign
exchange pricing system to provide client-tailored pricing
streams and hedging optimization. And we also launched UBS
Neo Question Bank, the largest global database of market-
related questions asked by professional investors. There are
many other examples of digital innovation, which you can read
about in our annual report.
4
4
Our global reach and breadth of expertise are sources of
toward sustainable finance. In 2020, returns on our sustainable
competitive advantage. Our firm-wide thought
leadership
investing mandates showed that investing for good doesn’t have
translates
into opportunities for client conversations and
to come at the expense of returns. The degree to which firms
interactions each day. And we still have more potential, as 77%
are able to establish their sustainable offerings will likely drive
of our wealth management clients are telling us they want more
their competitiveness and reputation in coming years.
contact and ideas.
Building on the best of our Global Wealth Management and
Digital transformation
Investment Bank capabilities, we created a unified capital
markets group and global family office segment focus. Asset
Technology allows us to differentiate the services we offer
Management and Global Wealth Management in the US also
clients and also provides operational benefits. We aim to enable
teamed up on separately managed accounts. These examples
our clients and staff to work and interact in a flexible and
demonstrate how UBS works together – across regions,
productive way. As we transform our infrastructure, we seek to
businesses and fields of expertise – to deliver better, more
anticipate and address our clients’ preferences for digital
streamlined services and comprehensive advice and solutions for
interactions and services, as well as gain new insights through
our clients.
Evolution of the financial sector
effective data management. This will facilitate the development
of responsible artificial intelligence to better tailor our client and
employee experiences. Underpinning all of this, we prioritize
data security, availability and reliability, supporting systems and
The move toward digital everything has increased the need to
application stability.
invest in technology, and the pandemic has accelerated clients’
Continued investments in technology have allowed us to
several years. Moreover, the divergence of business models into
very effectively. More than 95% of internal and external staff
either niche and advisory firms or firms with global or local scale
were able to work on a remote basis, and we deepened our
has been accelerated. Newer entrants, including large-platform
client relationships through the use of digital capabilities. For
technology firms, are targeting selected components of the
example, our UBS My Way application offers clients in selected
financial industry’s value chain. While we have not yet seen a
markets a comprehensive view of their investment portfolio.
fundamental unbundling of
these processes and client
Clients can work with their advisors to interactively design their
relationships, the trend of forging partnerships between new
own portfolio. We also introduced multi-banking for our Swiss
entrants and incumbent banks will likely continue, as technology
corporate clients, which integrates third-party banks for full
and innovation help banks overcome new challenges and offer
transparency across accounts and convenient payment execution
new solutions for clients. One thing is clear: financial firms that
through a single platform – a unique value proposition in the
have the scale also have the advantage in this area.
Swiss market.
Digitalization provides new opportunities and potential for
Our Investment Bank strives to be the digital investment bank
significant efficiencies. As banks face heightened challenges
of the future. We’ve developed a state-of-the-art foreign
from digitalization,
intensified competition, and
low and
exchange pricing system to provide client-tailored pricing
persistently negative interest rates, as well as expectations of
streams and hedging optimization. And we also launched UBS
continuing easy monetary policy, there may be further industry
Neo Question Bank, the largest global database of market-
consolidation.
related questions asked by professional investors. There are
many other examples of digital innovation, which you can read
about in our annual report.
Annual Report 2020 | Letter to shareholders
Bringing the best of UBS to clients
Another trend that has been gaining importance – long
before the pandemic, but also accelerated by it – is the shift
Developing tomorrow’s leaders
to
respond
We believe the future of work will require an agile and
connected workforce
to an ever-changing
environment, as well as evolving client behavior and preferences.
Building on our experience and capabilities, we embrace cultural
and digital transformation as a way to enable our employees to
succeed in new environments and to remain a widely recognized
employer of choice.
At UBS, it isn’t just about jobs, it’s about offering career and
development opportunities.
talent
development leads to greater employee engagement, improved
collaboration, better productivity and reduced attrition, all of
which benefits our employees, businesses and clients.
Internal mobility and
A diverse workforce is a strong competitive advantage and
we aim to shape a diverse and inclusive organization that’s
innovative, provides outstanding service to our clients and offers
equal opportunities. In short, a great place to work for everyone.
Our approach encompasses a number of diversity aspects, but
increasing gender and ethnic diversity are our highest near-term
priorities.
year-end 2018. We have published responses to questions
frequently asked by shareholders, clients, employees and other
stakeholders
at
on
ubs.com/investors.
this matter.
available
They’re
Virtual AGM in 2021
Protecting the health of shareholders and employees continues
to be our number one priority. And due to the ongoing COVID-
19 pandemic, related restrictions and continued uncertainty, the
Board of Directors has decided to hold the 2021 AGM as a
webcast again. As such, it won’t be possible to physically attend
the AGM. Nevertheless, we look forward to your feedback and
to welcoming you to this year’s virtual AGM on 8 April.
Thank you for your ongoing support.
Yours sincerely,
expectations and adoption rates of digital services, possibly by
manage the remote-working challenges caused by the pandemic
The French cross-border matter
The trial at the Court of Appeal is scheduled for 8 March to
24 March 2021, with its judgment expected later in the year.
UBS denies any criminal wrongdoing in this case. Our provision
remains at EUR 450 million (USD 549 million), unchanged since
Axel A. Weber
Chairman of the
Board of Directors
Ralph A.J.G. Hamers
Group Chief Executive Officer
4
5
5
We face
forward
UBS Annual Review 2020
Available from 29 March 2021 at
ubs.com/annualreview
Corporate information
UBS Group AG is incorporated and domiciled in Switzerland and operates
under Art. 620ff. of the Swiss Code of Obligations as an Aktiengesellschaft, a
corporation limited by shares. Its registered office is at Bahnhofstrasse 45,
CH-8001 Zurich, Switzerland, telephone +41-44-234 11 11, and its corporate
identification number is CHE-395.345.924. UBS Group AG was incorporated
on 10 June 2014 and was established in 2014 as the holding company of the
UBS Group. UBS Group AG shares are listed on the SIX Swiss Exchange and
on the New York Stock Exchange (ISIN: CH0244767585; CUSIP: H42097107).
UBS Group AG owns 100% of the outstanding shares of UBS AG.
Contacts
Switchboards
For all general inquiries
ubs.com/contact
Zurich +41-44-234 1111
London +44-207-567 8000
New York +1-212-821 3000
Hong Kong +852-2971 8888
Singapore +65-6495 8000
Investor Relations
Institutional, professional and retail
investors are supported by UBS’s Investor
Relations team.
UBS Group AG, Investor Relations
P.O. Box, CH-8098 Zurich, Switzerland
ubs.com/investors
Zurich +41-44-234 4100
New York +1-212-882 5734
Media Relations
Global media and journalists are supported
by UBS’s Media Relations team.
ubs.com/media
Zurich +41-44-234 8500
mediarelations@ubs.com
London +44-20-7567 4714
ubs-media-relations@ubs.com
New York +1-212-882 5858
mediarelations@ubs.com
Hong Kong +852-2971 8200
sh-mediarelations-ap@ubs.com
Office of the Group Company Secretary
The Group Company Secretary receives
inquiries on compensation and related
issues addressed to members of the
Board of Directors.
UBS Group AG, Office of the
Group Company Secretary
P.O. Box, CH-8098 Zurich, Switzerland
sh-company-secretary@ubs.com
Zurich +41-44-235 6652
Shareholder Services
UBS’s Shareholder Services team, a unit
of the Group Company Secretary’s office, is
responsible for the registration of
UBS Group AG registered shares.
UBS Group AG, Shareholder Services
P.O. Box, CH-8098 Zurich, Switzerland
sh-shareholder-services@ubs.com
Zurich +41-44-235 6652
US Transfer Agent
For global registered share-related
inquiries in the US.
Computershare Trust Company NA
P.O. Box 505000
Louisville, KY 40233-5000, USA
Shareholder online inquiries:
www-us.computershare.com/
investor/Contact
Shareholder website:
computershare.com/investor
Calls from the US
+1-866-305-9566
Calls from outside the US
+1-781-575-2623
TDD for hearing impaired
+1-800-231-5469
TDD for foreign shareholders
+1-201-680-6610
Corporate calendar UBS Group AG
Imprint
Publication of the Sustainability Report 2020:
Thursday, 11 March 2021
Publisher: UBS Group AG, Zurich, Switzerland | ubs.com
Annual General Meeting 2021:
Thursday, 8 April 2021
Language: English / German | SAP-No. 80531E
Publication of the first quarter 2021 report:
Tuesday, 27 April 2021
Publication of the second quarter 2021 report: Tuesday, 20 July 2021
Publication of the third quarter 2021 report:
Tuesday, 26 October 2021
© UBS 2021. The key symbol and UBS are among the registered and
unregistered trademarks of UBS. All rights reserved.
Printed in Switzerland on chlorine-free paper with mineral oil-reduced inks.
Paper production from socially responsible and ecologically sound forestry
practices
6
6
We face
forward
UBS Annual Review 2020
Available from 29 March 2021 at
ubs.com/annualreview
Highlights of the
2020 financial year
We demonstrated a strong performance across our business units and
geographical regions throughout the 2020 financial year.
Group results
Resources
Profitability
USD 6.6 billion
Net profit attributable to
shareholders
USD 1.1 trillion
Total assets
17.4 %
Return on common equity
tier 1 capital
(2019: USD 4.3 billion)
(2019: USD 1.0 trillion)
(2019: 12.4%)
USD 1.77
Diluted earnings
per share
(2019: USD 1.14)
USD 59.4 billion
12.8 %
Equity attributable
to shareholders
Return on tangible equity
(2019: USD 54.5 billion)
(2019: 9.0%)
6
7
Corporate information
UBS Group AG is incorporated and domiciled in Switzerland and operates
under Art. 620ff. of the Swiss Code of Obligations as an Aktiengesellschaft, a
corporation limited by shares. Its registered office is at Bahnhofstrasse 45,
CH-8001 Zurich, Switzerland, telephone +41-44-234 11 11, and its corporate
identification number is CHE-395.345.924. UBS Group AG was incorporated
on 10 June 2014 and was established in 2014 as the holding company of the
UBS Group. UBS Group AG shares are listed on the SIX Swiss Exchange and
on the New York Stock Exchange (ISIN: CH0244767585; CUSIP: H42097107).
UBS Group AG owns 100% of the outstanding shares of UBS AG.
Contacts
Switchboards
For all general inquiries
ubs.com/contact
Zurich +41-44-234 1111
London +44-207-567 8000
New York +1-212-821 3000
Hong Kong +852-2971 8888
Singapore +65-6495 8000
Investor Relations
Institutional, professional and retail
investors are supported by UBS’s Investor
Relations team.
UBS Group AG, Investor Relations
P.O. Box, CH-8098 Zurich, Switzerland
ubs.com/investors
Zurich +41-44-234 4100
New York +1-212-882 5734
Media Relations
Global media and journalists are supported
by UBS’s Media Relations team.
ubs.com/media
Zurich +41-44-234 8500
mediarelations@ubs.com
London +44-20-7567 4714
ubs-media-relations@ubs.com
New York +1-212-882 5858
mediarelations@ubs.com
Hong Kong +852-2971 8200
sh-mediarelations-ap@ubs.com
Office of the Group Company Secretary
The Group Company Secretary receives
inquiries on compensation and related
issues addressed to members of the
Board of Directors.
UBS Group AG, Office of the
Group Company Secretary
P.O. Box, CH-8098 Zurich, Switzerland
sh-company-secretary@ubs.com
Zurich +41-44-235 6652
Shareholder Services
UBS’s Shareholder Services team, a unit
of the Group Company Secretary’s office, is
responsible for the registration of
UBS Group AG registered shares.
UBS Group AG, Shareholder Services
P.O. Box, CH-8098 Zurich, Switzerland
sh-shareholder-services@ubs.com
Zurich +41-44-235 6652
US Transfer Agent
For global registered share-related
inquiries in the US.
Computershare Trust Company NA
P.O. Box 505000
Louisville, KY 40233-5000, USA
Shareholder online inquiries:
www-us.computershare.com/
investor/Contact
Shareholder website:
computershare.com/investor
Calls from the US
+1-866-305-9566
Calls from outside the US
+1-781-575-2623
TDD for hearing impaired
+1-800-231-5469
TDD for foreign shareholders
+1-201-680-6610
Corporate calendar UBS Group AG
Imprint
Publication of the Sustainability Report 2020:
Thursday, 11 March 2021
Publisher: UBS Group AG, Zurich, Switzerland | ubs.com
Annual General Meeting 2021:
Thursday, 8 April 2021
Language: English / German | SAP-No. 80531E
Publication of the first quarter 2021 report:
Tuesday, 27 April 2021
Publication of the second quarter 2021 report: Tuesday, 20 July 2021
Publication of the third quarter 2021 report:
Tuesday, 26 October 2021
© UBS 2021. The key symbol and UBS are among the registered and
unregistered trademarks of UBS. All rights reserved.
Printed in Switzerland on chlorine-free paper with mineral oil-reduced inks.
Paper production from socially responsible and ecologically sound forestry
practices
Annual Report 2020
Our key figures
As of or for the year ended
31.12.181
31.12.191
3311..1122..2200
3322,,339900
2244,,223355
88,,115555
66,,555577
11..7777
28,889
23,312
5,577
4,304
1.14
30,213
24,222
5,991
4,516
1.18
1111..33
1122..88
1177..44
1111..77
33..44
7733..33
1199..44
5522..33
7.9
9.0
12.4
11.0
3.2
80.5
22.7
(4.7)
8.6
9.8
13.1
11.8
3.3
79.9
24.5
366.0
USD million, except where indicated
GGrroouupp rreessuullttss
Operating income
Operating expenses
Operating profit / (loss) before tax
Net profit / (loss) attributable to shareholders
Diluted earnings per share (USD)2
PPrrooffiittaabbiilliittyy aanndd ggrroowwtthh33
Return on equity (%)
Return on tangible equity (%)
Return on common equity tier 1 capital (%)
Return on risk-weighted assets, gross (%)
Return on leverage ratio denominator, gross (%)4
Cost / income ratio (%)
Effective tax rate (%)
Net profit growth (%)
RReessoouurrcceess33
Total assets
Equity attributable to shareholders
Common equity tier 1 capital5
Risk-weighted assets5
Common equity tier 1 capital ratio (%)5
Going concern capital ratio (%)5
Total loss-absorbing capacity ratio (%)5
Leverage ratio denominator5
Leverage ratio denominator (with temporary FINMA exemption)6
Common equity tier 1 leverage ratio (%)5
Common equity tier 1 leverage ratio (%) (with temporary FINMA exemption)6
Going concern leverage ratio (%)5
Going concern leverage ratio (%) (with temporary FINMA exemption)6
Total loss-absorbing capacity leverage ratio (%)5
Liquidity coverage ratio (%)7
OOtthheerr
Invested assets (USD billion)8
Personnel (full-time equivalents)
Market capitalization9
Total book value per share (USD)9
Total book value per share (CHF)9
Tangible book value per share (USD)9
Tangible book value per share (CHF)9
11 Refer to the “Accounting and financial reporting” and “Consolidated financial statements” sections of this report for information on the restatement of comparative information, where applicable. 22 Refer to
“Share information and earnings per share” in the “Consolidated financial statements” section of this report for more information. 33 Refer to the “Performance targets and capital guidance” section of this report
for more information about our performance targets. 44 The leverage ratio denominators used for the return calculations relating to the respective periods in 2020 do not reflect the effects of the temporary
exemption that has been granted by FINMA in connection with COVID-19. Refer to the “Regulatory and legal developments” section of this report for more information. 55 Based on the Swiss systemically relevant
bank framework as of 1 January 2020. Refer to the “Capital, liquidity and funding, and balance sheet” section of this report for more information. 66 Refer to the “Regulatory and legal developments” and
“Capital, liquidity and funding, and balance sheet” sections of this report for further details about the temporary FINMA exemption. 77 Refer to the “Capital, liquidity and funding, and balance sheet” section of
this report for more information. 88 Consists of invested assets for Global Wealth Management, Asset Management and Personal & Corporate Banking. Refer to “Note 32 Invested assets and net new money” in
the “Consolidated financial statements” section of this report for more information. 99 Refer to “UBS shares” in the “Capital, liquidity and funding, and balance sheet” section of this report for more information.
11,,112255,,776655
5599,,444455
3399,,889900
228899,,110011
1133..88
1199..44
3355..22
11,,003377,,115500
994444,,332233
33..8855
44..2222
55..44
55..99
99..88
115522
958,500
52,896
34,073
263,747
12.9
17.5
31.7
904,595
972,194
54,501
35,535
259,208
13.7
20.0
34.6
911,322
3,101
66,888
45,907
14.34
14.10
12.54
12.33
3,607
68,601
45,661
15.07
14.59
13.28
12.86
44,,118877
7711,,555511
5500,,001133
1166..7744
1144..8822
1144..9911
1133..2211
9.8
134
9.3
136
3.90
3.77
5.1
5.7
Events subsequent to the publication of the unaudited fourth quarter 2020 report
The 2020 results and the balance sheet as of 31 December 2020 differ from those presented in the unaudited fourth quarter 2020
report published on 26 January 2021 as a result of events adjusted for after the balance sheet date. Provisions for litigation,
regulatory and similar matters increased, which reduced 2020 operating profit before tax and 2020 net profit attributable to
shareholders each by USD 72 million. As a result, basic earnings per share decreased by USD 0.02 and diluted earnings per share
decreased by USD 0.02.
8
8
Alternative performance measures
An alternative performance measure (an APM) is a financial measure of historical or future financial performance, financial position
or cash flows other than a financial measure defined or specified in the applicable recognized accounting standards or in other
applicable regulations. We report a number of APMs in the discussion of the financial and operating performance of the Group, our
business divisions and our Group Functions. We use APMs to provide a more complete picture of our operating performance and to
reflect management’s view of the fundamental drivers of our business results. A definition of each APM, the method used to
calculate it and the information content are presented under “Alternative performance measures” in the appendix to this report.
Our APMs may qualify as non-GAAP measures as defined by US Securities and Exchange Commission (SEC) regulations.
11
2
44
Annual Report 2020
Our key figures
USD million, except where indicated
GGrroouupp rreessuullttss
Operating income
Operating expenses
Operating profit / (loss) before tax
Net profit / (loss) attributable to shareholders
Diluted earnings per share (USD)2
PPrrooffiittaabbiilliittyy aanndd ggrroowwtthh33
Return on equity (%)
Return on tangible equity (%)
Return on common equity tier 1 capital (%)
Return on risk-weighted assets, gross (%)
Return on leverage ratio denominator, gross (%)4
Cost / income ratio (%)
Effective tax rate (%)
Net profit growth (%)
RReessoouurrcceess33
Total assets
Equity attributable to shareholders
Common equity tier 1 capital5
Risk-weighted assets5
Common equity tier 1 capital ratio (%)5
Going concern capital ratio (%)5
Total loss-absorbing capacity ratio (%)5
Leverage ratio denominator5
Leverage ratio denominator (with temporary FINMA exemption)6
Common equity tier 1 leverage ratio (%)5
Common equity tier 1 leverage ratio (%) (with temporary FINMA exemption)6
Going concern leverage ratio (%)5
Going concern leverage ratio (%) (with temporary FINMA exemption)6
Total loss-absorbing capacity leverage ratio (%)5
Liquidity coverage ratio (%)7
OOtthheerr
Invested assets (USD billion)8
Personnel (full-time equivalents)
Market capitalization9
Total book value per share (USD)9
Total book value per share (CHF)9
Tangible book value per share (USD)9
Tangible book value per share (CHF)9
As of or for the year ended
3311..1122..2200
31.12.191
31.12.181
(4.7)
366.0
11,,112255,,776655
5599,,444455
3399,,889900
228899,,110011
972,194
54,501
35,535
259,208
958,500
52,896
34,073
263,747
11,,003377,,115500
994444,,332233
911,322
904,595
28,889
23,312
5,577
4,304
1.14
7.9
9.0
12.4
11.0
3.2
80.5
22.7
13.7
20.0
34.6
3.90
5.7
9.8
134
3,607
68,601
45,661
15.07
14.59
13.28
12.86
30,213
24,222
5,991
4,516
1.18
8.6
9.8
13.1
11.8
3.3
79.9
24.5
12.9
17.5
31.7
3.77
5.1
9.3
136
3,101
66,888
45,907
14.34
14.10
12.54
12.33
3322,,339900
2244,,223355
88,,115555
66,,555577
11..7777
1111..33
1122..88
1177..44
1111..77
33..44
7733..33
1199..44
5522..33
1133..88
1199..44
3355..22
33..8855
44..2222
55..44
55..99
99..88
115522
44,,118877
7711,,555511
5500,,001133
1166..7744
1144..8822
1144..9911
1133..2211
11 Refer to the “Accounting and financial reporting” and “Consolidated financial statements” sections of this report for information on the restatement of comparative information, where applicable. 22 Refer to
“Share information and earnings per share” in the “Consolidated financial statements” section of this report for more information. 33 Refer to the “Performance targets and capital guidance” section of this report
for more information about our performance targets. 44 The leverage ratio denominators used for the return calculations relating to the respective periods in 2020 do not reflect the effects of the temporary
exemption that has been granted by FINMA in connection with COVID-19. Refer to the “Regulatory and legal developments” section of this report for more information. 55 Based on the Swiss systemically relevant
bank framework as of 1 January 2020. Refer to the “Capital, liquidity and funding, and balance sheet” section of this report for more information. 66 Refer to the “Regulatory and legal developments” and
“Capital, liquidity and funding, and balance sheet” sections of this report for further details about the temporary FINMA exemption. 77 Refer to the “Capital, liquidity and funding, and balance sheet” section of
this report for more information. 88 Consists of invested assets for Global Wealth Management, Asset Management and Personal & Corporate Banking. Refer to “Note 32 Invested assets and net new money” in
the “Consolidated financial statements” section of this report for more information. 99 Refer to “UBS shares” in the “Capital, liquidity and funding, and balance sheet” section of this report for more information.
Events subsequent to the publication of the unaudited fourth quarter 2020 report
The 2020 results and the balance sheet as of 31 December 2020 differ from those presented in the unaudited fourth quarter 2020
report published on 26 January 2021 as a result of events adjusted for after the balance sheet date. Provisions for litigation,
regulatory and similar matters increased, which reduced 2020 operating profit before tax and 2020 net profit attributable to
shareholders each by USD 72 million. As a result, basic earnings per share decreased by USD 0.02 and diluted earnings per share
decreased by USD 0.02.
Terms used in this report, unless the context requires otherwise
“UBS,” “UBS Group,” “UBS Group AG consolidated,” “Group,”
“the Group,” “we,” “us” and “our”
UBS Group AG and its consolidated subsidiaries
“UBS AG consolidated”
UBS AG and its consolidated subsidiaries
“UBS Group AG” and “UBS Group AG standalone”
UBS Group AG on a standalone basis
“UBS AG” and “UBS AG standalone”
UBS AG on a standalone basis
“UBS Switzerland AG” and “UBS Switzerland AG standalone”
UBS Switzerland AG on a standalone basis
“UBS Europe SE consolidated”
UBS Europe SE and its consolidated subsidiaries
“UBS Americas Holding LLC” and
“UBS Americas Holding LLC consolidated”
UBS Americas Holding LLC and its consolidated subsidiaries
In this report, unless the context requires otherwise, references to any gender shall apply to all genders.
8
9
9
Our Board of Directors
Axel A. Weber Chairman of the Board of Directors /Chairperson of
the Corporate Culture and Responsibility Committee/Chairperson of the
Governance and Nominating Committee
Jeremy Anderson Vice Chairman and Senior Independent
Director/Chairperson of the Audit Committee/member of the
Governance and Nominating Committee
Beatrice Weder di Mauro Member of the Audit Committee / member
of the Corporate Culture and Responsibility Committee
William C. Dudley Member of the Corporate Culture and
Responsibility Committee / member of the Governance and
Nominating Committee / member of the Risk Committee
Reto Francioni Member of the Compensation Committee / member
of the Risk Committee
Jeanette Wong Member of the Audit Committee/member of
the Compensation Committee/member of the Corporate Culture and
Responsibility Committee
10
10
Our Board of Directors
10
Nathalie Rachou Member of the Risk Committee
Dieter Wemmer Member of the Audit Committee/member of
the Compensation Committee/member of the Governance and
Nominating Committee
Julie G. Richardson Chairperson of the Compensation Committee/
member of the Governance and Nominating Committee/member of the
Risk Committee
Mark Hughes Chairperson of the Risk Committee/member of the
Corporate Culture and Responsibility Committee
Fred Hu Member of the Governance and Nominating Committee/member
of the Risk Committee
The Board of Directors (BoD) of UBS Group AG, under the
leadership of the Chairman, consists of between 6 to 12 members
as per our Articles of Association. The BoD decides on the strategy
of the Group upon recommendation by the Group Chief Executive
Officer (Group CEO) and is responsible for the overall direction,
supervision and control of the Group and its management, as well
as for supervising compliance with applicable laws, rules and
regulations. The BoD exercises oversight over UBS Group AG and
its subsidiaries and is responsible for establishing a clear Group
framework
governance
to provide effective steering and
supervision of the Group, taking into account the material risks to
which UBS Group AG and its subsidiaries are exposed. The BoD
has ultimate responsibility for the success of the Group and for
delivering sustainable shareholder value within a framework of
prudent and effective controls, approves all financial statements
for issue and appoints and removes all Group Executive Board
(GEB) members.
11
11
Our Group Executive Board
UBS Group AG operates under a strict dual board structure, as
mandated by Swiss banking law, and therefore the BoD delegates
the management of the business to the GEB. Under the leadership
of the Group CEO, the GEB was comprised of 13 members as of
31 December 2020 and has executive management responsibility
for the steering of the Group and its business. It assumes overall
responsibility for developing and implementing the strategies of
the Group, business divisions and Group functions, as approved
by the BoD.
› Refer to “Board of Directors” and “Group Executive Board” in the
“Corporate governance” section of this report or to ubs.com/bod
and ubs.com/geb for the full biographies of our BoD and GEB
members
Ralph A. J.G. Hamers Group Chief Executive Officer
Christian Bluhm Group Chief Risk Officer
Suni Harford President Asset Management
Markus U. Diethelm Group General Counsel
Edmund Koh President UBS Asia Pacific
Sabine Keller-Busse President Personal & Corporate Banking and
President UBS Switzerland (from 1 February 2021)
Group Chief Operating Officer ad interim
12
12
Our Group Executive Board
UBS Group AG operates under a strict dual board structure, as
mandated by Swiss banking law, and therefore the BoD delegates
the management of the business to the GEB. Under the leadership
› Refer to “Board of Directors” and “Group Executive Board” in the
“Corporate governance” section of this report or to ubs.com/bod
and ubs.com/geb for the full biographies of our BoD and GEB
of the Group CEO, the GEB was comprised of 13 members as of
members
31 December 2020 and has executive management responsibility
for the steering of the Group and its business. It assumes overall
responsibility for developing and implementing the strategies of
the Group, business divisions and Group functions, as approved
by the BoD.
Kirt Gardner Group Chief Financial Officer
Tom Naratil Co-President Global Wealth Management and
President UBS Americas
Markus Ronner Group Chief Compliance and Governance Officer
Iqbal Khan Co-President Global Wealth Management and
(since 1 February 2021) President UBS Europe, Middle East and Africa
Axel P. Lehmann President Personal & Corporate Banking and
President UBS Switzerland (until 31 January 2021)
Robert Karofsky Co-President Investment Bank
12
Piero Novelli Co-President Investment Bank
13
Our evolution
Since our origins in the mid-19th century, many financial
institutions have become part of the history of our firm and
helped shape our development. 1998 was a major turning point:
two of the three largest Swiss banks, Union Bank of Switzerland
and Swiss Bank Corporation (SBC), merged to form UBS. Both
banks were well established and successful in their own right.
Union Bank of Switzerland had grown organically to become the
largest Swiss bank. In contrast, SBC had grown mainly through
strategic partnerships and acquisitions, including S.G. Warburg
in 1995.
In 2000, we acquired PaineWebber, a US brokerage and asset
management firm with roots going back to 1879, establishing
us as a significant player in the US. Over the past 50 years, we
have also built a strong presence in the Asia Pacific region,
where we are the largest wealth manager (by invested assets), a
top-tier investment bank and an established player in asset
management.
After incurring significant losses in the 2008 financial crisis, in
2011 we started a strategic transformation toward a business
model focused on our core businesses: wealth management,
and personal and corporate banking in Switzerland. We sought
to revert to our roots, emphasizing a client-centric model that
requires
less risk-taking and capital, and we successfully
completed that transformation.
Today, we are a global financial services firm, the largest truly
global wealth manager with over USD 3.0 trillion in invested
assets, a leading Swiss personal and corporate bank, a large-
scale and diversified global asset manager and a focused
investment bank.
In 2014, we began adapting our legal entity structure in
response to too-big-to-fail requirements and other regulatory
initiatives. First, we established UBS Group AG as the ultimate
parent holding company for the Group. In 2015, we transferred
personal and corporate banking and Swiss-booked wealth
management businesses from UBS AG to the newly established
UBS Switzerland AG. That same year we set up UBS Business
Solutions AG as the Group’s service company. In 2016, UBS
Americas Holding LLC became the
intermediate holding
company for our US subsidiaries and our wealth management
subsidiaries across Europe were merged into UBS Europe SE. In
2019, we merged UBS Limited, our UK-headquartered
subsidiary, into UBS Europe SE, our Germany-headquartered
European subsidiary.
The chart below gives an overview of our principal legal
entities and our legal entity structure.
› Refer to ubs.com/history for more information
› Refer to the “Risk factors” and “Regulatory and legal
developments” sections of this report for more information
The legal structure of the UBS Group as of 5 March 2021
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(cid:19)(cid:2)(cid:52)(cid:71)(cid:72)(cid:71)(cid:84)(cid:2)(cid:86)(cid:81)(cid:2)(cid:112)(cid:48)(cid:81)(cid:86)(cid:71)(cid:2)(cid:20)(cid:26)(cid:2)(cid:43)(cid:80)(cid:86)(cid:71)(cid:84)(cid:71)(cid:85)(cid:86)(cid:85)(cid:2)(cid:75)(cid:80)(cid:2)(cid:85)(cid:87)(cid:68)(cid:85)(cid:75)(cid:70)(cid:75)(cid:67)(cid:84)(cid:75)(cid:71)(cid:85)(cid:2)(cid:67)(cid:80)(cid:70)(cid:2)(cid:81)(cid:86)(cid:74)(cid:71)(cid:84)(cid:2)(cid:71)(cid:80)(cid:86)(cid:75)(cid:86)(cid:75)(cid:71)(cid:85)(cid:113)(cid:2)(cid:75)(cid:80)(cid:2)(cid:86)(cid:74)(cid:71)(cid:2)(cid:112)(cid:37)(cid:81)(cid:80)(cid:85)(cid:81)(cid:78)(cid:75)(cid:70)(cid:67)(cid:86)(cid:71)(cid:70)(cid:2)(cid:386)(cid:80)(cid:67)(cid:80)(cid:69)(cid:75)(cid:67)(cid:78)(cid:2)(cid:85)(cid:86)(cid:67)(cid:86)(cid:71)(cid:79)(cid:71)(cid:80)(cid:86)(cid:85)(cid:113)(cid:2)(cid:85)(cid:71)(cid:69)(cid:86)(cid:75)(cid:81)(cid:80)(cid:2)(cid:81)(cid:72)(cid:2)(cid:86)(cid:74)(cid:75)(cid:85)(cid:2)(cid:84)(cid:71)(cid:82)(cid:81)(cid:84)(cid:86)(cid:2)(cid:72)(cid:81)(cid:84)(cid:2)(cid:79)(cid:81)(cid:84)(cid:71)(cid:2)(cid:75)(cid:80)(cid:72)(cid:81)(cid:84)(cid:79)(cid:67)(cid:86)(cid:75)(cid:81)(cid:80)(cid:2)(cid:67)(cid:68)(cid:81)(cid:87)(cid:86)(cid:2)(cid:55)(cid:36)(cid:53)(cid:111)(cid:85)(cid:2)(cid:85)(cid:87)(cid:68)(cid:85)(cid:75)(cid:70)(cid:75)(cid:67)(cid:84)(cid:75)(cid:71)(cid:85)(cid:14)(cid:2)(cid:75)(cid:80)(cid:69)(cid:78)(cid:87)(cid:70)(cid:75)(cid:80)(cid:73)(cid:2)(cid:75)(cid:80)(cid:70)(cid:75)(cid:88)(cid:75)(cid:70)(cid:87)(cid:67)(cid:78)(cid:78)(cid:91)(cid:2)(cid:85)(cid:75)(cid:73)(cid:80)(cid:75)(cid:386)(cid:69)(cid:67)(cid:80)(cid:86)(cid:2)(cid:85)(cid:87)(cid:68)(cid:85)(cid:75)(cid:70)(cid:75)(cid:67)(cid:84)(cid:75)(cid:71)(cid:85)(cid:2)
(cid:67)(cid:80)(cid:70)(cid:2)(cid:85)(cid:87)(cid:68)(cid:15)(cid:73)(cid:84)(cid:81)(cid:87)(cid:82)(cid:85)(cid:16)(cid:2) (cid:20)(cid:2)(cid:55)(cid:36)(cid:53)(cid:2)(cid:46)(cid:75)(cid:79)(cid:75)(cid:86)(cid:71)(cid:70)(cid:2)(cid:89)(cid:67)(cid:85)(cid:2)(cid:79)(cid:71)(cid:84)(cid:73)(cid:71)(cid:70)(cid:2)(cid:75)(cid:80)(cid:86)(cid:81)(cid:2)(cid:55)(cid:36)(cid:53)(cid:2)(cid:39)(cid:87)(cid:84)(cid:81)(cid:82)(cid:71)(cid:2)(cid:53)(cid:39)(cid:2)(cid:71)(cid:72)(cid:72)(cid:71)(cid:69)(cid:86)(cid:75)(cid:88)(cid:71)(cid:2)(cid:19)(cid:2)(cid:47)(cid:67)(cid:84)(cid:69)(cid:74)(cid:2)(cid:20)(cid:18)(cid:19)(cid:27)(cid:16)(cid:2) (cid:21)(cid:2)(cid:49)(cid:86)(cid:74)(cid:71)(cid:84)(cid:2)(cid:85)(cid:75)(cid:73)(cid:80)(cid:75)(cid:386)(cid:69)(cid:67)(cid:80)(cid:86)(cid:2)(cid:80)(cid:81)(cid:80)(cid:15)(cid:55)(cid:53)(cid:2)(cid:85)(cid:87)(cid:68)(cid:85)(cid:75)(cid:70)(cid:75)(cid:67)(cid:84)(cid:75)(cid:71)(cid:85)(cid:2)(cid:67)(cid:84)(cid:71)(cid:2)(cid:73)(cid:71)(cid:80)(cid:71)(cid:84)(cid:67)(cid:78)(cid:78)(cid:91)(cid:2)(cid:74)(cid:71)(cid:78)(cid:70)(cid:2)(cid:71)(cid:75)(cid:86)(cid:74)(cid:71)(cid:84)(cid:2)(cid:70)(cid:75)(cid:84)(cid:71)(cid:69)(cid:86)(cid:78)(cid:91)(cid:2)(cid:68)(cid:91)(cid:2)(cid:55)(cid:36)(cid:53)(cid:2)(cid:35)(cid:41)(cid:2)(cid:81)(cid:84)(cid:2)(cid:75)(cid:80)(cid:70)(cid:75)(cid:84)(cid:71)(cid:69)(cid:86)(cid:78)(cid:91)(cid:2)(cid:86)(cid:74)(cid:84)(cid:81)(cid:87)(cid:73)(cid:74)(cid:2)(cid:55)(cid:36)(cid:53)(cid:2)(cid:53)(cid:89)(cid:75)(cid:86)(cid:92)(cid:71)(cid:84)(cid:78)(cid:67)(cid:80)(cid:70)(cid:2)(cid:35)(cid:41)(cid:2)
(cid:81)(cid:84)(cid:2)(cid:55)(cid:36)(cid:53)(cid:2)(cid:35)(cid:85)(cid:85)(cid:71)(cid:86)(cid:2)(cid:47)(cid:67)(cid:80)(cid:67)(cid:73)(cid:71)(cid:79)(cid:71)(cid:80)(cid:86)(cid:2)(cid:35)(cid:41)(cid:16)(cid:2)
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(cid:43)(cid:80)(cid:69)(cid:16)(cid:2)(cid:81)(cid:84)(cid:2)(cid:75)(cid:80)(cid:70)(cid:75)(cid:84)(cid:71)(cid:69)(cid:86)(cid:78)(cid:91)(cid:2)(cid:86)(cid:74)(cid:84)(cid:81)(cid:87)(cid:73)(cid:74)(cid:2)(cid:55)(cid:36)(cid:53)(cid:2)(cid:40)(cid:75)(cid:80)(cid:67)(cid:80)(cid:69)(cid:75)(cid:67)(cid:78)(cid:2)(cid:53)(cid:71)(cid:84)(cid:88)(cid:75)(cid:69)(cid:71)(cid:85)(cid:2)(cid:43)(cid:80)(cid:69)(cid:16)
(cid:22)(cid:2)(cid:49)(cid:72)(cid:2)(cid:89)(cid:74)(cid:75)(cid:69)(cid:74)(cid:2)(cid:27)(cid:27)(cid:7)(cid:2)(cid:70)(cid:75)(cid:84)(cid:71)(cid:69)(cid:86)(cid:78)(cid:91)(cid:2)(cid:74)(cid:71)(cid:78)(cid:70)(cid:2)(cid:68)(cid:91)(cid:2)(cid:55)(cid:36)(cid:53)(cid:2)(cid:35)(cid:79)(cid:71)(cid:84)(cid:75)(cid:69)(cid:67)(cid:85)(cid:2)(cid:43)(cid:80)(cid:69)(cid:16)(cid:2)(cid:67)(cid:80)(cid:70)(cid:2)(cid:19)(cid:7)(cid:2)(cid:74)(cid:71)(cid:78)(cid:70)(cid:2)(cid:68)(cid:91)(cid:2)(cid:55)(cid:36)(cid:53)(cid:2)(cid:35)(cid:79)(cid:71)(cid:84)(cid:75)(cid:69)(cid:67)(cid:85)(cid:2)(cid:42)(cid:81)(cid:78)(cid:70)(cid:75)(cid:80)(cid:73)(cid:2)(cid:46)(cid:46)(cid:37)(cid:16)(cid:2)
14
14
Our strategy,
business
model and
environment
Management report
1
Our strategy, business model and environment | Our strategy
Our strategy
Our strategy is centered around our clients: how we can make the
most of our capabilities across the firm to help them achieve their
financial goals, whether they are wealthy individuals, retail clients,
or corporations and institutions. We aim to drive attractive
shareholder returns by growing and leveraging our unique,
integrated and complementary business portfolio and geographic
footprint.
UBS is the largest truly global wealth manager, and a leading
personal and corporate bank in Switzerland, with a large-scale
and diversified global asset manager and a focused investment
bank. We concentrate on capital-efficient businesses in targeted
markets where we have a strong competitive position and an
attractive long-term growth or profitability outlook. We view
capital strength as the foundation of our strategy.
In delivering all of UBS as one firm to our clients, we intend
to: strengthen our leading client franchises and grow share;
position UBS for growth by expanding our services and
capabilities; drive greater efficiencies and scale; and further
intensify the joint efforts across the firm for the benefit of our
clients.
Driving increasing shareholder returns
We manage UBS for the long term, focusing on sustainable
profit growth and responsible resource deployment. We aim to
balance growth opportunities with cost and capital efficiency, in
order to drive attractive risk-adjusted returns and sustainable
performance.
In Global Wealth Management, we are focused on remaining
close to clients, increasing time spent with them, empowering
regions and improving our responsiveness and speed to market,
as well as delivering on all of the firm’s capabilities through joint
efforts with the Investment Bank and Asset Management.
Furthermore, we are expanding our product offering while
becoming more efficient, leveraging scale through partnerships,
and optimizing processes to increase productivity. As a result of
this, we aim to increase profit before tax by 10–15% annually
over the cycle and drive higher pre-tax margins by elevating our
leading franchise.
In the Investment Bank, we intend to improve returns
sustainably by driving profitable growth, by further optimizing
resources and through collaboration. We will maintain our
capital-light business model that is focused on advice and
execution and leverages our digital capabilities. Together with
the other business divisions, and through external partnerships,
we aim to deliver market-leading digital, research and banking
capabilities to our clients, while consuming up to one-third of
Group resources.
In Asset Management, we are capitalizing on our
differentiated client offering
further growth,
performance and scale. We plan to build on our strengths in
fast-growing areas of the industry, such as sustainable investing,
private markets and alternative investments.
to achieve
In Personal & Corporate Banking, we aim to enhance our
digital initiatives and services while improving efficiency in order
to deliver steady profit growth. By expanding our leading
position in digital services in Switzerland, along with broadening
our advisory solutions and products offering, we expect to
increase profits despite the current negative interest rate
environment, although we do face headwinds due to the
uncertainty resulting from the COVID-19 pandemic.
We want to deliver more as one firm to our clients. Joint
efforts across our business divisions are critical to the success of
our strategy and a source of competitive advantage. This
collaboration also provides further revenue growth potential and
enables us to better meet client needs.
We are fully committed to our sustainability activities,
through which we aim to maximize the positive effects of such
investments while mitigating negative impacts. Our growing
range of sustainable finance products and services enables us to
help our clients to mobilize capital toward the achievement of
specific environmental or social outcomes. Our goal is to be the
financial provider of choice for these clients. During 2020, we
became the first major global financial institution to make
sustainable investments the preferred solution for private clients
investing globally.
Our environmental and social risk framework helps us to
better understand and respond to potential risks to the
environment and human rights.
We are widely recognized for our sustainable practices. During
2020 we were named an industry leader in the Dow Jones
Sustainability Indices, for the sixth consecutive year, rated AA by
MSCI and included in CDP’s Climate change A List.
› Refer to “Society” and “Our focus on sustainability” in the “How
we create value for our stakeholders” section of this report for
more information about our engagement and leadership in
sustainability matters
› Refer to the Sustainability Report 2020, available from 11 March
2021 under “Annual reporting” at ubs.com/investors, for more
information
We aim to drive improvements in firm-wide efficiency to fund
growth and enhance returns. We believe continued optimization
of our processes, platforms, organization and capital resources
will help us to achieve this.
Our targets for the immediate future include realizing the
benefits of existing external partnerships and exploring select
new opportunities.
We see technology as a key lever to differentiate the services
we offer our clients, through an omni-channel experience and
leveraging insights from data and connectivity, while enabling
our firm to operate more effectively and efficiently. Our aim is to
enable our clients and staff to work and interact in an easy,
flexible and productive way. As we transform our infrastructure
to support new products and channels, we can anticipate and
address our clients’ preference for digital interactions and
services, while also gaining new insights through effective data
management. This enables the development of responsible
artificial intelligence for better tailoring our client and employee
experience. Underpinning all of this, we prioritize availability and
reliability, supporting system and application stability.
16
16
Attractive capital return profile
We plan to maintain an attractive capital return profile through
dividends and share repurchases. Our capital strength and
capital-accretive business model enable us to grow our business
while delivering attractive capital returns to our shareholders.
The balance between cash dividends and share repurchases
has been adjusted from 2020 onward, with a greater weight
toward share repurchases as compared with prior years’ returns.
We remain committed to returning excess capital to our
shareholders and delivering total capital returns consistent with
our previous levels. We intend to propose an ordinary dividend
per share of USD 0.37 for the 2020 financial year, to be
approved at the 2021 general meeting of shareholders. In
addition, before COVID-related restrictions on share repurchases
were introduced, we repurchased CHF 350 million (USD 364
million) of our shares, and in the second half of 2020, we built a
capital reserve of USD 2.0 billion for potential share repurchases.
For reference, total capital returns to shareholders for the 2019
financial year were USD 3.4 billion. In the first quarter of 2021,
we repurchased the remaining CHF 100 million of our 2018–
2021 USD 2 billion share repurchase program, which is now
complete and closed. On 8 February 2021, we commenced a
new three-year share repurchase program of up to CHF 4 billion,
of which we expect to execute up to USD 1 billion by the end of
the first quarter of 2021. We consider business conditions and
developments or strategic opportunities when determining
excess capital available for share repurchases.
Strategic update
On 26 January 2021, our Group CEO outlined the focus areas to
deliver on UBS’s future, with strategic updates to be provided
during the second quarter of 2021 and beyond. We are
currently conducting thorough firm-wide reviews so as to be fit
for the future and to capture growth opportunities. We will look
to become more flexible and agile, while delivering the firm to
our clients in a seamless way. As part of this process, we are
enhancing accountability, and reviewing metrics and targets to
deliver attractive shareholder returns.
Our strategy, business model and environment | Our strategy
Our strategy
Our strategy is centered around our clients: how we can make the
position in digital services in Switzerland, along with broadening
most of our capabilities across the firm to help them achieve their
our advisory solutions and products offering, we expect to
financial goals, whether they are wealthy individuals, retail clients,
increase profits despite the current negative interest rate
or corporations and institutions. We aim to drive attractive
environment, although we do face headwinds due to the
shareholder returns by growing and leveraging our unique,
uncertainty resulting from the COVID-19 pandemic.
integrated and complementary business portfolio and geographic
We want to deliver more as one firm to our clients. Joint
footprint.
efforts across our business divisions are critical to the success of
UBS is the largest truly global wealth manager, and a leading
our strategy and a source of competitive advantage. This
personal and corporate bank in Switzerland, with a large-scale
collaboration also provides further revenue growth potential and
and diversified global asset manager and a focused investment
enables us to better meet client needs.
bank. We concentrate on capital-efficient businesses in targeted
We are fully committed to our sustainability activities,
markets where we have a strong competitive position and an
through which we aim to maximize the positive effects of such
attractive long-term growth or profitability outlook. We view
investments while mitigating negative impacts. Our growing
capital strength as the foundation of our strategy.
range of sustainable finance products and services enables us to
In delivering all of UBS as one firm to our clients, we intend
help our clients to mobilize capital toward the achievement of
to: strengthen our leading client franchises and grow share;
specific environmental or social outcomes. Our goal is to be the
position UBS for growth by expanding our services and
financial provider of choice for these clients. During 2020, we
capabilities; drive greater efficiencies and scale; and further
became the first major global financial institution to make
intensify the joint efforts across the firm for the benefit of our
sustainable investments the preferred solution for private clients
clients.
investing globally.
Driving increasing shareholder returns
Our environmental and social risk framework helps us to
better understand and respond to potential risks to the
environment and human rights.
We manage UBS for the long term, focusing on sustainable
We are widely recognized for our sustainable practices. During
profit growth and responsible resource deployment. We aim to
2020 we were named an industry leader in the Dow Jones
balance growth opportunities with cost and capital efficiency, in
Sustainability Indices, for the sixth consecutive year, rated AA by
order to drive attractive risk-adjusted returns and sustainable
MSCI and included in CDP’s Climate change A List.
performance.
In Global Wealth Management, we are focused on remaining
close to clients, increasing time spent with them, empowering
› Refer to “Society” and “Our focus on sustainability” in the “How
we create value for our stakeholders” section of this report for
more information about our engagement and leadership in
regions and improving our responsiveness and speed to market,
sustainability matters
as well as delivering on all of the firm’s capabilities through joint
efforts with the Investment Bank and Asset Management.
› Refer to the Sustainability Report 2020, available from 11 March
2021 under “Annual reporting” at ubs.com/investors, for more
Furthermore, we are expanding our product offering while
information
becoming more efficient, leveraging scale through partnerships,
and optimizing processes to increase productivity. As a result of
We aim to drive improvements in firm-wide efficiency to fund
this, we aim to increase profit before tax by 10–15% annually
growth and enhance returns. We believe continued optimization
over the cycle and drive higher pre-tax margins by elevating our
of our processes, platforms, organization and capital resources
leading franchise.
will help us to achieve this.
In the Investment Bank, we intend to improve returns
Our targets for the immediate future include realizing the
sustainably by driving profitable growth, by further optimizing
benefits of existing external partnerships and exploring select
resources and through collaboration. We will maintain our
new opportunities.
capital-light business model that is focused on advice and
We see technology as a key lever to differentiate the services
execution and leverages our digital capabilities. Together with
we offer our clients, through an omni-channel experience and
the other business divisions, and through external partnerships,
leveraging insights from data and connectivity, while enabling
we aim to deliver market-leading digital, research and banking
our firm to operate more effectively and efficiently. Our aim is to
capabilities to our clients, while consuming up to one-third of
enable our clients and staff to work and interact in an easy,
Group resources.
flexible and productive way. As we transform our infrastructure
In Asset Management, we are capitalizing on our
to support new products and channels, we can anticipate and
differentiated client offering
to achieve
further growth,
address our clients’ preference for digital interactions and
performance and scale. We plan to build on our strengths in
services, while also gaining new insights through effective data
fast-growing areas of the industry, such as sustainable investing,
management. This enables the development of responsible
private markets and alternative investments.
artificial intelligence for better tailoring our client and employee
In Personal & Corporate Banking, we aim to enhance our
experience. Underpinning all of this, we prioritize availability and
digital initiatives and services while improving efficiency in order
reliability, supporting system and application stability.
to deliver steady profit growth. By expanding our leading
16
17
17
Our strategy, business model and environment
Our strategy, business model and environment | Performance targets and capital guidance
Performance targets and capital guidance
The table below shows the performance targets and capital
guidance, based on reported results.
› Refer to “Alternative performance measures” in the appendix to
this report for definitions of and further information about our
Performance against targets and capital guidance is taken
into account when determining variable compensation.
› Refer to the “Compensation” section of this report for more
information about variable compensation
performance measures
Targets and capital guidance
(on a reported basis)
Group returns
12–15% return on CET1 capital (RoCET1)
Cost efficiency
Positive operating leverage and 75–78% cost / income ratio
Growth
10–15% profit before tax growth in Global Wealth Management over the cycle
Capital allocation
Up to 1⁄3 of Group RWA and LRD in the Investment Bank
Capital guidance
~13% CET1 capital ratio
>3.7% CET1 leverage ratio
18
18
Our strategy, business model and environment | Performance targets and capital guidance
Performance targets and capital guidance
The table below shows the performance targets and capital
Performance against targets and capital guidance is taken
guidance, based on reported results.
into account when determining variable compensation.
› Refer to “Alternative performance measures” in the appendix to
› Refer to the “Compensation” section of this report for more
this report for definitions of and further information about our
information about variable compensation
performance measures
Targets and capital guidance
(on a reported basis)
Group returns
12–15% return on CET1 capital (RoCET1)
Cost efficiency
Positive operating leverage and 75–78% cost / income ratio
Growth
10–15% profit before tax growth in Global Wealth Management over the cycle
Capital allocation
Up to 1⁄3 of Group RWA and LRD in the Investment Bank
Capital guidance
~13% CET1 capital ratio
>3.7% CET1 leverage ratio
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Our businesses
Delivering as one firm
Personal & Corporate
We operate through four business divisions: Global Wealth
Banking, Asset
Management,
Management and the Investment Bank. Our global reach and the
breadth of our expertise are major assets setting us apart from our
competitors.
We see joint efforts as key to our growth, both within and
between business divisions. We are at our best when we
How we deliver the whole firm to our clients – examples
strengths
to provide our
combine our
clients more
comprehensive and better solutions through, for example, a
unified
capital markets group across Global Wealth
Management and the Investment Bank, and a Global Family
Office joint venture. Initiatives such as the Group Franchise
Awards encourage employees to look for ways to build bridges
across teams and offer the whole firm to our clients.
Wealth Management
Platforms
The Wealth Management Platform
is shared between Global Wealth
Management Switzerland &
International and Personal &
Corporate Banking in Switzerland.
This platform can be navigated
intuitively and supports strong
advice capabilities across all
channels, thus helping our clients to
benefit from a broader universe
of products and services, simplified
onboarding and a better banking
experience. In the US, our innovative
partnership with Broadridge is
aimed at revamping the technology
used for our financial advisors’
workstations, thus improving their
productivity.
Separately managed
accounts (SMAs) in the
Americas
In the US, we have combined the
portfolio management and related
execution resources from across
Global Wealth Management and
Asset Management within Asset
Management. Alongside this, in
January 2020, we introduced
a new approach enabling Global
Wealth Management clients to
access selected SMA strategies in
the Americas with no additional
management fee for the clients.
This transformative move allows our
financial advisors to focus on
delivering the best ideas, solutions
and capabilities to our clients –
regardless of where they originate
in the firm – and positions UBS as
an industry leader.
Global Wealth
Management
Asset
Management
Personal
&
Corporate
Banking
Investment
Bank
Shifts
and referrals
Personal & Corporate Banking
initiates client asset shifts and client
referrals to other business divisions
to ensure that our clients are best
served, based on their needs, and
fosters growth by delivering the
entire firm’s value proposition to
our clients. For example, personal
banking clients whose needs in
terms of investing have become
more complex are shifted to Global
Wealth Management’s high
net worth individuals and affluent
segments, and corporate and
institutional segment clients are
referred to Asset Management for
pension fund solutions or the
Investment Bank for capital market
and corporate transactions, so as to
deliver the entire firm to our clients.
Global Family
Office
Our Global Family Office unit brings
together the capabilities of Global
Wealth Management, Asset
Management and the Investment
Bank to leverage growth
opportunities and deliver holistic
solutions. It provides customized,
institutional-style services to
wealthy families and individuals
seeking access to, or advice on,
capital market activities.
Global
Lending
We have introduced a new Global
Lending team: a cross-divisional
group designed to serve the
financing and lending needs of all
UBS clients around the world. The
team aims to provide a faster,
simpler and more client-centric
approach that establishes a single,
global center of excellence that will
look to strengthen UBS’s financing
and lending capabilities in every
region. It expands the UBS product
offering to meet the needs of all
our clients, whether individuals or
families, professional family offices,
corporations or large institutions.
The team also aligns UBS’s best
talent and resources by integrating
Global Wealth Management and
Investment Bank financing, lending
and risk management experts in
one team.
Unified capital
markets group
We are continuing to develop a
strategic partnership between
Global Wealth Management and
the Investment Bank that is
focused on growth – in our ultra
high net worth, middle market
institutions and public finance
businesses – and identifying
synergies across the supporting
infrastructure. This important
initiative includes creating a unified
capital markets team, integrating
risk management systems and
simplifying our regional operating
processes.
18
19
19
Our strategy, business model and environment | Our businesses
Global Wealth Management
As the largest truly global wealth manager, with over USD 3.0
trillion in invested assets, our goal is providing tailored advice
and solutions to wealthy individuals and families.
More than 22,000 Global Wealth Management employees
help clients achieve their goals. We are proud to serve our ultra
high net worth and global family office (GFO) clients, where our
presence is particularly strong, and we have access to the
majority of billionaires worldwide.1
Organizational changes
In January 2020, we announced several initiatives designed to
achieve Global Wealth Management’s growth ambitions and to
elevate the quality and value of services delivered to clients.
Three distinct business units in EMEA were created – Europe;
Central and Eastern Europe, Greece and Israel; and the Middle
East and Africa – to better capture the diverse opportunities in
these markets. In May 2020, we introduced the new Global
Lending team, a cross-divisional group designed to serve the
financing and lending needs of UBS clients worldwide using a
faster, simpler and more client-centric approach that establishes
a single global center of excellence to strengthen UBS’s
financing and lending capabilities in every region. We also
further strengthened our joint efforts with the Investment Bank
and Asset Management so as to better deliver all of the firm’s
capabilities to clients.
As part of our organizational changes, ultra high net worth
client relationships and advisors were integrated into our
regional business units to increase speed to market and
proximity to clients. By combining our capital markets teams
across Global Wealth Management and the Investment Bank,
we are able to provide clients with an enhanced offering, faster
execution and more competitive conditions.
Our focus
We serve high net worth and ultra high net worth individuals,
families and family offices worldwide, as well as affluent clients
in selected markets. Our dedicated GFO unit works with ultra
individuals and their families to deliver
high net worth
sustainable financial returns and long-lasting impact. In addition
to extensive global wealth management services, it provides
access to our
Investment Bank and Asset Management
capabilities across geographies.
Already a market leader in the ultra high net worth segment
outside the US,2 we believe we can also become the firm of
choice for the wealthiest clients in the US, many of whom
already have relationships with UBS. Our diversified global
footprint allows us to capture growth in the largest and the
fastest-growing wealth markets (the US and Asia Pacific,
respectively).
Through the expertise of our Chief Investment Office, we
focus on increasing mandate and lending penetration, delivering
innovative solutions for clients (e.g., structured solutions, private
markets, sustainability and other types of thematic investing),
and enhancing advisor productivity by making operational
processes more efficient. We also look to maintain low attrition
and increase our share of clients’ business.
Our investment in operating platforms and tools that support
our clients and client advisors is aimed at better serving our
clients’ needs and improving efficiency. As of 31 December
2020, some 85% of invested assets outside the Americas were
booked on our strategic Wealth Management Platform. In the
US, in collaboration with software provider Broadridge, we are
building the Wealth Management Americas Platform, for which
we expect to complete first phase software delivery in 2021. The
development of our platforms
is happening alongside
enhancements to our digital capabilities, for the benefit of our
clients and advisors.
› Refer to “Clients” in the “How we create value for our
stakeholders” section of this report for more information about
innovation and digitalization
How we operate
Our global footprint and presence in the world’s largest and
fastest-growing markets position us well to serve clients with
global interests and demands. The US is our largest market,
accounting for around half of our invested assets. We are the
largest wealth manager in Asia Pacific and second largest in
Latin America, in terms of invested assets.2
In Switzerland, we hold a leading market position2 and can
deploy the full range of UBS’s products and services across all
business divisions. Our broad domestic footprint in Europe
allows us to provide locally adapted offerings, and our local
offices across Central Europe, the Middle East and Africa keep
us close to our clients.
Joint efforts with the Investment Bank, Asset Management
and selected external partners enable us to offer clients broad
access to financing, global capital markets and portfolio
solutions.
› Refer to “Delivering as one firm” in this section for examples of
the joint efforts of the business divisions
Our competitors fall into two categories: peers, such as
Morgan Stanley and JP Morgan, with a strong position in the
Americas but more limited global footprints; and peers with
similar international footprints and operating models, such as
Credit Suisse and Julius Baer, but with significantly smaller
presences than UBS in the US. In addition, we have strategically
strong positions in the fastest-growing client segment (ultra high
net worth) and region
(Asia Pacific). The size and the
diversification of our footprint, as well as our premium brand
and reputation, would be difficult and expensive to replicate.
11 Based on UBS internal analysis.
22 Statements of market position for Global Wealth Management are UBS’s estimates based on published invested assets and internal estimates.
20
20
Our strategy, business model and environment | Our businesses
Global Wealth Management
As the largest truly global wealth manager, with over USD 3.0
Through the expertise of our Chief Investment Office, we
trillion in invested assets, our goal is providing tailored advice
focus on increasing mandate and lending penetration, delivering
and solutions to wealthy individuals and families.
innovative solutions for clients (e.g., structured solutions, private
More than 22,000 Global Wealth Management employees
markets, sustainability and other types of thematic investing),
help clients achieve their goals. We are proud to serve our ultra
and enhancing advisor productivity by making operational
high net worth and global family office (GFO) clients, where our
processes more efficient. We also look to maintain low attrition
presence is particularly strong, and we have access to the
and increase our share of clients’ business.
majority of billionaires worldwide.1
Organizational changes
Our investment in operating platforms and tools that support
our clients and client advisors is aimed at better serving our
clients’ needs and improving efficiency. As of 31 December
2020, some 85% of invested assets outside the Americas were
In January 2020, we announced several initiatives designed to
booked on our strategic Wealth Management Platform. In the
achieve Global Wealth Management’s growth ambitions and to
US, in collaboration with software provider Broadridge, we are
elevate the quality and value of services delivered to clients.
building the Wealth Management Americas Platform, for which
Three distinct business units in EMEA were created – Europe;
we expect to complete first phase software delivery in 2021. The
Central and Eastern Europe, Greece and Israel; and the Middle
development of our platforms
is happening alongside
East and Africa – to better capture the diverse opportunities in
enhancements to our digital capabilities, for the benefit of our
these markets. In May 2020, we introduced the new Global
clients and advisors.
Lending team, a cross-divisional group designed to serve the
financing and lending needs of UBS clients worldwide using a
faster, simpler and more client-centric approach that establishes
a single global center of excellence to strengthen UBS’s
› Refer to “Clients” in the “How we create value for our
stakeholders” section of this report for more information about
innovation and digitalization
financing and lending capabilities in every region. We also
How we operate
further strengthened our joint efforts with the Investment Bank
and Asset Management so as to better deliver all of the firm’s
Our global footprint and presence in the world’s largest and
capabilities to clients.
fastest-growing markets position us well to serve clients with
As part of our organizational changes, ultra high net worth
global interests and demands. The US is our largest market,
client relationships and advisors were integrated into our
accounting for around half of our invested assets. We are the
regional business units to increase speed to market and
largest wealth manager in Asia Pacific and second largest in
proximity to clients. By combining our capital markets teams
Latin America, in terms of invested assets.2
across Global Wealth Management and the Investment Bank,
In Switzerland, we hold a leading market position2 and can
we are able to provide clients with an enhanced offering, faster
deploy the full range of UBS’s products and services across all
execution and more competitive conditions.
Our focus
business divisions. Our broad domestic footprint in Europe
allows us to provide locally adapted offerings, and our local
offices across Central Europe, the Middle East and Africa keep
us close to our clients.
We serve high net worth and ultra high net worth individuals,
Joint efforts with the Investment Bank, Asset Management
families and family offices worldwide, as well as affluent clients
and selected external partners enable us to offer clients broad
in selected markets. Our dedicated GFO unit works with ultra
access to financing, global capital markets and portfolio
high net worth
individuals and their families to deliver
solutions.
sustainable financial returns and long-lasting impact. In addition
to extensive global wealth management services, it provides
access to our
Investment Bank and Asset Management
› Refer to “Delivering as one firm” in this section for examples of
the joint efforts of the business divisions
capabilities across geographies.
Our competitors fall into two categories: peers, such as
Already a market leader in the ultra high net worth segment
Morgan Stanley and JP Morgan, with a strong position in the
outside the US,2 we believe we can also become the firm of
Americas but more limited global footprints; and peers with
choice for the wealthiest clients in the US, many of whom
similar international footprints and operating models, such as
already have relationships with UBS. Our diversified global
Credit Suisse and Julius Baer, but with significantly smaller
footprint allows us to capture growth in the largest and the
presences than UBS in the US. In addition, we have strategically
fastest-growing wealth markets (the US and Asia Pacific,
strong positions in the fastest-growing client segment (ultra high
net worth) and region
(Asia Pacific). The size and the
diversification of our footprint, as well as our premium brand
and reputation, would be difficult and expensive to replicate.
11 Based on UBS internal analysis.
22 Statements of market position for Global Wealth Management are UBS’s estimates based on published invested assets and internal estimates.
respectively).
20
7
regional
business units
and our Global
Family Offi ce,
which serves clients globally across the regions
United States
and Canada
Switzerland
Europe
Asia Pacifi c
Latin America
Middle East
and Africa
Central and
Eastern Europe,
Greece and Israel
What we offer
Our distinctive approach to wealth management is designed to
strengthen engagement with our clients and help them achieve
their financial and investing goals.
Operating as a unified business, we aim to offer clients the
best solutions, services and expertise globally. Our experts
provide thought leadership, investment analysis and investment
strategies, and develop and source solutions for our clients. The
Chief
Investment Office provides our UBS House View,
identifying investment opportunities designed to protect and
increase our clients’ wealth over generations. Regional client
strategy teams deepen our understanding of clients’ needs,
behaviors and preferences, enabling us to better tailor our
offerings. Our product specialists deliver investment solutions,
including our flagship investment mandates, innovative long-
term themes and sustainable investment offerings.
Clients benefit from our comprehensive expertise, including
wealth planning, investing, philanthropy, corporate and banking
services, and family advisory services. We also offer extensive
mortgage, securities-based and structured lending expertise.
institution to make sustainable
In September 2020, we became the first major global
financial
investments the
preferred solution for private clients investing globally. This
reflects our belief in sustainable and impact investing from a
performance perspective and increased client demand for
relevant advice and solutions. In line with this view, our 100%-
sustainable
investing portfolios and bespoke sustainable
investing portfolio solutions had grown to over USD 20 billion as
of 31 December 2020, and a new personalized advisory solution
was launched in 2020. This solution, tailored to clients’
individual sustainable investing preferences, continues to gain
traction as it becomes available in additional locations and client
segments.
UBS continues to successfully launch private market impact
offerings related to the Sustainable Development Goals. For
example, in 2020, we launched Oncology Impact Fund II, which
is a biotech venture capital fund that has raised USD 600 million
in client commitments.
› Refer to the Sustainability Report 2020, available from 11 March
2021 under “Annual reporting” at ubs.com/investors, for more
information about sustainability matters
We also continue to broaden our offering across asset classes
and themes, collaborating with external partners, such as
Rockefeller Asset Management, Rethink Impact and Bridge
Investment Group, to provide clients with various differentiated
sustainable and impact investing opportunities.
We work constantly on responding swiftly to changing client
needs. The following three key product developments in 2020
leading
illustrate our efforts to further differentiate our
discretionary and advisory mandate offerings. In March 2020,
we successfully launched UBS Manage Advanced [My Way], a
solution that lets clients truly individualize their portfolios.
› Refer to “Clients” in the “How we create value for our
stakeholders” section of this report for more information about
innovation and digitalization
In April 2020, together with Asset Management, we
launched a premium discretionary offering for our GFO clients,
designed to fully leverage Asset Management’s investment
management and content capabilities, including customized
asset allocations.
In November 2020, as part of our long-term cooperation with
Partners Group, we enhanced our discretionary and advisory
mandate offering by broadening access to private equity. Clients
can diversify their mandates into private equity by accessing fully
paid-in solutions provided by Partners Group and UBS.
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21
Our strategy, business model and environment
Our strategy, business model and environment | Our businesses
Personal & Corporate Banking
As a leading Swiss personal and corporate bank, we provide
comprehensive financial products and services to private,
corporate and institutional clients. Personal & Corporate Banking
is the core of our universal bank delivery model in Switzerland.
Our focus
We aim to provide a superior client experience by combining
excellence
interaction
in personal client relationships and
through new technology. Client service excellence is at the heart
of our business, as was demonstrated in 2020, when we were a
strong partner at the side of corporate clients through the
COVID-19 pandemic. We made available billions of Swiss francs
of liquidity and offered flexibility, for example with amortization
payments. We continue to support our clients with extensive
services, individual advice and a wide range of digital products.
We established several growth initiatives over the course of
2020. One of these was key4, an online platform for financing
owner-occupied homes, which we launched in June 2020. It is a
continuation of the platform business we started in 2017 with
the income-producing real estate mortgage platform UBS
Atrium. As part of an open banking approach, numerous lead
generation partners (mortgage brokers, real estate agents and
business-to-customer platforms) were onboarded in 2020 and
added to key4 and UBS Atrium. Both platforms and partnerships
are central parts of our Swiss digital strategy.
Technology plays a key role in our client-centered operating
model and we aim to expand our digital leadership. Our multi-
year digitalization program is further enhancing the client
experience. Technological solutions allow us to offer new
products to clients, such as the innovative UBS Global Card for
frequent travelers and online shopping, and to identify new
cross-selling opportunities in more targeted ways. We are
planning to launch the first Swiss virtual consumer credit card in
early 2021. Virtual issuance will enable customers to use an
issued credit card immediately in e-commerce transactions or via
their e-wallets, without waiting for a physical card to arrive in
the mail.
› Refer to “Clients” in the “How we create value for our
stakeholders” section of this report for more information about
innovation and digitalization
To further strengthen our position as a leader in terms of
sustainability, we became the first Swiss bank to convert all
second and third pillar pension funds (the UBS Vitainvest family,
at the time of conversion approximately CHF 8 billion of assets
under management) to sustainable investment strategies aligned
with defined environmental, social and governance criteria.
Furthermore, we are extending sustainability-linked loans to our
large corporate clients in order to increase the attractiveness of
acting sustainably and advising them on issuing green bonds.
› Refer to the Sustainability Report 2020, available from 11 March
2021 under “Annual reporting” at ubs.com/investors, for more
information about sustainability matters
We also collaborate successfully with insurance companies.
For example, we work with Swiss Re subsidiary iptiQ to offer
clients life insurance that fits seamlessly into our mortgage
advice. And, with Zurich Insurance, we have launched a new
bancassurance offering for start-ups to cover the needs of young
entrepreneurs in Switzerland.
How we operate
We operate primarily in our Swiss home market. With our
business areas of Personal Banking, Corporate & Institutional
Clients, and Digital Platforms & Marketplaces, we are organized
into 10 regions (with 239 branches as of 31 December 2020),
covering distinct Swiss economic areas. We plan to further adjust
our branch network to changing client behavior and are closing
44 branches in the first quarter of 2021; our services are
increasingly provided through the more
in-demand digital
channels.
We also support the international business activities of our
Swiss corporate and institutional clients through local hubs in
Frankfurt, New York, Hong Kong and Singapore. No other Swiss
bank offers its corporate clients local banking capabilities
abroad.
In Swiss Personal Banking, our main competitors are Credit
Suisse, PostFinance, Raiffeisen, cantonal banks, and other
regional and local Swiss banks; we also face competition from
international neobanks and other national digital market
participants. Areas of competition are basic banking services,
mortgages and foreign exchange, as well as
investment
mandates and funds.
In Corporate & Institutional Clients, our main competitors are
Credit Suisse, cantonal banks and globally active foreign banks.
We compete in basic banking services, cash management, trade
and export finance, asset servicing, investment advice for
institutional clients, corporate finance and lending, and cash and
securities transactions for banks.
22
22
Our strategy, business model and environment | Our businesses
Personal & Corporate Banking
What we offer
Our corporate and institutional clients benefit from our
financing and investment solutions, particularly access to equity
and debt capital markets, syndicated and structured credit,
private placements, leasing, and traditional financing. We offer
cash
transaction banking
management services, trade and export finance, and global
custody solutions for institutional clients.
for payment and
solutions
Our personal banking clients have access to a comprehensive,
life cycle-based offering, a broad range of basic banking
products, from payments to deposits, cards, and convenient
online and mobile banking, as well as lending (predominantly
mortgages),
is
complemented by our UBS KeyClub reward program, which
provides clients in Switzerland with exclusive and attractive
offers (some from third-party partners). We work closely with
Global Wealth Management to offer leading private banking
and wealth management services.
retirement services. This
investments and
We work closely with the Investment Bank to offer capital
market and foreign exchange products, hedging strategies, and
trading capabilities, as well as corporate finance advice. In
cooperation with Asset Management, we also provide fund and
portfolio management solutions.
› Refer to “Delivering as one firm” in this section for examples of
the joint efforts of the business divisions
As a leading Swiss personal and corporate bank, we provide
under management) to sustainable investment strategies aligned
comprehensive financial products and services to private,
with defined environmental, social and governance criteria.
corporate and institutional clients. Personal & Corporate Banking
Furthermore, we are extending sustainability-linked loans to our
is the core of our universal bank delivery model in Switzerland.
large corporate clients in order to increase the attractiveness of
Our focus
We aim to provide a superior client experience by combining
excellence
in personal client relationships and
interaction
acting sustainably and advising them on issuing green bonds.
› Refer to the Sustainability Report 2020, available from 11 March
2021 under “Annual reporting” at ubs.com/investors, for more
information about sustainability matters
through new technology. Client service excellence is at the heart
We also collaborate successfully with insurance companies.
of our business, as was demonstrated in 2020, when we were a
For example, we work with Swiss Re subsidiary iptiQ to offer
strong partner at the side of corporate clients through the
clients life insurance that fits seamlessly into our mortgage
COVID-19 pandemic. We made available billions of Swiss francs
advice. And, with Zurich Insurance, we have launched a new
of liquidity and offered flexibility, for example with amortization
bancassurance offering for start-ups to cover the needs of young
payments. We continue to support our clients with extensive
entrepreneurs in Switzerland.
services, individual advice and a wide range of digital products.
We established several growth initiatives over the course of
How we operate
2020. One of these was key4, an online platform for financing
owner-occupied homes, which we launched in June 2020. It is a
We operate primarily in our Swiss home market. With our
continuation of the platform business we started in 2017 with
business areas of Personal Banking, Corporate & Institutional
the income-producing real estate mortgage platform UBS
Clients, and Digital Platforms & Marketplaces, we are organized
Atrium. As part of an open banking approach, numerous lead
into 10 regions (with 239 branches as of 31 December 2020),
generation partners (mortgage brokers, real estate agents and
covering distinct Swiss economic areas. We plan to further adjust
business-to-customer platforms) were onboarded in 2020 and
our branch network to changing client behavior and are closing
added to key4 and UBS Atrium. Both platforms and partnerships
44 branches in the first quarter of 2021; our services are
are central parts of our Swiss digital strategy.
increasingly provided through the more
in-demand digital
Technology plays a key role in our client-centered operating
channels.
model and we aim to expand our digital leadership. Our multi-
We also support the international business activities of our
year digitalization program is further enhancing the client
Swiss corporate and institutional clients through local hubs in
experience. Technological solutions allow us to offer new
Frankfurt, New York, Hong Kong and Singapore. No other Swiss
products to clients, such as the innovative UBS Global Card for
bank offers its corporate clients local banking capabilities
frequent travelers and online shopping, and to identify new
abroad.
cross-selling opportunities in more targeted ways. We are
In Swiss Personal Banking, our main competitors are Credit
planning to launch the first Swiss virtual consumer credit card in
Suisse, PostFinance, Raiffeisen, cantonal banks, and other
early 2021. Virtual issuance will enable customers to use an
regional and local Swiss banks; we also face competition from
issued credit card immediately in e-commerce transactions or via
international neobanks and other national digital market
their e-wallets, without waiting for a physical card to arrive in
participants. Areas of competition are basic banking services,
the mail.
mortgages and foreign exchange, as well as
investment
› Refer to “Clients” in the “How we create value for our
mandates and funds.
stakeholders” section of this report for more information about
In Corporate & Institutional Clients, our main competitors are
innovation and digitalization
Credit Suisse, cantonal banks and globally active foreign banks.
We compete in basic banking services, cash management, trade
To further strengthen our position as a leader in terms of
and export finance, asset servicing, investment advice for
sustainability, we became the first Swiss bank to convert all
institutional clients, corporate finance and lending, and cash and
second and third pillar pension funds (the UBS Vitainvest family,
securities transactions for banks.
at the time of conversion approximately CHF 8 billion of assets
239
branches1 in
Switzerland
Personal Banking has 239 branches1
in Switzerland, of which 67 are shared
with Global Wealth Management
and / or Corporate & Institutional Clients
11 As of 31 December 2020. We are closing 44 branches in the first quarter of 2021. Larger circles indicate a higher number of branches in a location.
22
23
23
Our strategy, business model and environment Our strategy, business model and environment | Our businesses
Asset Management
UBS Asset Management is a large-scale and diversified global
asset manager, with USD 1.1 trillion in invested assets. We offer
investment capabilities and styles across all major traditional and
alternative asset classes, as well as advisory support to
intermediaries and Global Wealth
institutions, wholesale
Management clients around the world.
agenda in financial markets, in 2020 we joined the “One Planet
Asset Managers” initiative and became one of the founding
members of the “Net Zero Asset Managers” initiative.
› Refer to the Sustainability Report 2020, available from 11 March
2021 under “Annual reporting” at ubs.com/investors, for more
information about sustainability matters
Organizational changes
the operational setup of Asset
In 2020, we changed
Management’s platforms businesses to provide greater scale and
breadth of offering to our clients, and to support their ongoing
development in a highly competitive marketplace, while at the
same time enabling us to sharpen our focus on the execution of
the division’s strategic priorities. As a result, we sold a majority
stake (51.2%) in UBS Fondcenter AG to Clearstream, Deutsche
Börse Group’s post-trade services provider. UBS holds a minority
(48.8%) shareholding in the business, and Global Wealth
Management continues to leverage the platform’s leading
capabilities as its preferred provider. In addition, UBS Partner
was transferred to become part of UBS’s “Banks for Banks”
offering in Personal & Corporate Banking.
› Refer to “Delivering as one firm” in this section for examples of
the joint efforts of the business divisions
Our focus
Our strategy is focused on capitalizing on the areas where we
have a leading position and differentiated capabilities, so as to
drive further profitable growth and scale.
factors
social and governance
innovation; dedicated research; the
Sustainable and impact investing remains a key area, as
clients increasingly seek solutions that combine their investment
goals with sustainability objectives. We are continuing the
expansion of our world-class capabilities in areas such as
climate-aware solutions. We do this through: product and
integration of
service
environmental,
into our
investment processes, leveraging our proprietary analytics; and
active corporate engagement. At the start of 2020, we launched
our new Climate Aware framework, an innovative solution that
can be customized to clients‘ objectives to support them in their
own climate-change transition. Designed to protect assets
against climate risks, this approach considers a company‘s
is
forward-looking commitment to carbon reduction and
underpinned by our climate engagement strategy, investing in
companies at the heart of the shift to a climate-smart future.
Alongside this, we launched a suite of active Climate Aware
products, building on our award-winning passive offering. Our
Climate Aware assets under management (AuM) have grown to
more than USD 15 billion, while our wider sustainable-focused
AuM have reached over USD 97 billion. In addition, reflecting
our commitment to support investor networks and drive the ESG
In response to the increasing importance of private markets
and alternative investments, we are building on our existing
expertise in these areas, including our real estate and hedge
fund businesses, as well as our capabilities across infrastructure,
private equity and private debt.
We also continue to develop our award-winning1 indexed
and alternative beta businesses globally, including exchange-
traded funds (ETFs) in Europe and Switzerland. We provide
customization while leveraging our highly scalable platform,
with a particular focus on key areas such as sustainability and
fixed income products.
› Refer to “Clients” in the “How we create value for our
stakeholders” section of this report for more information about
innovation and digitalization
Geographically, we continue to invest in our leading presence
and products in China, both onshore and offshore, one of the
fastest-growing asset management markets in the world,
building on our extensive and long-standing presence in the Asia
Pacific region. We are rated the number one foreign manager of
inbound AuM in Greater China.2
In the rapidly evolving and attractive wholesale segment, we
aim to significantly expand our market share through a
combination of continued increase in share of clients’ business,
expansion of our strategic partnerships with distributors, and the
build-out of our client service and product shelf offerings, as
well as the launch of new white-labelling and implementation
capabilities.
To drive further growth in our Investment Solutions business,
which provides access to and combines the breadth and depth
of our capabilities across public and private markets, we are
focused on delivering superior multi-asset strategies and white-
label solutions to meet the needs of clients around the world.
We also continue to intensify our joint efforts with our other
business divisions,
in particular with Global Wealth
Management, to enable our teams to draw on the best ideas,
solutions and capabilities from across the firm in order to deliver
superior investment performance and experiences for our clients.
For example, the separately managed accounts initiative with
Global Wealth Management in the US generated USD 53 billion
in net new money inflows in 2020 and strongly positions us to
capture attractive opportunities in other channels by leveraging
our world-class expertise and capabilities to meet growing client
demand.
› Refer to “Delivering as one firm” in this section for examples of
the joint efforts of the business divisions
11 Passive Manager of the Year in the European Pensions Awards 2020 and ranked fourth largest ETF provider in Europe as of December 2020 (source: ETFGI).
22 Ranking compiled by Broadridge in April 2020.
24
24
Our strategy, business model and environment | Our businesses
Asset Management
UBS Asset Management is a large-scale and diversified global
agenda in financial markets, in 2020 we joined the “One Planet
asset manager, with USD 1.1 trillion in invested assets. We offer
Asset Managers” initiative and became one of the founding
investment capabilities and styles across all major traditional and
members of the “Net Zero Asset Managers” initiative.
alternative asset classes, as well as advisory support to
institutions, wholesale
intermediaries and Global Wealth
› Refer to the Sustainability Report 2020, available from 11 March
2021 under “Annual reporting” at ubs.com/investors, for more
Management clients around the world.
information about sustainability matters
Organizational changes
In response to the increasing importance of private markets
and alternative investments, we are building on our existing
In 2020, we changed
the operational setup of Asset
expertise in these areas, including our real estate and hedge
Management’s platforms businesses to provide greater scale and
fund businesses, as well as our capabilities across infrastructure,
breadth of offering to our clients, and to support their ongoing
private equity and private debt.
development in a highly competitive marketplace, while at the
We also continue to develop our award-winning1 indexed
same time enabling us to sharpen our focus on the execution of
and alternative beta businesses globally, including exchange-
the division’s strategic priorities. As a result, we sold a majority
traded funds (ETFs) in Europe and Switzerland. We provide
stake (51.2%) in UBS Fondcenter AG to Clearstream, Deutsche
customization while leveraging our highly scalable platform,
Börse Group’s post-trade services provider. UBS holds a minority
with a particular focus on key areas such as sustainability and
(48.8%) shareholding in the business, and Global Wealth
fixed income products.
Management continues to leverage the platform’s leading
capabilities as its preferred provider. In addition, UBS Partner
was transferred to become part of UBS’s “Banks for Banks”
offering in Personal & Corporate Banking.
› Refer to “Delivering as one firm” in this section for examples of
the joint efforts of the business divisions
Our focus
› Refer to “Clients” in the “How we create value for our
stakeholders” section of this report for more information about
innovation and digitalization
Geographically, we continue to invest in our leading presence
and products in China, both onshore and offshore, one of the
fastest-growing asset management markets in the world,
building on our extensive and long-standing presence in the Asia
Pacific region. We are rated the number one foreign manager of
Our strategy is focused on capitalizing on the areas where we
inbound AuM in Greater China.2
have a leading position and differentiated capabilities, so as to
In the rapidly evolving and attractive wholesale segment, we
drive further profitable growth and scale.
aim to significantly expand our market share through a
Sustainable and impact investing remains a key area, as
combination of continued increase in share of clients’ business,
clients increasingly seek solutions that combine their investment
expansion of our strategic partnerships with distributors, and the
goals with sustainability objectives. We are continuing the
build-out of our client service and product shelf offerings, as
expansion of our world-class capabilities in areas such as
well as the launch of new white-labelling and implementation
climate-aware solutions. We do this through: product and
capabilities.
service
innovation; dedicated research; the
integration of
To drive further growth in our Investment Solutions business,
environmental,
social and governance
factors
into our
which provides access to and combines the breadth and depth
investment processes, leveraging our proprietary analytics; and
of our capabilities across public and private markets, we are
active corporate engagement. At the start of 2020, we launched
focused on delivering superior multi-asset strategies and white-
our new Climate Aware framework, an innovative solution that
label solutions to meet the needs of clients around the world.
can be customized to clients‘ objectives to support them in their
We also continue to intensify our joint efforts with our other
own climate-change transition. Designed to protect assets
business divisions,
in particular with Global Wealth
against climate risks, this approach considers a company‘s
Management, to enable our teams to draw on the best ideas,
forward-looking commitment to carbon reduction and
is
solutions and capabilities from across the firm in order to deliver
underpinned by our climate engagement strategy, investing in
superior investment performance and experiences for our clients.
companies at the heart of the shift to a climate-smart future.
For example, the separately managed accounts initiative with
Alongside this, we launched a suite of active Climate Aware
Global Wealth Management in the US generated USD 53 billion
products, building on our award-winning passive offering. Our
in net new money inflows in 2020 and strongly positions us to
Climate Aware assets under management (AuM) have grown to
capture attractive opportunities in other channels by leveraging
more than USD 15 billion, while our wider sustainable-focused
our world-class expertise and capabilities to meet growing client
AuM have reached over USD 97 billion. In addition, reflecting
demand.
our commitment to support investor networks and drive the ESG
› Refer to “Delivering as one firm” in this section for examples of
the joint efforts of the business divisions
11 Passive Manager of the Year in the European Pensions Awards 2020 and ranked fourth largest ETF provider in Europe as of December 2020 (source: ETFGI).
22 Ranking compiled by Broadridge in April 2020.
To support our growth, we are focused on disciplined
execution of our operational excellence initiatives. This includes
further automation, simplification, process optimization and
offshoring / nearshoring of selected activities, complemented by
continued modernization of our platform and development of
our analytics and data capabilities.
How we operate
Our business division is organized along six areas: Client
Coverage, Investments, Real Estate & Private Markets, Products,
Multi-Manager Solutions, and the COO.
We cover the main asset management markets globally, and
have a local presence in 23 markets across four regions: the
Americas; Europe, the Middle East and Africa; Switzerland; and
Asia Pacific. We have nine main hubs: Chicago, Hong Kong,
London, New York, Shanghai, Singapore, Sydney, Tokyo and
Zurich.
Our main competitors are global firms with wide-ranging
capabilities and distribution channels, such as Amundi,
BlackRock, DWS, Goldman Sachs Asset Management, Invesco,
JPMorgan Asset Management, Morgan Stanley Investment
Management and Schroders, as well as firms with a specific
market or asset-class focus.
What we offer
We offer clients a wide range of investment products and
services in different asset classes, in the form of segregated,
pooled or advisory mandates, as well as registered investment
funds in various jurisdictions.
Our traditional and alternative capabilities include equities,
fixed income, hedge funds, real estate and private markets, and
indexed and alternative beta strategies (including exchange-
traded funds), as well as sustainable and impact investing
products and solutions.
Our Investment Solutions business draws on the breadth of
our capabilities to offer: asset allocation and currency investment
strategies across the risk / return spectrum; customized multi-
asset solutions, advisory and fiduciary services; and multi-
manager hedge fund solutions and advisory services.
9
main hubs
covering the full breadth of our
investment insights across the
world to serve our clients
New York
United States
Chicago
United States
Zurich
Switzerland
Tokyo
Japan
Hong Kong (SAR)
China
Sydney
Australia
London
United Kingdom
Singapore
Singapore
Shanghai
China
24
25
25
Our strategy, business model and environment
Our strategy, business model and environment | Our businesses
Investment Bank
The Investment Bank provides services to institutional, corporate
and wealth management clients, helping them raise capital,
grow their businesses, invest for growth and manage risks. Our
traditional strengths are in equities, foreign exchange, research,
advisory services and capital markets, complemented by a
targeted rates and credit platform. We use our data-driven
research and technology capabilities to support clients adapting
to evolving market structures and changes in regulatory,
technological, economic and competitive landscapes.
Aiming to deliver market-leading solutions by using our
intellectual capital and electronic platforms, we work closely
with Global Wealth Management, Personal & Corporate
Banking and Asset Management to bring the best of UBS’s
capabilities to our clients. We do so with a disciplined
approach to balance sheet deployment and costs.
Organizational changes
In January 2020, we realigned the Investment Bank to meet
clients’ evolving needs and to further focus resources on
opportunities for profitable growth and digital transformation.
Corporate Client Solutions and Investor Client Services were
renamed Global Banking and Global Markets, respectively.
Global Banking operates with two product verticals: Capital
Markets (which includes Public Capital Markets and Private
Financing Markets) and Advisory (which includes Mergers &
Acquisitions), adopting a global coverage model. Global Markets
combined Equities with Foreign Exchange, Rates and Credit, and
introduced three product verticals
(Execution & Platform,
Derivatives & Solutions, and Financing) and three horizontal
and Digital
functions
Transformation). This Global Markets structure is designed to
align business processes and operations, and to reduce
inefficiencies and duplication.
It offers a more holistic
understanding of clients’ cross-product needs and aims to foster
tighter coordination of client coverage and distribution, enabling
improved oversight of key risks and allocation of resources.
Investment Bank Research and UBS Evidence Lab Innovations
have been moved to Group Functions, in Group Research and
Analytics, but remain critical parts of our advisory and content
offering.
Trading, Distribution,
(Risk &
Our focus
Our priority is the provision of seamless client service and high-
quality execution. In Global Banking, we position ourselves as
trusted advisor through our deep client coverage and by
providing access to the full capabilities of UBS.
Our global coverage model utilizes our deep international
industry expertise and product capabilities to meet the emerging
needs of clients. We provide our clients with excellence in
execution, financing and structured solutions through our Global
Markets franchise.
26
26
In Global Markets, our sharpest competitive edge comes from
coordinating our services across a wide range of asset classes
and products.
Led by our businesses, our digital strategy harnesses
technology to provide access to a wide range of sources of
global liquidity and differentiated content. UBS Investment Bank
Innovation Lab aims to speed up innovation by facilitating proofs
of concept. Global Research continues to publish research
informed by primary data to concentrate on data-driven
outcomes and insights.
Our balanced global reach gives attractive options for
growth. In the Americas, the largest investment banking fee
pool globally, we focus on increasing market share in our
core Global Banking and Global Markets businesses. In Asia
Pacific, opportunities arise mainly from expected market
internationalization and growth in China. We plan to grow by
strengthening our presence, both onshore and offshore. In
EMEA, we plan to leverage our strong base and brand
recognition even further.
Joint efforts between the Investment Bank and the other
business divisions (e.g., the creation of a unified capital markets
group) and, externally, strategic partnerships (e.g., UBS BB jointly
with Banco do Brasil, focused on Latin America) are a key
strategic priority. We expect these initiatives to lead to growth
by delivering global products to each region, leveraging our
global connectivity across borders, sharing and strengthening
our best client relationships.
› Refer to “Delivering as one firm” in this section for examples of
the joint efforts of the business divisions
How we operate
Our business division consists of two areas: Global Banking and
Global Markets. Governed by the executive, operating, risk,
and asset and liability committees, each business area is
organized globally by product.
Our geographically balanced business has a global reach,
with a presence in more than 30 countries and offices in the
major financial hubs.
Competing firms operate in many of our markets, but our
strategy differentiates us, with its focus on leadership in the
areas where we have chosen to compete, and a business model
that leverages talent and technology rather than balance sheet.
Our main competitors are the major global investment banks
(e.g., Morgan Stanley, Credit Suisse and Goldman Sachs) and
corporate investment banks (e.g., Bank of America, Barclays,
Citigroup, BNP Paribas, Deutsche Bank and JPMorgan Chase). We
also compete with boutique investment banks and fintech firms in
certain regions and products.
Joint efforts with Global Wealth Management and Asset
Management enable us to provide clients with broad access to
financing, global capital markets and portfolio solutions.
› Refer to “Delivering as one firm” in this section for examples of
the joint efforts of the business divisions
Our strategy, business model and environment | Our businesses
Investment Bank
The Investment Bank provides services to institutional, corporate
In Global Markets, our sharpest competitive edge comes from
and wealth management clients, helping them raise capital,
coordinating our services across a wide range of asset classes
grow their businesses, invest for growth and manage risks. Our
and products.
traditional strengths are in equities, foreign exchange, research,
Led by our businesses, our digital strategy harnesses
advisory services and capital markets, complemented by a
technology to provide access to a wide range of sources of
targeted rates and credit platform. We use our data-driven
global liquidity and differentiated content. UBS Investment Bank
research and technology capabilities to support clients adapting
Innovation Lab aims to speed up innovation by facilitating proofs
to evolving market structures and changes in regulatory,
of concept. Global Research continues to publish research
technological, economic and competitive landscapes.
informed by primary data to concentrate on data-driven
Aiming to deliver market-leading solutions by using our
outcomes and insights.
intellectual capital and electronic platforms, we work closely
Our balanced global reach gives attractive options for
with Global Wealth Management, Personal & Corporate
growth. In the Americas, the largest investment banking fee
Banking and Asset Management to bring the best of UBS’s
pool globally, we focus on increasing market share in our
capabilities to our clients. We do so with a disciplined
core Global Banking and Global Markets businesses. In Asia
approach to balance sheet deployment and costs.
Pacific, opportunities arise mainly from expected market
Organizational changes
internationalization and growth in China. We plan to grow by
strengthening our presence, both onshore and offshore. In
EMEA, we plan to leverage our strong base and brand
In January 2020, we realigned the Investment Bank to meet
recognition even further.
clients’ evolving needs and to further focus resources on
Joint efforts between the Investment Bank and the other
opportunities for profitable growth and digital transformation.
business divisions (e.g., the creation of a unified capital markets
Corporate Client Solutions and Investor Client Services were
group) and, externally, strategic partnerships (e.g., UBS BB jointly
renamed Global Banking and Global Markets, respectively.
with Banco do Brasil, focused on Latin America) are a key
Global Banking operates with two product verticals: Capital
strategic priority. We expect these initiatives to lead to growth
Markets (which includes Public Capital Markets and Private
by delivering global products to each region, leveraging our
Financing Markets) and Advisory (which includes Mergers &
global connectivity across borders, sharing and strengthening
Acquisitions), adopting a global coverage model. Global Markets
our best client relationships.
combined Equities with Foreign Exchange, Rates and Credit, and
introduced three product verticals
(Execution & Platform,
Derivatives & Solutions, and Financing) and three horizontal
› Refer to “Delivering as one firm” in this section for examples of
the joint efforts of the business divisions
functions
(Risk &
Trading, Distribution,
and Digital
How we operate
Transformation). This Global Markets structure is designed to
align business processes and operations, and to reduce
Our business division consists of two areas: Global Banking and
inefficiencies and duplication.
It offers a more holistic
Global Markets. Governed by the executive, operating, risk,
understanding of clients’ cross-product needs and aims to foster
and asset and liability committees, each business area is
tighter coordination of client coverage and distribution, enabling
organized globally by product.
improved oversight of key risks and allocation of resources.
Our geographically balanced business has a global reach,
Investment Bank Research and UBS Evidence Lab Innovations
with a presence in more than 30 countries and offices in the
have been moved to Group Functions, in Group Research and
major financial hubs.
Analytics, but remain critical parts of our advisory and content
Competing firms operate in many of our markets, but our
strategy differentiates us, with its focus on leadership in the
areas where we have chosen to compete, and a business model
that leverages talent and technology rather than balance sheet.
Our main competitors are the major global investment banks
Our priority is the provision of seamless client service and high-
(e.g., Morgan Stanley, Credit Suisse and Goldman Sachs) and
quality execution. In Global Banking, we position ourselves as
corporate investment banks (e.g., Bank of America, Barclays,
trusted advisor through our deep client coverage and by
Citigroup, BNP Paribas, Deutsche Bank and JPMorgan Chase). We
providing access to the full capabilities of UBS.
also compete with boutique investment banks and fintech firms in
Our global coverage model utilizes our deep international
certain regions and products.
industry expertise and product capabilities to meet the emerging
Joint efforts with Global Wealth Management and Asset
needs of clients. We provide our clients with excellence in
Management enable us to provide clients with broad access to
execution, financing and structured solutions through our Global
financing, global capital markets and portfolio solutions.
Markets franchise.
› Refer to “Delivering as one firm” in this section for examples of
the joint efforts of the business divisions
offering.
Our focus
26
Since 2005, we have addressed increasing client demand for
sustainable investing, providing thematic and sector research
and investment solutions through socially responsible and
impact exchange-traded funds and
In
addition, we offer capital-raising and strategic advisory services
globally to companies that make positive contributions to
climate change mitigation and adaptation.
index-linked notes.
› Refer to the Sustainability Report 2020, available from 11 March
2021 under “Annual reporting” at ubs.com/investors, for more
information about sustainability matters
What we offer
Our Global Banking business advises clients on strategic business
opportunities and helps them raise capital to fund their activities.
Our Global Markets business enables our clients to buy, sell
and finance securities on capital markets worldwide and to
manage their risks and liquidity.
In cooperation with Global Research, we offer clients
differentiated content on major financial markets and securities
around the globe, spanning more than 30 countries and 50
sectors. Separately, our experts in UBS Evidence Lab Innovations
create insight-ready data sets on diverse topics.
We seek to develop new products and solutions consistent
with our capital-efficient business model, typically related to new
technologies or changing market standards.
› Refer to “Clients” in the “How we create value for our
stakeholders” section of this report for more information about
innovation and digitalization
9
fi nancial
hubs
in all major fi nancial centers
New York
United States
Chicago
United States
Zurich
Switzerland
Frankfurt
Germany
Shanghai
China
Singapore
Singapore
London
United Kingdom
Hong Kong (SAR)
China
Tokyo
Japan
27
27
Our strategy, business model and environment
Our strategy, business model and environment | Our businesses
Group Functions
Group Functions (formerly named Corporate Center) provides
services to the Group, focusing on effectiveness, risk mitigation
and efficiency. Group Functions also includes the Non-core and
Legacy Portfolio unit.
How we are organized
Group Functions
The major areas within Group Functions are Group Services
(which consists of Technology, Corporate Services, Human
Resources, Operations, Finance, Legal, Risk Control, Research
and Analytics, Compliance, Regulatory & Governance,
Communications & Branding and UBS in Society), Group
Treasury and Non-core and Legacy Portfolio.
Investment Bank Research and UBS Evidence Lab Innovations
have been moved to Group Functions, in Group Research and
Analytics.
In recent years, we have aligned support functions and
business divisions. The vast majority of such functions are fully
aligned or shared among business divisions, where they have full
management responsibility. By keeping the activities of the
businesses and support functions close, we increase efficiency
and create a working environment built on accountability and
collaboration.
Non-core and Legacy Portfolio, a small residual set of
activities in Group Treasury and certain other costs mainly
related to deferred tax assets and costs relating to our legal
entity transformation program, is retained centrally.
Group Treasury
Group Treasury manages balance sheet structural risk (e.g.,
interest rate, structural foreign exchange and collateral risks)
and the risks associated with our liquidity and funding
portfolios. Group Treasury serves all business divisions and its
risk management is integrated into the Group risk governance
framework.
Non-core and Legacy Portfolio
Non-core and Legacy Portfolio manages legacy positions from
businesses exited by the Investment Bank, following a largely
passive wind-down strategy. Overseen by a committee chaired
by the Group Chief Risk Officer, its portfolio also includes
positions relating to legal matters arising from businesses
transferred to it at the time of its formation.
› Refer to “Note 18 Provisions and contingent liabilities” in the
“Consolidated financial statements” section of this report for
more information about litigation, regulatory and similar
matters
28
28
Our strategy, business model and environment | Our businesses
Group Functions
Legacy Portfolio unit.
How we are organized
Group Functions
Group Functions (formerly named Corporate Center) provides
Group Treasury
services to the Group, focusing on effectiveness, risk mitigation
Group Treasury manages balance sheet structural risk (e.g.,
and efficiency. Group Functions also includes the Non-core and
interest rate, structural foreign exchange and collateral risks)
and the risks associated with our liquidity and funding
portfolios. Group Treasury serves all business divisions and its
risk management is integrated into the Group risk governance
framework.
The major areas within Group Functions are Group Services
Non-core and Legacy Portfolio
(which consists of Technology, Corporate Services, Human
Non-core and Legacy Portfolio manages legacy positions from
Resources, Operations, Finance, Legal, Risk Control, Research
businesses exited by the Investment Bank, following a largely
and Analytics, Compliance, Regulatory & Governance,
passive wind-down strategy. Overseen by a committee chaired
Communications & Branding and UBS in Society), Group
by the Group Chief Risk Officer, its portfolio also includes
Treasury and Non-core and Legacy Portfolio.
positions relating to legal matters arising from businesses
Investment Bank Research and UBS Evidence Lab Innovations
transferred to it at the time of its formation.
have been moved to Group Functions, in Group Research and
Analytics.
› Refer to “Note 18 Provisions and contingent liabilities” in the
“Consolidated financial statements” section of this report for
In recent years, we have aligned support functions and
more information about litigation, regulatory and similar
business divisions. The vast majority of such functions are fully
matters
aligned or shared among business divisions, where they have full
management responsibility. By keeping the activities of the
businesses and support functions close, we increase efficiency
and create a working environment built on accountability and
collaboration.
Non-core and Legacy Portfolio, a small residual set of
activities in Group Treasury and certain other costs mainly
related to deferred tax assets and costs relating to our legal
entity transformation program, is retained centrally.
Our environment
Our response to COVID-19
The COVID-19 pandemic caused an unprecedented situation for
UBS and its employees in 2020. It has required our ongoing
focus on safeguarding the well-being of our employees and their
families, serving our clients and ensuring operational continuity.
In response to the pandemic, governments have taken
limiting public
measures to severely constrain movement,
gatherings, requiring working from home where possible, and
closing down or restricting non-essential retail and business
activity. These measures have had a severely adverse effect on
global economic activity, resulting in the sharpest downturn in
global GDP since World War II in the first half of 2020, followed
by an uneven rebound in economic activity during the second
half of the year.
Governmental measures to support the economy
Governments and central banks offered and continue to offer
significant fiscal and monetary support intended to help firms
and employees to remain solvent through the COVID-19
pandemic, and financial services firms were provided with
exceptional access to liquidity in the first phase of the pandemic.
In addition, a number of regulatory and supervisory measures
have been temporarily introduced, seeking to provide banks
with increased flexibility in deploying capital and liquidity
resources to support economies.
› Refer to the “Regulatory and legal developments” section of this
report
Our support for clients and the economies in which we
operate
Throughout 2020, we actively engaged in lending activities
across our businesses to support our clients and the real
economy. As the pandemic intensified and market liquidity
became
limited, we experienced higher drawdowns on
committed credit facilities by corporate clients in the Investment
Bank and in Personal & Corporate Banking.
The program established by the Swiss Federal Council in
March 2020 to support small and medium-sized entities (SMEs)
by granting loans closed on 31 July 2020. As of that date, we
had committed CHF 2.7 billion of loans up to CHF 0.5 million,
which are 100% guaranteed by the Swiss government, and
CHF 0.6 billion of loans between CHF 0.5 million and CHF 20
million, which are 85% government-guaranteed. As of
31 December 2020, the total committed loans amounted to
CHF 3.0 billion (31 July 2020: CHF 3.3 billion), of which CHF 1.8
billion was drawn. We intend to donate any economic profits
from this program to COVID-19 relief efforts, although no such
profits were made in 2020.
In the US, we are supporting the lending programs created
under the CARES Act for small businesses. Working with a
partner, we made up to USD 2 billion available under the
Paycheck Protection Program during 2020 and provided loans
under the program in the amount of USD 656 million as of
31 December 2020. We donated around USD 2 million of fees
earned on such loans in 2020 to COVID-19 relief efforts.
Our previous investments in technology enabled us to
maintain effective connectivity within and across our businesses
and support functions. Leveraging existing and newly integrated
tools, this resulted in new ways of digitally interacting with
clients.
Across our business divisions, we continued to support our
clients with advice needed to manage their assets, along with
actively developing investment solutions and global insights. Our
dynamic risk management enabled our business and our clients
to successfully navigate the volatile market conditions.
Our support for communities
Recognizing the strain and hardship the current situation is
causing across our communities, we committed USD 30 million
to various aid projects related to COVID-19 that provide support
across the communities in which we operate. A part of this
amount has been used to match the USD 15 million raised by
our clients and our employees for the UBS Optimus Foundation’s
COVID-19 Response Fund, which supports various organizations,
including healthcare organizations that facilitate testing and
increase capacity for emergency treatments.
28
29
29
Our strategy, business model and environment
Our strategy, business model and environment | Our environment
Our support for employees
Our employees’ response to the pandemic has been remarkable:
they have demonstrated resilience, dedication and client focus
through an unrelenting year. More than 95% of internal and
external staff are able to work concurrently on a remote basis,
and our employees have been working from home to a
significant degree since the first quarter of 2020. We continue
to monitor country- and location-specific developments, as well
as governmental requirements, and adapt our plans for the
return of employees to our offices accordingly, prioritizing the
health of our employees and clients.
Recognizing the additional pressure placed on employees by
closed workplaces and schools, restricted activities and varying
degrees of lockdown, we introduced a range of measures
throughout 2020 to help employees adapt. For example, we
offered extra flexibility to care for children and introduced a
variety of tools and resources to support employees’ physical,
mental, financial and social well-being.
As a sign of appreciation for their contribution throughout
this challenging year, and acknowledging that the pandemic
may have resulted in unforeseen expenses, the Group Executive
Board awarded UBS’s employees at less senior ranks a one-time
cash payment equivalent to one week’s salary. Furthermore, we
paused restructuring activities during 2020 that would have led
to redundancies, providing our employees with some stability
during these uncertain times.
In the third quarter of 2020, we modified the forfeiture
conditions of certain outstanding deferred compensation awards
for eligible employees in order to provide additional career
flexibility during this time of uncertainty. Outstanding deferred
compensation awards granted to Group Executive Board
members and those granted under the Long-Term Incentive
Plan, as well as those granted to financial advisors in the US,
were not affected by these changes.
Operational resilience
With the bulk of our workforce working outside of our offices
since late March 2020, we face new challenges and operational
risks, including maintenance of supervisory and surveillance
controls, as well as increased fraud and data security risks. The
existing resilience built into our operations and the effectiveness
of our business continuity management and operational risk
procedures have been critical in handling the ongoing pandemic
and circumstances related to it, and have enabled us to continue
to serve our stakeholders without material negative impact.
As a result of our prior investments in infrastructure and
execution of our established business continuity management
frameworks, we managed the record transaction volumes
experienced in March 2020, along with extreme spikes in
volatility and limited liquidity in some markets, without material
disruption in our service to clients.
› Refer to “Operational risk” in the “Risk management and
control” section of this report for more information about
operational risk
Effects of the COVID-19 pandemic on our financial and
capital position
Despite the uncertainties caused by the pandemic, the negative
effects of the COVID-19 crisis on our financial and capital
positions were limited in 2020.
Although we experienced an increase in credit loss expenses
under IFRS 9 in 2020, we maintained a strong capital and
liquidity position
in the face of the adverse economic
developments, the sharp decline in market valuations and the
increased levels of volatility.
Overall, we expect elevated credit loss expenses to persist for
at least as long as the COVID-19 containment measures
continue, although at levels lower than in the first half of 2020.
Due to the credit quality of our portfolio, we remain confident in
our ability to maintain our overall strength and stability and to
continue to support our clients.
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Our strategy, business model and environment | Our environment
Our support for employees
Operational resilience
With the bulk of our workforce working outside of our offices
Our employees’ response to the pandemic has been remarkable:
since late March 2020, we face new challenges and operational
they have demonstrated resilience, dedication and client focus
risks, including maintenance of supervisory and surveillance
through an unrelenting year. More than 95% of internal and
controls, as well as increased fraud and data security risks. The
external staff are able to work concurrently on a remote basis,
existing resilience built into our operations and the effectiveness
and our employees have been working from home to a
of our business continuity management and operational risk
significant degree since the first quarter of 2020. We continue
procedures have been critical in handling the ongoing pandemic
to monitor country- and location-specific developments, as well
and circumstances related to it, and have enabled us to continue
as governmental requirements, and adapt our plans for the
to serve our stakeholders without material negative impact.
return of employees to our offices accordingly, prioritizing the
As a result of our prior investments in infrastructure and
health of our employees and clients.
execution of our established business continuity management
Recognizing the additional pressure placed on employees by
frameworks, we managed the record transaction volumes
closed workplaces and schools, restricted activities and varying
experienced in March 2020, along with extreme spikes in
degrees of lockdown, we introduced a range of measures
volatility and limited liquidity in some markets, without material
throughout 2020 to help employees adapt. For example, we
disruption in our service to clients.
offered extra flexibility to care for children and introduced a
variety of tools and resources to support employees’ physical,
› Refer to “Operational risk” in the “Risk management and
control” section of this report for more information about
Effects of the COVID-19 pandemic on our financial and
mental, financial and social well-being.
As a sign of appreciation for their contribution throughout
this challenging year, and acknowledging that the pandemic
operational risk
may have resulted in unforeseen expenses, the Group Executive
capital position
Board awarded UBS’s employees at less senior ranks a one-time
cash payment equivalent to one week’s salary. Furthermore, we
paused restructuring activities during 2020 that would have led
Despite the uncertainties caused by the pandemic, the negative
effects of the COVID-19 crisis on our financial and capital
to redundancies, providing our employees with some stability
positions were limited in 2020.
during these uncertain times.
In the third quarter of 2020, we modified the forfeiture
conditions of certain outstanding deferred compensation awards
for eligible employees in order to provide additional career
Although we experienced an increase in credit loss expenses
under IFRS 9 in 2020, we maintained a strong capital and
liquidity position
in the face of the adverse economic
developments, the sharp decline in market valuations and the
flexibility during this time of uncertainty. Outstanding deferred
increased levels of volatility.
compensation awards granted to Group Executive Board
members and those granted under the Long-Term Incentive
Plan, as well as those granted to financial advisors in the US,
were not affected by these changes.
Overall, we expect elevated credit loss expenses to persist for
at least as long as the COVID-19 containment measures
continue, although at levels lower than in the first half of 2020.
Due to the credit quality of our portfolio, we remain confident in
our ability to maintain our overall strength and stability and to
continue to support our clients.
Current market climate
Global economic developments in 2020
Economic and market outlook for 2021
In a year shaped by the COVID-19 pandemic, the global
economy contracted as governments imposed restrictions to
stem the spread of the disease. Global GDP shrank by 3.4%, the
most severe downturn since World War II, after growing 2.9%
in 2019. These developments were met with unprecedented
fiscal and monetary support.
Swiss GDP fell 3%, compared with a growth rate of 1.1% in
2019.
US GDP declined by 3.5%, following growth of 2.2% in
2019, as COVID-19-related restrictions curbed economic activity.
The contraction was even more acute in the Eurozone, with a
6.8% fall in GDP, after a 1.3% expansion in 2019. Eurozone
economies have suffered more than the US from a reduction in
global trade flows. Germany’s economy contracted by 5.3%,
after growing by 0.6% in 2019.
The UK suffered the largest contraction of all, with GDP
down 9.9%.
China was among the first nations that started to recover
from the pandemic and suffered to a lesser extent from further
waves of the virus than Europe or the US. Growth slowed to
2.3%, following growth of 6.1% in 2019. Other leading Asian
economies also weathered the pandemic relatively well, with
South Korea’s economy contracting just 1%, after growing
2.7% in 2019. Taiwan was a rare example of a developed
economy that managed to grow in 2020, with GDP expanding
3%.
Top emerging markets outside Asia were generally less
resilient. Mexico’s economy shrank 8.5% after a 0.3%
contraction in 2019. Brazil’s growth was minus 4.7%, after just
1.1% growth in 2019.
interest
lowering
the pandemic,
Major central banks attempted to cushion the economic blow
rates, expanding
from
quantitative easing programs, and
introducing emergency
lending facilities. Notably, the Federal Reserve’s balance sheet
expanded from around USD 4 trillion to USD 7 trillion. The
European Central Bank (the ECB) held rates at minus 50 basis
points, while rates remained at minus 75 basis points in
Switzerland. That did not stop inflation undershooting targets in
most countries: in the US, inflation was 1.9%, versus a target of
2%; the Eurozone saw just 0.4% inflation, compared with a
target of at or just below 2%.
But central bank easing, substantial fiscal support and
optimism over the start of vaccine rollouts helped equity markets
to advance despite the economic headwinds. The MSCI All
Country World Index rose 14.3% and the S&P 500 was up
16.2%. The biggest advance came in the technology sector,
with the Nasdaq Composite climbing 43.6%. China’s CSI 300
was a notable outperformer, rising 27.2%.
It was also a favorable year for investors holding government
bonds. The yield on 10-year US Treasury bonds fell around
100 basis points to 0.92%. The yield on the 10-year German
Bund fell 35 basis points to negative 0.53%.
We expect 2021 to be a year of renewal. Economic activity in
China has already largely normalized. The latest progress toward
vaccination raises the prospect that Switzerland, the US, the UK,
and the Eurozone are on the way to returning to economic
normality and a sustained recovery. We expect developed
market earnings in 2021 to have the potential to roughly match
2019 levels. Meanwhile, we expect listed emerging market
companies will earn more in 2021 than in 2019, powered by
robust earnings growth in Asia.
US relations with China will, in our view, remain strained and
we do not predict a major rollback of US tariffs or restrictions on
selected Chinese technology firms. But we do expect the Biden
administration to pursue a less confrontational, more multi-
lateral approach with China. President Biden is also likely to be
less willing than his predecessor to use tariffs as an instrument
of foreign policy. This combination, in our view, removes a major
source of market volatility.
With the 50-50 split in the US Senate and the Democratic
Party’s slim margin in the House of Representatives, the Biden
administration may find it difficult to implement its USD 2 trillion
green spending election proposal. Nevertheless, we expect
President Biden to use executive orders and other regulatory
tools to promote his administration’s green agenda. With
European governments committed to a green recovery from the
COVID-19 pandemic, we believe sustainable investing will gain
further in prominence in 2021 and in the years to come.
We expect central banks and governments to maintain
economic stimulus through 2021, at least until widespread
vaccination makes a return to economic normality possible. Even
then, policymakers will likely be reluctant to imperil the recovery
through a premature return to tighter monetary policy or
austerity. We do not expect rate increases from the Swiss
National Bank, the Fed, the ECB, the Bank of Japan or the Bank
of England in 2021. We expect government bond yields to
remain relatively
low. To fund social support packages,
governments ran an aggregate deficit of over 11% of global
GDP in 2020; however, we see significant tax increases as
unlikely in major economies.
We believe gradual economic normalization and continued
policy support will enable financial markets to advance in 2021.
We expect gains in equity markets in the Eurozone, the UK,
Switzerland and Japan. But we do see the leadership of the rally
shifting. While mega-cap US technology firms outperformed in
2020, we believe more cyclical parts of the market will lead in
2021, including mid- and small-cap stocks.
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31
Our strategy, business model and environment
Our strategy, business model and environment | Our environment
Industry trends
Although our industry has been heavily affected by continuous
regulatory developments over the past decade, technology has
clearly emerged as the main driver of change today and
increasingly affects the competitive landscape and our products
and operations. In parallel, our industry is materially driven by
market and macroeconomic conditions.
› Refer to “Current market climate” in this section for information
about global economic growth
Digitalization
Technology is changing the way banks operate and we expect it
will continue to do so, in step with advances in computing
capability, evolving client needs, and digital trends. Investment in
technology is no longer solely considered a means of making
banks more efficient. Today, such investment is the key to keeping
banks flexible and competitive in a digitalized world, and it creates
the opportunity to develop new business models.
The global impact of COVID-19 has accelerated digital
transformation and also influenced the way in which institutions
interact with clients. Clients’ preference for omni-channel advice
is stronger than ever: there has been growth
in client
engagement across all digital channels, as well as increases in
the number of client-facing webinars and virtual client meetings.
Clients care about the ease of access to information and client
advisors, and the simplicity of doing business using technology.
As the digital transformation accelerates, clients now accept
digitalized personalized advice as complementary to human
interaction. Some of the opportunities for growth stem from
providing new digitally enabled advisory services that help clients
tailor their product portfolios and take advantage of customized
life-planning or business advice.1 Going forward, clients will
expect banks to offer more digital and mobile-based tools for
financial management advice.
Technological advances make banking operations more
efficient as well as more resilient and able to provide continuity
for employee access. There is a trend for the automation of
banking processes that are repetitive and labor intensive, such as
data collection, data crunching and data reporting tasks.
Consolidation
Many regions and businesses in the financial services industry
are still highly fragmented. We expect further consolidation,
with the key drivers being ongoing margin pressure, a push for
cost efficiencies and increasing scale advantages resulting from
the fixed costs of technology and regulatory developments.
Many banks now seek increasing exposure and access to regions
with attractive growth profiles, such as Asia and other emerging
local acquisitions or partnerships. The
markets,
through
increased focus on core capabilities and geographical footprints
and the ongoing simplification of business models to reduce
operational and compliance risks will result in further disposals
of non-core businesses and assets.
The impact of the COVID-19 pandemic may further accelerate
consolidation, as banks
from
face
digitalization, low interest rates and intensified competition.
There are likely to be more mergers and acquisitions in the US
and especially the EU, with growing regulatory appetite.
increasing
threats
New competitors
is evolving.
Our competitive environment
In addition to
traditional competitors in the asset-gathering businesses, new
entrants are targeting selected parts of the value chain.
However, we have not yet seen a fundamental unbundling of
the value chain and client relationships, which might ultimately
result in the disintermediation of banks by new competitors.
Over the long term, we believe large platform companies
entering the financial services industry could pose a significant
competitive threat, given their strong client franchises and
access to client data. Fintech firms are gaining momentum,
particularly due to COVID-19 as consumers respond and adapt
to the crisis. However, such firms have not to date materially
disrupted our asset-gathering businesses. The trend for forging
partnerships between new entrants and incumbent banks has
continued throughout the pandemic and is set to go on, as
technology and
innovation help banks overcome new
challenges.
Regulation
The COVID-19 pandemic dominated the regulatory agenda in
2020 and caused a shift in regulatory and supervisory priorities.
Although the financial sector has demonstrated resilience, a
number of unintended implications of the regulatory framework
led to new discussions that we expect to shape regulation in the
coming years, such as the role and use of capital and liquidity
buffers, and procyclical effects in areas such as the market risk
and accounting frameworks. The pandemic has also significantly
increased the regulatory focus on operational resilience, with
several jurisdictions proposing measures to enhance operational
resilience in the financial sector.
While policymakers delayed the Basel III implementation
timeline due to COVID-19, the reforms remain on the agenda,
as rulemaking at the national level continues. We also expect
further adjustments to the Swiss too-big-to-fail framework,
with additional
systemically
important banks.
requirements
liquidity
for
11 The 2020 Accenture Global Banking Consumer Study published on 8 December 2020: accenture.com/ca-en/insights/banking/consumer-study-making-digital-banking-more-human
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32
Our strategy, business model and environment | Our environment
Industry trends
Although our industry has been heavily affected by continuous
increased focus on core capabilities and geographical footprints
regulatory developments over the past decade, technology has
and the ongoing simplification of business models to reduce
clearly emerged as the main driver of change today and
operational and compliance risks will result in further disposals
increasingly affects the competitive landscape and our products
of non-core businesses and assets.
and operations. In parallel, our industry is materially driven by
The impact of the COVID-19 pandemic may further accelerate
market and macroeconomic conditions.
› Refer to “Current market climate” in this section for information
about global economic growth
consolidation, as banks
face
increasing
threats
from
digitalization, low interest rates and intensified competition.
There are likely to be more mergers and acquisitions in the US
and especially the EU, with growing regulatory appetite.
Digitalization
New competitors
Technology is changing the way banks operate and we expect it
will continue to do so, in step with advances in computing
Our competitive environment
is evolving.
In addition to
capability, evolving client needs, and digital trends. Investment in
traditional competitors in the asset-gathering businesses, new
technology is no longer solely considered a means of making
entrants are targeting selected parts of the value chain.
banks more efficient. Today, such investment is the key to keeping
However, we have not yet seen a fundamental unbundling of
banks flexible and competitive in a digitalized world, and it creates
the value chain and client relationships, which might ultimately
the opportunity to develop new business models.
result in the disintermediation of banks by new competitors.
The global impact of COVID-19 has accelerated digital
Over the long term, we believe large platform companies
transformation and also influenced the way in which institutions
entering the financial services industry could pose a significant
interact with clients. Clients’ preference for omni-channel advice
competitive threat, given their strong client franchises and
is stronger than ever: there has been growth
in client
access to client data. Fintech firms are gaining momentum,
engagement across all digital channels, as well as increases in
particularly due to COVID-19 as consumers respond and adapt
the number of client-facing webinars and virtual client meetings.
to the crisis. However, such firms have not to date materially
Clients care about the ease of access to information and client
disrupted our asset-gathering businesses. The trend for forging
advisors, and the simplicity of doing business using technology.
partnerships between new entrants and incumbent banks has
As the digital transformation accelerates, clients now accept
continued throughout the pandemic and is set to go on, as
digitalized personalized advice as complementary to human
technology and
innovation help banks overcome new
interaction. Some of the opportunities for growth stem from
challenges.
providing new digitally enabled advisory services that help clients
tailor their product portfolios and take advantage of customized
Regulation
life-planning or business advice.1 Going forward, clients will
expect banks to offer more digital and mobile-based tools for
The COVID-19 pandemic dominated the regulatory agenda in
financial management advice.
2020 and caused a shift in regulatory and supervisory priorities.
Technological advances make banking operations more
Although the financial sector has demonstrated resilience, a
efficient as well as more resilient and able to provide continuity
number of unintended implications of the regulatory framework
for employee access. There is a trend for the automation of
led to new discussions that we expect to shape regulation in the
banking processes that are repetitive and labor intensive, such as
coming years, such as the role and use of capital and liquidity
data collection, data crunching and data reporting tasks.
buffers, and procyclical effects in areas such as the market risk
Consolidation
and accounting frameworks. The pandemic has also significantly
increased the regulatory focus on operational resilience, with
several jurisdictions proposing measures to enhance operational
Many regions and businesses in the financial services industry
resilience in the financial sector.
are still highly fragmented. We expect further consolidation,
While policymakers delayed the Basel III implementation
with the key drivers being ongoing margin pressure, a push for
timeline due to COVID-19, the reforms remain on the agenda,
cost efficiencies and increasing scale advantages resulting from
as rulemaking at the national level continues. We also expect
the fixed costs of technology and regulatory developments.
further adjustments to the Swiss too-big-to-fail framework,
Many banks now seek increasing exposure and access to regions
with additional
liquidity
requirements
for
systemically
with attractive growth profiles, such as Asia and other emerging
important banks.
markets,
through
local acquisitions or partnerships. The
Looking ahead, we expect increased regulatory policy
developments in areas including digital innovation, the use and
protection of data, cybersecurity and anti-money laundering.
We also expect further progress on sustainability-related policy
proposals, with a focus on climate risks, sustainable finance
taxonomies and overall disclosure requirements. Regulators will
address more recent challenges that could impact financial
stability, such as the non-banking financial industry and digital
currencies.
Many of these developments are taking place in a new wave
of national focus that could pose additional challenges to the
provision of cross-border financial services. Further restrictions
with regard to market access into the EU in particular would
have a significant effect on Switzerland as a financial center,
affecting UBS. In addition, the relationship between the UK and
the EU following the expiration of the transition period on 31
December 2020 may affect future regulatory priorities and
in how countries
in Europe. Variations
financial services
implement rules, and increased national focus, bring risks of
additional regulatory fragmentation, which in turn may lead to
higher costs for us and new financial stability risks.
However, we believe the continuous refinements made to our
business model and the proactive management of regulatory
change put us
in a strong position to absorb future
developments in the regulatory environment.
› Refer to the “Regulatory and legal developments” and “Capital,
liquidity and funding, and balance sheet” sections of this report
for more information
Wealth creation
All figures below are from the BCG Global Wealth Report 20201
and refer to the 2019 financial year. Global wealth grew by
9.6% to USD 226 trillion in 2019, the fastest rate of increase
since 2005 and the second-best performance of the past two
decades. This was driven by a 24% rally in global equities, the
best year since 2009. The rise in wealth marked a recovery from
2018, which registered a growth rate of just 0.8%. North
America continued to represent the largest concentration of
wealth, at 44%, followed by Western Europe at 20%. But Asia
has been gaining ground, with a compound growth rate of close
to 11% over the past decade, compared with 6.3% in North
America and 3.9% in Western Europe. The outlook for wealth in
the coming years will be partly defined by the pace of economic
recovery from the COVID-19 pandemic. A swift rebound would
likely see wealth rise by a compounded 4.5% over the next four
years, falling to 3.2% in the event of a slow recovery and 1.4%
if the pandemic leaves lasting scars on the global economy.
Wealth transfer
Demographic and socioeconomic developments continue to
generate shifts in wealth. Our “Riding the storm – Billionaires
insights 2020” report found a next generation of rebuilders is in
the making. When the current storms pass, we expect a new
generation of billionaire innovators will emerge, and that
generation may well play a critical role in resolving many of the
current problems. Using the growing repertoire of emerging
technologies, we expect tomorrow’s innovators will digitize,
refresh and revolutionize the economy. Whether intentionally or
not, this can help bridge financial, social and environmental
deficits. We are responding to the evolving wealth landscape
with a framework that addresses all aspects of our clients’
financial lives, called UBS Wealth Way. It begins with discovery
questions and a conversation with clients about what is most
important to them. We help clients organize their financial life
along three key strategies: Liquidity to help provide cash flow for
short-term expenses; Longevity for long-term needs; and Legacy
for needs that go beyond their own and help improve the lives
of others, a key part of wealth transfer planning.
Sustainable finance
Markets around the world are undergoing a profound
transformation as investors factor in climate change and other
sustainable themes with regard to investment risk and return.
Shifting societal values and greater regulation are further
strengthening client demand. Investors are adding sustainable
investing strategies to their portfolios, with fastest growth
around funds focusing on energy transition. We think this will
shape investments and markets in the years ahead as businesses
increasingly embed sustainability. Our view is that this trend
plays to UBS’s strengths, as we have been at the forefront of
sustainable finance for over two decades, making us well placed
to continue developing the innovative products and solutions
our institutional and private clients need.
› Refer to the Sustainability Report 2020, available from 11 March
2021 under “Annual reporting” at ubs.com/investors, for more
information about sustainability matters
Search for yield
longer term have been diversifying
Over the last decade, central banks’ monetary policies have kept
interest rates at historically low levels, which caused a significant
decline in bond yields across advanced economies. This has
created challenges for investors looking for income and portfolio
diversification. Investors searching for sustainable, high returns
illiquid
for the
alternatives – private equity, property, hedge funds and
infrastructure – that can deliver compelling risk-adjusted returns.
At the same time, investors continue to look for low-cost,
efficient passive strategies across liquid equity markets. We
expect this “barbell strategy” of combining high-alpha and low-
cost passive strategies will continue, and we believe the breadth
of Asset Management’s investment expertise enables us to find
the right solutions for clients across asset classes and regions.
into
11 The 2020 Accenture Global Banking Consumer Study published on 8 December 2020: accenture.com/ca-en/insights/banking/consumer-study-making-digital-banking-more-human
11 Based on BCG Global Wealth Report 2020. The BCG Global Wealth Report 2020 defines wealth segmentation as follows: wealth of greater than USD 20 million to be classified as ultra high net worth individuals;
USD 1–20 million for high net worth individuals; USD 0.25–1 million for affluent individuals.
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Our strategy, business model and environment
Our strategy, business model and environment | How we create value for our stakeholders
How we create value for our stakeholders
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Advice on a broad range of products and
services by trusted advisors
A mix of personal interaction with our
advisors in combination with digital
service anywhere, anytime (convenient
digital banking)
Top quality solutions and the highest
standards in terms of asset safety, data
and information security, confidentiality
and privacy
A combination of global reach and local
capabilities targeting positive investment
outcomes
Competitively priced products and
services
Disciplined execution of our strategy
leading to attractive capital returns
through dividends and share repurchases
Comprehensive and clear disclosures on
quantitative and qualitative data
necessary to make informed investment
decisions
Recognizing and proactively addressing
strategic opportunities and challenges
IInnvveessttoorrss
EEmmppllooyyeeeess
A world-class employer providing an
engaging, supportive and inclusive
workplace culture
Skill and career development
opportunities and rewards for
performance
An environment that provides a sense of
belonging and of adding value to clients,
to shareholders and to society
Delivering tailored advice and
customized solutions, using our
intellectual capital and digital platforms
Building long-term personalized
relationships with our clients
Developing new products, solutions
and strategic partnerships in response
to clients’ evolving needs, including in
the digital age
Providing access to global capital
markets and providing bespoke
financing solutions
Meeting increasing sustainable
investment and private markets
demand from clients
Executing our strategy with discipline
and agility as the external environment
evolves, while aiming to deliver cost-
and capital-efficient growth
Providing transparent, timely and
reliable public disclosures
Investment performance in light
of current market environment
Individualized client meetings
Holistic goal-based financial
planning
Sustainable finance and
investing opportunities
Data privacy and security
Products and services, including
those around digital banking
Need for even more personal
advice during the COVID-19
pandemic
Structural growth and return
potential in our businesses
Cost efficiency and ability to
generate positive operating
leverage
Ability to protect or even grow
revenues in a low-for-longer
interest rate environment
Asset risk and support for the
economy in the environment
surrounding COVID-19
Requests for regular client feedback,
feedback monitoring and complaint
handling
Primarily virtual client events and
conferences, including information on
key developments and opportunities
Client satisfaction surveys
New ways of digitally interacting with
clients resulting from the COVID-19
pandemic
Financial reports, investor and analyst
conference calls, and / or webcasts, as
well as media updates on our
performance or other disclosures
General shareholder meetings
Investor and analyst meetings
New ways of digitally interacting with
investors resulting from the COVID-19
pandemic, with limited impact on usual
meeting schedules and participation,
given reliable virtual solutions; all
general meetings held virtually
Attracting and developing great talent
The three keys to a strong
corporate culture
Regular employee surveys and other
virtual employee engagement activities
Fostering a workplace culture that
supports and engages our employees,
enabling them to develop their careers
and unlock their full potential
Strategic focus on diversity and
inclusion, with a focus on
gender, race and ethnicity
Holistic support, including health and
well-being initiatives, empowered
employees and fostered resilience
The future of work; preparing for
future demands and
circumstances
SSoocciieettyy
Facilitation of economic development
that is sustainable for the planet and
humankind
Promoting significant and lasting
improvements in the well-being of
communities in which we operate
Sustainable finance
Our climate strategy
Maximization of our positive effects and
minimization of any negative effects on
society and the environment
Proactive management of the
environmental and societal impacts of
our business
Taking an active role in the transition
of our economy toward
environmentally and socially
sustainable solutions
Advising clients to align their business
models with ESG parameters and the
SDGs
Our client and corporate
philanthropy efforts
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34
Group Franchise Awards program and
peer-to-peer recognition
Regular “Ask the CEO” events, along
with senior leadership, regional and
functional employee sessions
Safeguarding our employees’ health and
well-being; providing extra flexibility and
support enabling them to succeed in
new environments
Community investments and
partnerships with social institutions
Interaction with NGOs
Participation in forums and round tables,
as well as industry-, sector- and topic-
specific debates
Dialogs with regulators and
governments
Support of COVID-19-related aid
projects across our communities
Our strategy, business model and environment | How we create value for our stakeholders
How we create value for our stakeholders
Clients
Our clients are the heart of our business. We are committed to
building and sustaining long-term relationships based on mutual
respect, trust and integrity. Understanding our clients’ needs and
expectations enables us to best serve their interests and to
create value for them.
Our clients and what matters most to them
There is no archetypal UBS client. Our clients have varying needs,
but each of them expects outstanding advice and service, a wide
range of choices, and an excellent client experience.
Global Wealth Management focuses on serving the unique
and sophisticated needs of high net worth and ultra high net
worth individuals, families, and family offices worldwide, as well
as affluent clients in selected markets. We give them access to
outstanding advice, service, and investment opportunities from
around the globe, delivered by experts they can trust. Using a
holistic, goals-based approach to financial planning, we deliver a
personalized wealth management experience and work side by
side with clients to help them realize their ambitions. Our client-
facing advisors and the global teams supporting them focus on
developing long-term client relationships, which often span
generations. Clients look to us for expertise in helping them to
plan for, protect and grow their wealth, as well as helping them
make some of the most important decisions in their lives. From
significant
liquidity events to professional milestones and
personal turning points, we aim to give clients the confidence to
move forward and achieve their goals. Through extensive
research into clients’ preferences and goals, and broader analysis
of
investor sentiment globally, we constantly evolve our
offerings to meet the shifting priorities of today’s wealthy
clients. This
in digital capabilities and
developing products to help clients fund their lifestyles and
manage their cash flow, as well as offering guidance on how
they can create a
impact for their
communities and the causes they most care about. We are the
leading global wealth manager for clients
in
investing,1 with a commitment to developing
sustainable
solutions that allow clients to align their financial goals and their
personal values.
lasting and positive
interested
investing
includes
› Refer to “Global Wealth Management” in the “Our businesses”
section of this report for more information about sustainable
investment offerings
Personal & Corporate Banking serves a total of approximately
2.6 million individual clients and over 100,000 corporate clients,
companies ranging from start-ups to multi-nationals, including
specialized entities, such as pension funds and insurers, real
estate companies, commodity traders, and banks. As a result,
our clients include more than 30% of Swiss households, more
than 90% of the largest 250 Swiss corporations and more than
50% of mid-size to large pension funds in Switzerland. Our
clients look for financial advice based on their needs at each
11 Euromoney Private Banking and Wealth Management Survey 2020: Overall Global Results.
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Advice on a broad range of products and
Delivering tailored advice and
Investment performance in light
Individualized client meetings
services by trusted advisors
customized solutions, using our
of current market environment
A mix of personal interaction with our
Holistic goal-based financial
feedback monitoring and complaint
advisors in combination with digital
Building long-term personalized
planning
handling
intellectual capital and digital platforms
Requests for regular client feedback,
service anywhere, anytime (convenient
relationships with our clients
digital banking)
Developing new products, solutions
Sustainable finance and
investing opportunities
Top quality solutions and the highest
and strategic partnerships in response
standards in terms of asset safety, data
to clients’ evolving needs, including in
Data privacy and security
Primarily virtual client events and
conferences, including information on
key developments and opportunities
and information security, confidentiality
the digital age
Client satisfaction surveys
A combination of global reach and local
markets and providing bespoke
clients resulting from the COVID-19
capabilities targeting positive investment
financing solutions
Need for even more personal
pandemic
Providing access to global capital
those around digital banking
New ways of digitally interacting with
Products and services, including
advice during the COVID-19
pandemic
Competitively priced products and
Meeting increasing sustainable
investment and private markets
demand from clients
and privacy
outcomes
services
IInnvveessttoorrss
Disciplined execution of our strategy
Executing our strategy with discipline
Structural growth and return
Financial reports, investor and analyst
leading to attractive capital returns
and agility as the external environment
potential in our businesses
conference calls, and / or webcasts, as
through dividends and share repurchases
evolves, while aiming to deliver cost-
Comprehensive and clear disclosures on
and capital-efficient growth
Cost efficiency and ability to
generate positive operating
well as media updates on our
performance or other disclosures
quantitative and qualitative data
Providing transparent, timely and
leverage
General shareholder meetings
necessary to make informed investment
reliable public disclosures
decisions
Ability to protect or even grow
Investor and analyst meetings
Recognizing and proactively addressing
strategic opportunities and challenges
revenues in a low-for-longer
interest rate environment
Asset risk and support for the
economy in the environment
surrounding COVID-19
New ways of digitally interacting with
investors resulting from the COVID-19
pandemic, with limited impact on usual
meeting schedules and participation,
given reliable virtual solutions; all
general meetings held virtually
EEmmppllooyyeeeess
A world-class employer providing an
Attracting and developing great talent
The three keys to a strong
Regular employee surveys and other
engaging, supportive and inclusive
workplace culture
Fostering a workplace culture that
corporate culture
virtual employee engagement activities
Skill and career development
opportunities and rewards for
performance
supports and engages our employees,
Strategic focus on diversity and
Group Franchise Awards program and
enabling them to develop their careers
inclusion, with a focus on
peer-to-peer recognition
and unlock their full potential
gender, race and ethnicity
Regular “Ask the CEO” events, along
An environment that provides a sense of
well-being initiatives, empowered
future demands and
functional employee sessions
belonging and of adding value to clients,
employees and fostered resilience
circumstances
Holistic support, including health and
The future of work; preparing for
with senior leadership, regional and
to shareholders and to society
SSoocciieettyy
Facilitation of economic development
Promoting significant and lasting
Sustainable finance
that is sustainable for the planet and
improvements in the well-being of
humankind
communities in which we operate
Our climate strategy
Maximization of our positive effects and
Taking an active role in the transition
Our client and corporate
minimization of any negative effects on
of our economy toward
philanthropy efforts
society and the environment
Proactive management of the
environmentally and socially
sustainable solutions
environmental and societal impacts of
Advising clients to align their business
our business
models with ESG parameters and the
SDGs
Safeguarding our employees’ health and
well-being; providing extra flexibility and
support enabling them to succeed in
new environments
Community investments and
partnerships with social institutions
Interaction with NGOs
Participation in forums and round tables,
as well as industry-, sector- and topic-
specific debates
Dialogs with regulators and
governments
Support of COVID-19-related aid
projects across our communities
stage of their individual or corporate journey. We aim to deliver
outstanding advice to them via a multi-channel approach.
Clients have access to digital banking, a wide network of
branches and remote contact centers. These channels are
designed to deliver a superior, convenient client experience with
24/7 availability, security and value for money, resulting in high
levels of client satisfaction. Clients are also offered a broad
range of products and services in all relevant areas: basic
banking, investing, financing (including mortgages), retirement
planning, cash management, trade and export finance, global
custody, and company succession, among others. Additionally,
they have full access to the solutions of the Investment Bank,
Asset Management and Global Wealth Management.
In Asset Management, we deliver investment products and
services directly to approximately 2,600 clients around the world –
including sovereign institutions, central banks, supranational
corporations, pension funds, insurers and charities – as well as to
its clients, wholesale
Global Wealth Management and
intermediaries and financial institutions. Our clients seek global
insights and a holistic approach to tailoring solutions to meet their
specific needs. By building long-term, personalized relationships
with our clients and partners, we aim to achieve a deep
understanding of their needs and to earn their trust. We draw on
the breadth and depth of our global investment capabilities –
across traditional and alternative, active and passive categories –
to deliver the solutions they need. We integrate sustainability into
our financial analysis enabling us to help clients meet their
sustainability objectives and their fiduciary duties.
The Investment Bank provides corporate, institutional and
wealth management clients with expert advice, financial
solutions, execution, and access to the world’s capital markets.
Our business model is specifically built around our clients and
their needs. Corporate clients can access advisory services, debt
and equity capital market solutions, and bespoke financing
through our reshaped Global Banking business. Our Global
Markets business focuses on helping institutional clients engage
with local markets around the world, offering equities and
equity-linked products, and foreign exchange, rates and credit
products and services.
› Refer to “Investment Bank” in the “Our businesses” section of
this report for more information about organizational changes
Our advisory and differentiated content offering
is
underpinned by Global Research. The differentiated nature of
our research, combined with UBS Evidence Lab Innovations,
which provides access to insight-ready data sets for thousands of
companies, aims to give clients an informational edge. In 2020,
we launched UBS China 360, new thematic research offering a
direct window into one of the world’s most dynamic economies,
connecting the dots across macroeconomic and industry themes,
and leveraging the power of UBS Evidence Lab Innovations and
our research franchise.
34
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Our strategy, business model and environment Our strategy, business model and environment | How we create value for our stakeholders
together
themselves via ubs.com, putting
Personal & Corporate Banking introduced several innovations,
reflecting our digital transformation progress and continuous
efforts to develop simple, smart and secure solutions. In June
2020, we launched a digital mortgage platform under our UBS-
endorsed key4 brand for private clients who prefer digital
channels. Our UBS Atrium mortgage platform, aimed at
corporate and institutional clients, has gained traction, already
servicing more than CHF 1.8 billion of credit volume. To expand
into real-estate ecosystems with our two platforms at the core,
in a Swiss start-up providing
we took an equity stake
homeowners with useful tools associated with home ownership,
and partner with different online platforms focused on real
estate and home ownership. The above reflects our commitment
to engage and rapidly achieve scale for new digital business
models. Our Digital Personal Bank has introduced a new
coverage model to service some 400,000 retail clients more
effectively and efficiently and offer advice on selected personal
banking products. Clients can now open a basic banking
package
their
individual package based on their needs. For payments we have
completed our wallet strategy with the launch of Google,
Samsung and Apple Pay for a contactless, secure and simple
experience. We announced a new payment innovation: our UBS
Global Card, a multi-currency card giving clients attractive
conditions when shopping abroad. Due to changing client
needs, and growing demand for an integrated, holistic banking
experience, we introduced multi-banking for corporate clients.
This attractive offering integrates third-party banks for full
transparency across accounts and convenient payment execution
via a single platform – a unique value proposition in the Swiss
market. Also, more than 80 bots have been deployed in Personal
& Corporate Banking, and many more business-aligned bots,
helping the firm and clients in these extraordinary times. For
instance, bots made the rapid processing of COVID-19 credit
applications possible, swiftly providing bridging liquidity to small
and medium-sized companies. Beyond banking, with a partner
from the insurance sector we tapped into the bancassurance
market by launching a start-up bancassurance offering to cover
the needs of young entrepreneurs on our UBS Start Business
platform. With another insurance-sector partner we piloted a
bespoke mortgage protection insurance product for our retail
clients. Sustainability is a key driver of new product and service
innovations. Almost 70% of mandates sold in Personal Banking
in 2020 were Sustainable Investing mandates. Additionally, we
introduced a sustainable Eco Credit Card, which is over 80%
biodegradable; as with the older version of UBS Optimus
Foundation credit card, a percentage of the amount spent using
the card is donated to UBS Optimus Foundation. Another
development in the sustainability space is the support we offer
for Swiss small and medium-sized entities in their energy-saving
efforts and transition to a low-carbon economy, e.g., with
energy check-ups.
› Refer to the Sustainability Report 2020, available from 11 March
2021 under “Annual reporting” at ubs.com/investors, for more
information about sustainability matters
We know the security and confidentiality of our clients’ data
is of utmost importance to them, as it is for UBS. That is why we
put the highest priority on having comprehensive measures in
place that are designed to ensure that client data confidentiality
and integrity are maintained. We continually assess and improve
our control environment to mitigate emerging cyber threats and
meet expanding legal and regulatory expectations. Investments
in our IT platforms preserve and improve our IT security
standards, with a focus on giving clients secure access to their
data via our digital channels and protecting that data from
unauthorized access. Although the level of sophistication,
impact and volume of cyberattacks continue to grow worldwide,
we are ever vigilant, maintaining a strong and agile cybersecurity
and information security program to mitigate and manage cyber
risk by providing robust, consistent, secure and resilient business
processes.
Enhancing the client experience through innovation and
digitalization
We streamline and simplify interactions with clients through
front-to-back digitalization and innovations.
In Global Wealth Management, we develop and deploy
digital tools enhancing the value of the human relationships that
differentiate UBS. Clients expect the convenience and speed that
technology offers but, simultaneously, feel a personal experience
with advisors is more important than ever. Our advisors use
state-of-the-art digital tools to spend more time with clients and
better evaluate the full scope of their financial lives. Our clients
appreciate digital tools that improve their experience, for
example, easy ways to view their portfolios or access to research
that is tailored to their needs. They also want multiple ways in
which to interact with their advisors. In 2020, the pandemic and
the associated need for physical distancing caused clients to
embrace the use of digital and mobile tools in greater numbers
than ever before. In the second quarter alone, electronic check
deposits using our mobile app increased by more than 120%.
We continue to introduce new and better tools to meet and
exceed clients’ expectations. For example, our UBS Manage
Advanced [My Way] app offers clients in selected markets an at-
a-glance comprehensive view of their investment portfolio. With
access to around 50 professionally managed
investment
modules (building blocks), it is underpinned by continuous
portfolio monitoring and risk management. It is digital and
interactive, as clients can work with their advisors on an iPad
app to design their own portfolio, easily including elements such
as sustainable investing and themes to reflect their individual
preferences and priorities. Built on state-of-the-art technology,
our new Online Services for clients in the US is a simpler and
more intuitive platform that makes managing finances online
easy, and creates an experience that supports advisors in driving
critical conversations to deliver the advice clients are looking for.
In Switzerland, our UBS Mobile Banking app has been enhanced
so clients can now see relevant investment views and have
access to our real-time quote capabilities before logging in. At a
broader level, we continue to make progress on our multi-year
strategy to serve clients globally from two platforms: the Wealth
Management Americas Platform in the US and the Wealth
Management Platform outside the US.
36
36
In Asset Management, we are accelerating our investment in
digitalization, with a focus on developing tools, technologies
and data capabilities to enhance the experience and service for
our clients, foster innovation and support alpha generation. For
example, we are developing a scalable platform to enable more
efficient development and management of
theme-based
investment products to meet growing client demand. We are
also expanding the suite of tools used by our Quantitative
Evidence & Data Science team, who utilize alternative and
traditional data combined with statistical modeling to enhance
and augment our fundamental and systematic investment
processes. The use of tools and online events rolled out in 2020
is being further expanded in response to the accelerated
adoption of digital interaction by our clients during the COVID-
19 pandemic.
sets delivered
The Investment Bank strives to be the digital investment bank
of the future, with innovation-led businesses driving efficiencies
and solutions. UBS Investment Bank Innovation Lab is aimed at
facilitating connections between business teams to leverage best
practice, build and test proofs of concept safely and quickly, and
inspire a culture of innovation. Our UBS Data Solutions business,
launched in 2018, has matured into a leading component of our
digital content portfolio, providing access to a broad suite of
data
via our Cloud-hosted application
programming interfaces (APIs). We strive to develop new
products and solutions consistent with our capital-efficient
business model, which are typically related to new technologies
or changing market standards. Examples include our FX Tree
solution, which provides client-tailored pricing streams and
hedging optimization, and our eFX offering, where our
continued strategic investments have earned us a top-three
ranking across major multi-dealer platforms and industry-wide
recognition through multiple awards. UBS Neo, our award-
winning multi-channel platform, lets our professional and
institutional clients access a comprehensive suite of products and
services covering the full investment life cycle. During 2020, we
launched UBS Neo Question Bank, the largest global database of
market-related questions asked by professional investors.
Advanced [My Way] app offers clients in selected markets an at-
platform. With another insurance-sector partner we piloted a
Engaging with our clients
We use a variety of channels to engage with clients, including
regular client relationship / service meetings, as well as various
corporate roadshows and dedicated events. We also engage
with our clients by supporting cultural and sporting events both
across Switzerland and internationally. During the COVID-19
pandemic, events have been swiftly transitioned online and we
expect that they will be further shifted into alternative marketing
channels (e.g., social media and content and dialog marketing)
in the future.
Our strategy, business model and environment | How we create value for our stakeholders
We know the security and confidentiality of our clients’ data
Personal & Corporate Banking introduced several innovations,
is of utmost importance to them, as it is for UBS. That is why we
reflecting our digital transformation progress and continuous
put the highest priority on having comprehensive measures in
efforts to develop simple, smart and secure solutions. In June
place that are designed to ensure that client data confidentiality
2020, we launched a digital mortgage platform under our UBS-
and integrity are maintained. We continually assess and improve
endorsed key4 brand for private clients who prefer digital
our control environment to mitigate emerging cyber threats and
channels. Our UBS Atrium mortgage platform, aimed at
meet expanding legal and regulatory expectations. Investments
corporate and institutional clients, has gained traction, already
in our IT platforms preserve and improve our IT security
servicing more than CHF 1.8 billion of credit volume. To expand
standards, with a focus on giving clients secure access to their
into real-estate ecosystems with our two platforms at the core,
data via our digital channels and protecting that data from
we took an equity stake
in a Swiss start-up providing
unauthorized access. Although the level of sophistication,
homeowners with useful tools associated with home ownership,
impact and volume of cyberattacks continue to grow worldwide,
and partner with different online platforms focused on real
we are ever vigilant, maintaining a strong and agile cybersecurity
estate and home ownership. The above reflects our commitment
and information security program to mitigate and manage cyber
to engage and rapidly achieve scale for new digital business
risk by providing robust, consistent, secure and resilient business
models. Our Digital Personal Bank has introduced a new
processes.
digitalization
Enhancing the client experience through innovation and
banking products. Clients can now open a basic banking
coverage model to service some 400,000 retail clients more
effectively and efficiently and offer advice on selected personal
package
themselves via ubs.com, putting
together
their
individual package based on their needs. For payments we have
We streamline and simplify interactions with clients through
completed our wallet strategy with the launch of Google,
front-to-back digitalization and innovations.
Samsung and Apple Pay for a contactless, secure and simple
In Global Wealth Management, we develop and deploy
experience. We announced a new payment innovation: our UBS
digital tools enhancing the value of the human relationships that
Global Card, a multi-currency card giving clients attractive
differentiate UBS. Clients expect the convenience and speed that
conditions when shopping abroad. Due to changing client
technology offers but, simultaneously, feel a personal experience
needs, and growing demand for an integrated, holistic banking
with advisors is more important than ever. Our advisors use
experience, we introduced multi-banking for corporate clients.
state-of-the-art digital tools to spend more time with clients and
This attractive offering integrates third-party banks for full
better evaluate the full scope of their financial lives. Our clients
transparency across accounts and convenient payment execution
appreciate digital tools that improve their experience, for
via a single platform – a unique value proposition in the Swiss
example, easy ways to view their portfolios or access to research
market. Also, more than 80 bots have been deployed in Personal
that is tailored to their needs. They also want multiple ways in
& Corporate Banking, and many more business-aligned bots,
which to interact with their advisors. In 2020, the pandemic and
helping the firm and clients in these extraordinary times. For
the associated need for physical distancing caused clients to
instance, bots made the rapid processing of COVID-19 credit
embrace the use of digital and mobile tools in greater numbers
applications possible, swiftly providing bridging liquidity to small
than ever before. In the second quarter alone, electronic check
and medium-sized companies. Beyond banking, with a partner
deposits using our mobile app increased by more than 120%.
from the insurance sector we tapped into the bancassurance
We continue to introduce new and better tools to meet and
market by launching a start-up bancassurance offering to cover
exceed clients’ expectations. For example, our UBS Manage
the needs of young entrepreneurs on our UBS Start Business
a-glance comprehensive view of their investment portfolio. With
bespoke mortgage protection insurance product for our retail
access to around 50 professionally managed
investment
clients. Sustainability is a key driver of new product and service
modules (building blocks), it is underpinned by continuous
innovations. Almost 70% of mandates sold in Personal Banking
portfolio monitoring and risk management. It is digital and
in 2020 were Sustainable Investing mandates. Additionally, we
interactive, as clients can work with their advisors on an iPad
introduced a sustainable Eco Credit Card, which is over 80%
app to design their own portfolio, easily including elements such
biodegradable; as with the older version of UBS Optimus
as sustainable investing and themes to reflect their individual
Foundation credit card, a percentage of the amount spent using
preferences and priorities. Built on state-of-the-art technology,
the card is donated to UBS Optimus Foundation. Another
our new Online Services for clients in the US is a simpler and
development in the sustainability space is the support we offer
more intuitive platform that makes managing finances online
for Swiss small and medium-sized entities in their energy-saving
easy, and creates an experience that supports advisors in driving
efforts and transition to a low-carbon economy, e.g., with
critical conversations to deliver the advice clients are looking for.
energy check-ups.
› Refer to the Sustainability Report 2020, available from 11 March
2021 under “Annual reporting” at ubs.com/investors, for more
information about sustainability matters
In Switzerland, our UBS Mobile Banking app has been enhanced
so clients can now see relevant investment views and have
access to our real-time quote capabilities before logging in. At a
broader level, we continue to make progress on our multi-year
strategy to serve clients globally from two platforms: the Wealth
Management Americas Platform in the US and the Wealth
Management Platform outside the US.
Global Wealth Management engaged with clients in a range
of ways in 2020, from personalized private briefings with subject
matter experts, to segment-specific virtual events, to large-scale
initiatives, such as UBS ElectionWatch 2020, which delivered
insights to clients about the policy and market implications of
the US elections. The global undertaking included virtual
conversations with some of the most prominent US policymakers
and political leaders of the past 20 years, along with UBS
experts. These events were complemented by a full set of
resources from our Chief Investment Office exploring the
potential investment landscape globally up to and beyond the
election. We use a mix of digital and non-digital channels
(including marketing
advertising,
campaigns,
publications and digital-only solutions) to help drive greater
awareness of UBS among prospective clients and reinforce trust-
based relationships between advisors and clients.
events,
Personal & Corporate Banking held regular client events
(mostly webcasts, virtual or hybrid events after the onset of the
COVID-19 pandemic), covering a wide range of topics. In 2020,
we increasingly engaged with clients via online channels, such as
social media, online displays and search engines, and decreased
our use of traditional out-of-home channels.
In Asset Management, we have a consistent program of client
events and engagement activities throughout the year. This
includes our flagship conferences, such as the annual UBS
Reserve Management Seminar, which was delivered for the first
time in a virtual format during the COVID-19 pandemic.
Alongside this, in 2020 our teams significantly intensified the
level of interaction with clients globally, facilitated by new digital
tools, and increased our publication of macro insights and
thought leadership to provide timely insights into the rapidly
evolving markets. We also hosted a broad range of virtual
events, including a new Nobel Perspectives webinar series, to
help our clients better understand market challenges and
investment opportunities, and continue to engage with clients
through our social media and online channels.
The Investment Bank hosted over 100 investor conferences
and educational seminars globally in 2020, covering a broad
range of macro, sector, regional and regulatory topics. Proving
the agility of UBS, almost all of these conferences were held
online. More than 45,000 clients attended such events in 2020,
providing insight and access to our own opinion leaders,
policymakers and leading industry experts. We leverage our
intellectual capital and relationships and use our execution
capabilities, differentiated research content, bespoke solutions,
client franchise model and global platform to expand coverage
across a broad set of clients.
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37
Our strategy, business model and environment Our strategy, business model and environment | How we create value for our stakeholders
How we measure client satisfaction
We use multiple techniques to regularly assess our achievements
and the satisfaction of our clients.
Global Wealth Management is increasingly using technology
and analytics capabilities to collect and respond to client
feedback. Our digital client feedback tool lets clients submit
monthly input about overall satisfaction with advisors and UBS,
and share both longer-term plans they would like to discuss with
their advisor and top-of-mind issues that could impact their
decision-making. Advisors and their teams have seamless, real-
time access to client input, enabling them to address concerns,
identify opportunities for engagement and follow up on new
topics of interest. The tool is fully available in the US and in
selected Asia Pacific and EMEA markets, with further rollout
globally expected in 2021.
Personal & Corporate Banking has conducted annual surveys
of Swiss clients since 2011, consistently covering all private and
corporate client segments annually since 2015. Clients provide
feedback on their satisfaction with regard to various topics (e.g.,
UBS overall, branches, client advisors, products and services) and
indicate further product or advisory needs. Survey responses are
distributed to client advisors, who follow up with each
respondent individually. In 2020, we had an all-time high client
satisfaction and net promoter score (NPS), and achieved a 90%
follow-up rate with non-anonymous survey participants.
In Asset Management, we have an integrated process to
record and manage client feedback through our client
relationship management tool. We also conduct regular surveys,
covering our wholesale and institutional clients globally, inviting
them to assess their satisfaction with our client service, products
and solutions, as well as other factors relevant to their
investments. The results are analyzed to identify focus areas for
improvement and our client relationship managers follow up
with respondents to address specific feedback where required.
The Investment Bank closely monitors client satisfaction via
individual product coverage points. Direct client feedback is
Internal
actively captured and
in our systems.
tracked
relationships, possibilities
regional forums serve as a platform for senior management to
discuss client
improvement,
potential opportunities and specific issues, where applicable.
Other processes are in place to enable consolidated findings to
be shared within UBS as appropriate. The Investment Bank also
closely monitors external surveys, which provide feedback across
a range of investment banking services.
for
We thoroughly evaluate the feedback we receive, including
complaints from clients, and take measures to address key
themes identified. In 2020, clients specifically expressed the
need for more tailored advice during the COVID-19 pandemic,
which is in line with our strategic focus to become part of the
solution to the crisis. Further feedback from clients showed that
our support during the pandemic has significantly improved
client satisfaction, despite adverse economic developments.
A quality feedback system in Global Wealth Management and
Personal & Corporate Banking provides a comprehensive and
systematic platform to receive and process client feedback and
suggestions. We receive feedback in various forms, including in
writing, electronically, orally to client advisors and staff in our
branches, via social media channels, and via the Swiss Banking
Ombudsman.
important, as
Client feedback, including complaints and suggestions, is
vitally
the development and
it supports
introduction of new products and services, as well as the
adapting of our offering in a client-focused manner. By
addressing client feedback, we aim to strengthen client
relationships, improve client satisfaction and make tangible
improvements to client and overall banking services. Having a
wide variety of quality feedback from clients enables us to
systematically evaluate and review our actions. By sharing their
views, clients contribute to quality improvements at all levels.
We aim to respond to each individual who provides feedback.
On significant topics and key developments, we also provide a
collective response in our external reporting. In 2020, key topics
included some targeted products and
and enhancements
services
centered mostly around digital banking
functionalities. These stemmed in particular from requests and
suggestions regarding existing and new features.
that
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38
Our strategy, business model and environment | How we create value for our stakeholders
We use multiple techniques to regularly assess our achievements
potential opportunities and specific issues, where applicable.
and the satisfaction of our clients.
Other processes are in place to enable consolidated findings to
Global Wealth Management is increasingly using technology
be shared within UBS as appropriate. The Investment Bank also
and analytics capabilities to collect and respond to client
closely monitors external surveys, which provide feedback across
feedback. Our digital client feedback tool lets clients submit
a range of investment banking services.
monthly input about overall satisfaction with advisors and UBS,
We thoroughly evaluate the feedback we receive, including
and share both longer-term plans they would like to discuss with
complaints from clients, and take measures to address key
their advisor and top-of-mind issues that could impact their
themes identified. In 2020, clients specifically expressed the
decision-making. Advisors and their teams have seamless, real-
need for more tailored advice during the COVID-19 pandemic,
time access to client input, enabling them to address concerns,
which is in line with our strategic focus to become part of the
identify opportunities for engagement and follow up on new
solution to the crisis. Further feedback from clients showed that
topics of interest. The tool is fully available in the US and in
our support during the pandemic has significantly improved
selected Asia Pacific and EMEA markets, with further rollout
client satisfaction, despite adverse economic developments.
globally expected in 2021.
A quality feedback system in Global Wealth Management and
Personal & Corporate Banking has conducted annual surveys
Personal & Corporate Banking provides a comprehensive and
of Swiss clients since 2011, consistently covering all private and
systematic platform to receive and process client feedback and
corporate client segments annually since 2015. Clients provide
suggestions. We receive feedback in various forms, including in
feedback on their satisfaction with regard to various topics (e.g.,
writing, electronically, orally to client advisors and staff in our
UBS overall, branches, client advisors, products and services) and
branches, via social media channels, and via the Swiss Banking
indicate further product or advisory needs. Survey responses are
Ombudsman.
distributed to client advisors, who follow up with each
Client feedback, including complaints and suggestions, is
respondent individually. In 2020, we had an all-time high client
vitally
important, as
it supports
the development and
satisfaction and net promoter score (NPS), and achieved a 90%
introduction of new products and services, as well as the
follow-up rate with non-anonymous survey participants.
adapting of our offering in a client-focused manner. By
In Asset Management, we have an integrated process to
addressing client feedback, we aim to strengthen client
record and manage client feedback through our client
relationships, improve client satisfaction and make tangible
relationship management tool. We also conduct regular surveys,
improvements to client and overall banking services. Having a
covering our wholesale and institutional clients globally, inviting
wide variety of quality feedback from clients enables us to
them to assess their satisfaction with our client service, products
systematically evaluate and review our actions. By sharing their
and solutions, as well as other factors relevant to their
views, clients contribute to quality improvements at all levels.
investments. The results are analyzed to identify focus areas for
We aim to respond to each individual who provides feedback.
improvement and our client relationship managers follow up
On significant topics and key developments, we also provide a
with respondents to address specific feedback where required.
collective response in our external reporting. In 2020, key topics
The Investment Bank closely monitors client satisfaction via
and enhancements
included some targeted products and
individual product coverage points. Direct client feedback is
services
that
centered mostly around digital banking
actively captured and
tracked
in our systems.
Internal
functionalities. These stemmed in particular from requests and
suggestions regarding existing and new features.
How we measure client satisfaction
regional forums serve as a platform for senior management to
discuss client
relationships, possibilities
for
improvement,
Our focus on sustainability
Our sustainability strategy is guided by the goal of being the
financial provider of choice for clients who wish to mobilize
capital toward the achievement of the 17 United Nations (UN)
Sustainable Development Goals (the SDGs) and the orderly
transition to a low-carbon economy. We work toward this goal
by integrating sustainability into our mainstream offerings and
by advising clients on their philanthropic works. We also
continue to set standards in our industry, including through the
management of environmental and
the
management of our environmental footprint and through our
sustainability disclosure.
social
risks,
Our sustainability ambitions and goals
We are committed to making UBS a force for driving positive
change in society and the environment for future generations.
We do so by focusing our firm on creating long-term positive
impact for clients, employees, investors and society.
Our ambitions and key goals (goals are cumulative figures, to be
achieved by the end of 2025)
Ambition: to be a leader in sustainable finance across all client
segments, with the key goal of
– adding USD 70 billion of invested assets classified as impact
investing1 or with sustainability focus.2
Ambition: to be a recognized innovator and thought leader in
philanthropy, with the key goals of
– raising USD 1 billion in donations to UBS’s client philanthropy
foundations and funds3 and reaching 25 million beneficiaries,
and
– helping one million beneficiaries to learn and develop skills for
employment, decent jobs and entrepreneurship through our
community investment activities.
Ambition: to be an industry leader for sustainable business
practices, with the key goals of
– achieving net zero for scope 1 and 2 greenhouse gas (GHG)
emissions,4
– retaining favorable positions in key environmental, social and
governance (ESG) ratings,
– implementing the Task Force on Climate-related Financial
Disclosures (the TCFD) recommendations (by the end of 2022),
and
– implementing the Principles for Responsible Banking (PRB) (by
September 2023).
Ambition: to be an employer of choice with the key goals of
– maintaining our recognition as one of the world’s most
attractive employers in key ratings and rankings,5 and
– increasing the percentage of Director level and above
positions filled by women (aspiration to reach 30%).
› Refer to the Sustainability Report 2020, available from 11 March
2021 under “Annual reporting” at ubs.com/investors, for more
information about UBS’s sustainability achievements in 2020 and
goals for 2021–2025
Advancing sustainability
UBS is fully committed to both maximizing the positive effects of
our business activities and to minimizing their negative impacts.
While our growing range of sustainable finance products and
services supports our commitment, our environmental and social
risk framework helps us to better understand and respond to
potential environment and human rights risks.
We are a founding signatory of the UN Principles for
Responsible Banking (the Principles). The Principles constitute a
comprehensive framework for the integration of sustainability
across banks. They define accountabilities and require each bank
to set, publish and work toward ambitious targets.
› Refer to the Sustainability Report 2020, available from 11 March
2021 under “Annual reporting” at ubs.com/investors, for more
information about how UBS is advancing sustainability in the
financial industry and beyond
Sustainable finance is vital to us and our clients
As a major financial institution, we are conscious that the
activities and decisions of our clients can have substantial
impacts on society. That is the reason we strive to incorporate
ESG considerations into the products and services we provide to
clients and to partner with them to help mobilize capital toward
achieving the SDGs and toward the orderly transition to a low-
carbon economy.
and
needs
finance
We know ESG topics are becoming increasingly vital to our
clients, so we are committed to serving their growing
sustainable
expectations. More
fundamentally, we believe sustainable finance is the future of
impact on financial performance,
finance. Recognition of
regulatory developments, evolving societal norms,
investor
demand and consumer preference are factors that contribute to
driving the continued evolution of mainstream investing toward
more holistic long-term-oriented approaches. Our clients turn to
us for advice on how they can help to finance the transition to a
low-carbon economy, support sustainable finance, align their
investments with their personal values, and better risk manage
their portfolios and businesses. They want to take advantage of
these opportunities, as well as manage the numerous risks
associated with this transformational challenge.
We, in turn, are looking to create more scalable sustainable
and impact investing solutions that deliver competitive financial
returns, and to advise our corporate clients on risks to their
business models, while driving positive environmental, social and
governance outcomes. Fundamentally, for the benefit of our
clients, we are shaping the landscape of sustainable finance by
innovation and partnerships to
using thought
support them in their sustainability efforts. Our clients’ growing
interest in sustainable finance is clearly shown in a number of
key surveys.
leadership,
38
39
39
11 Strategies where the intention is to generate measurable environmental and social impact alongside financial return.
22 Strategies where sustainability is an explicit part of the investment guidelines, universe, selection, and / or investment process.
33 Includes UBS Optimus Foundation, UBS UK Donor-Advised Foundation and UBS Philanthropy Foundation in Switzerland.
44 Scope 1 accounts for direct GHG emissions by UBS. Scope 2 accounts for indirect GHG emissions associated with the generation of imported / purchased electricity (grid average emission factor), heat or steam.
55 Indicators such as global and country-specific Universum rankings, peer-leading position in human resources elements of the Dow Jones Sustainability Indices, recognition by the Bloomberg Gender-Equality Index,
and market recognition in various new and established benchmarks / rankings.
Our strategy, business model and environment
Our strategy, business model and environment | How we create value for our stakeholders
A global UBS Asset Management survey of 600 institutional
investors found that European asset owner respondents predict
that systemic environmental factors (climate crisis, biodiversity
loss) will be more material to their investments in the next five
years than financial factors.1 In a survey of Swiss institutional
investors, 49% of respondents have already invested sustainably,
and of those, two-thirds plan to increase their share of
sustainable investments (SI).2 A UBS Investment Bank survey of
issuers and investors in both debt and equity capital markets
found that 68% of corporate clients are considering or currently
revising their sustainability strategy. And 70% stated they are
considering including ESG targets as part of their compensation
framework.3
from corporations and
The COVID-19 pandemic has fundamentally changed what is
expected
the market’s
understanding of the importance of climate transition and the
recognition of certain social issues as investment risks. We
therefore expect investor focus on these issues will increase after
COVID-19, with growing demand for corporate transparency
and stakeholder accountability.
increased
› Refer to “Sustainable finance – Ten trends for 2021” at
ubs.com/davos-agenda-2021 for UBS’s perspectives regarding
sustainable finance in 2021 and beyond
How we define sustainable finance
Sustainable finance refers to any form of financial service that
incorporates ESG criteria into business or investment decisions.
We provide sustainable finance solutions to all our client
segments, with a particular focus on sustainable investing.
› Refer to the “Key achievements in 2020” chart in the
Sustainability Report 2020, available from 11 March 2021 under
“Annual reporting” at ubs.com/investors
Sustainable investing (SI) is an approach that seeks to
incorporate ESG considerations into investment decisions. SI
strategies seek to better risk manage portfolios to 21st century
challenges and / or align investments with an investor’s values
regarding ESG topics, while also aiming to improve portfolio risk
and return characteristics.
Core sustainable investments are SI products that involve a
strict and diligent asset selection process through either
exclusions (of companies / sectors from portfolios where the
companies / sectors are not aligned to an investor’s values) or
positive selections (such as best-in-class, thematic or ESG
integration and impact investing).
We identify three sustainable investing approaches: exclusion
(individual companies or entire industries are excluded from
portfolios because their activities conflict with an investor’s
values); ESG integration (which combines ESG factors with
traditional financial considerations); and impact investing (which
is designed specifically to help generate positive, measurable
social and / or environmental impact alongside a financial return
– while another
shareholder
engagement).
impact-focused activity
is
We were among the early movers in developing terminology
to describe our sustainable investing activities and to consistently
report on them. We are, however, conscious of the need to
simplify and standardize the terminology for sustainable finance,
which will help to develop and expand the SI market. We are
therefore actively involved in the relevant discussions and are
committed to reflecting pertinent changes to terminology in our
reporting.
In 2020, we noted very strong momentum in our sustainable
finance activities. A key indicator is the development of our core
SI assets, where we more than doubled penetration, from 5.6%
of total invested assets in 2017 to 18.9% (USD 793 billion) in
2020 (2019: 13.5%, or USD 488 billion). Norms-based screening
assets, i.e., assets that fall under the application of a UBS policy4
and do not otherwise qualify as a core sustainable investment,
amounted to USD 798 billion as of 31 December 2020 (a
decrease from USD 818 billion in 2019). Total sustainable
investments, including norms-based screening assets, accounted
for USD 1,591 billion (2019: USD 1,306 billion), or 38.0%
(2019: 36.2%), of our total invested assets.
11 Survey conducted in June 2019 among 600 institutional clients (ESG: Do you or Don’t you?, UBS Asset Management and Responsible Investor).
22 Survey conducted in August 2020 among 110 Swiss institutional investors.
33 Survey conducted in October 2020 among 160 Investment Bank clients.
44 The assets in discretionary mandates and in UBS’s actively managed retail and institutional funds, as well as those in our firm’s proprietary trading book, are subject to our firm’s policy on the prohibition of
investment in and indirect financing of companies involved in the development, production or purchase of anti-personnel mines and cluster munitions.
Core sustainable investments1,2
USD billion, except where indicated
CCoorree SSII pprroodduuccttss aanndd mmaannddaatteess
Integration – sustainability focus3
Integration – ESG integration4
Impact investing5
Exclusions6
Third-party7
TToottaall ccoorree ssuussttaaiinnaabbllee iinnvveessttmmeennttss
UUBBSS ttoottaall iinnvveesstteedd aasssseettss
GRI
FS11
FS11
FS11
FS11
FS11
FS11
For the year ended
31.12.19
3311..1122..2200
112277..77
551122..88
1133..11
113322..22
77..44
779933..22
44,,118877..00
46.4
372.3
9.1
52.2
8.5
488.5
3,607.0
31.12.18
20.0
224.5
4.7
50.3
13.4
312.9
3,101.0
% change from
31.12.19
175.0
37.7
44.1
153.4
(11.8)
62.4
16.1
Core SI proportion of total invested assets (%)
11 In 2020, Asset Management refined its reporting methodology by carving out funds with high SI categories from funds of funds or mandates that are classified with a lower or no SI category. The impact of this
methodology change is an additional USD 109 billion in core SI (USD 2 billion in integration – sustainability focus and impact investing, USD 28 billion in integration – ESG integration and USD 79 billion in
exclusions) and a decrease of USD 29 billion in norms-based screening assets. 22 FS represents the performance indicators defined in the Financial Services Sector Supplement of the Global Reporting Initiative
reporting framework. 33 Strategies where sustainability is an explicit part of the investment guidelines, universe, selection, and / or investment process. 44 Strategies that integrate environmental, social and
governance (ESG) factors into fundamental financial analysis to improve risk / return. 55 Strategies where the intention is to generate measurable environmental and social impact alongside financial return.
66 Strategies that exclude companies from portfolios where they are not aligned to an investor’s values. Includes customized screening services (single or multiple exclusion criteria). 77 SI products from third-party
providers applying a strict and diligent asset selection process; the selection criteria have been reviewed for the end of the 2020 reporting cycle, following a stricter approach from the provider of sustainability
ratings. Excludes third-party products that went through a systematic Global Wealth Management onboarding process, now included under Integration – sustainability focus.
FS11
1188..99
13.5
10.1
40
40
A global UBS Asset Management survey of 600 institutional
regarding ESG topics, while also aiming to improve portfolio risk
Our offering to clients
We support clients’ sustainability efforts through thought
leadership, innovation and partnerships, and we strive to
incorporate ESG factors into the products and services we
provide.
financial
Our private clients can, by investing sustainably, make a
positive impact on the environment and society while achieving
similar returns to traditional investments, as confirmed by
numerous studies.1 In September 2020, we became the first
major global
sustainable
institution
investments the preferred solution for private clients investing
globally. Our private clients benefit from fully diversified
sustainable portfolios. The size of our 100%-sustainable multi-
asset portfolio, based on our Chief Investment Office’s dedicated
SI strategic asset allocation, surpassed USD 17 billion under
management in 2020, having grown from just over USD 1 billion
roughly three years ago.
to make
Through our Philanthropy Services platform, our private
clients receive unique access to social and financial innovation
and philanthropic advice, as well as tailored program design, co-
funding and co-development opportunities. We offer clients
expert advice, carefully selected programs from UBS Optimus
Foundation, and innovative social financing mechanisms, such as
development impact bonds. In this way, we believe our clients
can make a meaningful, and measurable, difference for their
chosen causes.
Institutional clients are increasingly embracing ESG as a
fundamental investment driver. This is particularly true in relation
to climate risk. In 2020, we delivered on a commitment made at
the World Economic Forum Annual General Meeting at the
beginning of the year and broadened our Asset Management’s
Climate Aware suite of strategies based on its innovative Climate
Aware framework, including equity and fixed income, and both
active and passive approaches. This should enable more clients
to align their investment and environmental goals.
Corporate clients are also transforming so as to align their
business models to ESG parameters and the SDGs. It is our aim
to meet clients, wherever they are in their sustainability journey,
with advice and support, products, expertise, and execution. To
this end, we offer assistance in areas such as the issuance of
Our strategy, business model and environment | How we create value for our stakeholders
investors found that European asset owner respondents predict
and return characteristics.
that systemic environmental factors (climate crisis, biodiversity
Core sustainable investments are SI products that involve a
loss) will be more material to their investments in the next five
strict and diligent asset selection process through either
years than financial factors.1 In a survey of Swiss institutional
exclusions (of companies / sectors from portfolios where the
investors, 49% of respondents have already invested sustainably,
companies / sectors are not aligned to an investor’s values) or
and of those, two-thirds plan to increase their share of
positive selections (such as best-in-class, thematic or ESG
sustainable investments (SI).2 A UBS Investment Bank survey of
integration and impact investing).
issuers and investors in both debt and equity capital markets
We identify three sustainable investing approaches: exclusion
found that 68% of corporate clients are considering or currently
(individual companies or entire industries are excluded from
revising their sustainability strategy. And 70% stated they are
portfolios because their activities conflict with an investor’s
considering including ESG targets as part of their compensation
values); ESG integration (which combines ESG factors with
framework.3
traditional financial considerations); and impact investing (which
The COVID-19 pandemic has fundamentally changed what is
is designed specifically to help generate positive, measurable
expected
from corporations and
increased
the market’s
social and / or environmental impact alongside a financial return
understanding of the importance of climate transition and the
– while another
impact-focused activity
is
shareholder
recognition of certain social issues as investment risks. We
engagement).
therefore expect investor focus on these issues will increase after
We were among the early movers in developing terminology
COVID-19, with growing demand for corporate transparency
to describe our sustainable investing activities and to consistently
and stakeholder accountability.
› Refer to “Sustainable finance – Ten trends for 2021” at
ubs.com/davos-agenda-2021 for UBS’s perspectives regarding
sustainable finance in 2021 and beyond
report on them. We are, however, conscious of the need to
simplify and standardize the terminology for sustainable finance,
which will help to develop and expand the SI market. We are
therefore actively involved in the relevant discussions and are
committed to reflecting pertinent changes to terminology in our
How we define sustainable finance
reporting.
Sustainable finance refers to any form of financial service that
finance activities. A key indicator is the development of our core
incorporates ESG criteria into business or investment decisions.
SI assets, where we more than doubled penetration, from 5.6%
We provide sustainable finance solutions to all our client
of total invested assets in 2017 to 18.9% (USD 793 billion) in
segments, with a particular focus on sustainable investing.
› Refer to the “Key achievements in 2020” chart in the
2020 (2019: 13.5%, or USD 488 billion). Norms-based screening
assets, i.e., assets that fall under the application of a UBS policy4
Sustainability Report 2020, available from 11 March 2021 under
and do not otherwise qualify as a core sustainable investment,
In 2020, we noted very strong momentum in our sustainable
“Annual reporting” at ubs.com/investors
amounted to USD 798 billion as of 31 December 2020 (a
decrease from USD 818 billion in 2019). Total sustainable
Sustainable investing (SI) is an approach that seeks to
investments, including norms-based screening assets, accounted
incorporate ESG considerations into investment decisions. SI
for USD 1,591 billion (2019: USD 1,306 billion), or 38.0%
strategies seek to better risk manage portfolios to 21st century
(2019: 36.2%), of our total invested assets.
challenges and / or align investments with an investor’s values
11 Survey conducted in June 2019 among 600 institutional clients (ESG: Do you or Don’t you?, UBS Asset Management and Responsible Investor).
22 Survey conducted in August 2020 among 110 Swiss institutional investors.
33 Survey conducted in October 2020 among 160 Investment Bank clients.
44 The assets in discretionary mandates and in UBS’s actively managed retail and institutional funds, as well as those in our firm’s proprietary trading book, are subject to our firm’s policy on the prohibition of
investment in and indirect financing of companies involved in the development, production or purchase of anti-personnel mines and cluster munitions.
Core sustainable investments1,2
USD billion, except where indicated
CCoorree SSII pprroodduuccttss aanndd mmaannddaatteess
Integration – sustainability focus3
Integration – ESG integration4
Impact investing5
Exclusions6
Third-party7
TToottaall ccoorree ssuussttaaiinnaabbllee iinnvveessttmmeennttss
UUBBSS ttoottaall iinnvveesstteedd aasssseettss
Core SI proportion of total invested assets (%)
GRI
FS11
FS11
FS11
FS11
FS11
FS11
FS11
For the year ended
3311..1122..2200
31.12.19
31.12.18
% change from
31.12.19
112277..77
551122..88
1133..11
113322..22
77..44
779933..22
44,,118877..00
1188..99
46.4
372.3
9.1
52.2
8.5
488.5
3,607.0
13.5
20.0
224.5
4.7
50.3
13.4
312.9
3,101.0
10.1
175.0
37.7
44.1
153.4
(11.8)
62.4
16.1
11 In 2020, Asset Management refined its reporting methodology by carving out funds with high SI categories from funds of funds or mandates that are classified with a lower or no SI category. The impact of this
methodology change is an additional USD 109 billion in core SI (USD 2 billion in integration – sustainability focus and impact investing, USD 28 billion in integration – ESG integration and USD 79 billion in
exclusions) and a decrease of USD 29 billion in norms-based screening assets. 22 FS represents the performance indicators defined in the Financial Services Sector Supplement of the Global Reporting Initiative
reporting framework. 33 Strategies where sustainability is an explicit part of the investment guidelines, universe, selection, and / or investment process. 44 Strategies that integrate environmental, social and
governance (ESG) factors into fundamental financial analysis to improve risk / return. 55 Strategies where the intention is to generate measurable environmental and social impact alongside financial return.
66 Strategies that exclude companies from portfolios where they are not aligned to an investor’s values. Includes customized screening services (single or multiple exclusion criteria). 77 SI products from third-party
providers applying a strict and diligent asset selection process; the selection criteria have been reviewed for the end of the 2020 reporting cycle, following a stricter approach from the provider of sustainability
from access
green, social and sustainability bonds, and the raising of capital
on international capital markets to further the quest for
renewable energy.
Retail clients
to
in Switzerland benefit
appropriate and relevant sustainable investment products from
Asset Management and Global Wealth Management that follow
our Group-wide approach to SI. This includes the UBS SI Strategy
Fund and the UBS ManageTM SI mandate solution. In 2020,
almost 70% of Personal Banking’s mandate sales were UBS
ManageTM SI. In 2020, all funds of the UBS Vitainvest family,
which cover pillar 2 (occupational pension) and pillar 3 (private
retirement savings) investments in Switzerland, were brought
into line with ESG criteria defined by UBS.
Taking climate action
Our climate strategy underpins our activities designed to support
our clients and our firm in preparing for an increasingly carbon-
constrained world. It underlines our commitment to the SDGs on
climate action and on affordable and clean energy, as well as
the Paris Agreement.
We have reported on our climate strategy aligned with the
Financial Stability Board’s TCFD recommendations since 2017.
The recommendations call on companies to disclose the impacts
of climate change on their businesses. This will allow investors
and financial institutions to make better investment decisions
with a common set of data to assess the climate-related risks
and opportunities of specific companies. We are committed to
aligning our climate disclosure within the five-year pathway
outlined by the TCFD (by the end of 2022) and to collaborating
within the industry to close gaps.
In 2020, we continued our multi-year efforts to develop
methodologies which enable more robust and transparent
disclosure of climate metrics. This includes: the development of a
novel transition risk heatmap methodology; improved granularity
and accuracy of climate-sensitive sectors and carbon-related
asset disclosure; and expansion of the weighted carbon intensity
metric. On the basis of the enhancements made, we revised
UBS’s exposure to carbon-related assets and recalculated
previous years’ exposure figures using the enhanced approach.
ratings. Excludes third-party products that went through a systematic Global Wealth Management onboarding process, now included under Integration – sustainability focus.
11 Gunnar Friede, Timo Busch and Alexander Bassen. ESG and financial performance: aggregated evidence from more than 2,000 empirical studies, Journal of Sustainable Finance & Investment, 2015.
40
41
41
Our strategy, business model and environment Our strategy, business model and environment | How we create value for our stakeholders
Our climate strategy highlights in 2020
– We reached our goal of 100% renewable electricity
– Our exposure to carbon-related assets on our banking
balance sheet is low, at 1.9%, or USD 5.4 billion, as of
31 December 2020, decreasing further from 2.3% at the end
of 2019 and 2.8% at the end of 2018.
– We were awarded top ratings and rankings by external
experts. We were named climate industry group leader in the
Dow Jones Sustainability Indices and were included in CDP’s
Climate A List.
consumption.
– Our climate-related sustainable investments increased to
USD 160.8 billion in 2020, from USD 108 billion in 2019.
– We actively engaged on climate topics with 49 oil & gas and
utilities companies, and voted on 50 climate-related
shareholder resolutions, of which we supported 88%.
› Refer to the “Risk management and control” section of this
report for additional information about UBS’s management of
climate risks and to the Sustainability Report 2020, available
from 11 March 2021 under “Annual reporting” at
ubs.com/investors, for UBS’s full TCFD disclosures
Climate-related metrics 2020
Risk management
Identified significant climate-related financial risk on balance sheet1
Carbon-related assets (USD billion)2
Proportion of total banking products exposure, gross (%)
Total exposure to climate-sensitive sectors (USD billion)3
Proportion of total banking products exposure, gross (%)
Weighted carbon intensity of Climate Aware strategies (in tonnes CO2e per USD million of revenue)4
Compared to weighted carbon intensity of composite benchmark (%) 5
Number of climate-related shareholder resolutions voted upon6
Proportion of supported climate-related shareholder resolutions (%)
Opportunities
Climate-related sustainable investments (USD billion)7
Proportion of UBS clients’ total invested assets (%)
Total deal value in equity or debt capital market services related to climate change mitigation and adaptation
(CCMA) (USD billion)8
Total deal value of financial advisory services related to CCMA (USD billion)
Number of strategic transactions in support of Switzerland’s Energy Strategy 2050
Own operations
GHG footprint (kilotonnes CO2e)9
Percentage change from baseline 2004 (target: –75% by 2020) (%)
For the year ended
% change from
3311..1122..2200
31.12.19
31.12.18
31.12.19
NNoonnee
55..44
11..99
3388..77
1133..77
6688..22
((5511..00))
5500
8888..00
116600..88
33..88
6699..88
2299..11
1111
None
6.1
2.3
35.2
13.3
74.5
(54.0)
44
81.8
108.0
3.0
52.7
34.5
12
None
7.5
2.8
36.1
13.5
89.6
(54.0)
43
88.0
87.5
2.8
31.6
24.9
8
7755
((7799..00))
104
(71.2)
132
(63.4)
(10)
10
(9)
14
49
32
(16)
(8)
(28)
11 Methodologies for climate-related financial risk are emerging and may change over time, as will be described under “Scenario analysis“ in our Sustainability Report 2020, available from 11 March 2021.
22 Banking products across the Investment Bank and Personal & Corporate Banking. IFRS 9 gross exposure including other financial assets at amortized cost, but excluding cash, receivables from securities financing
transactions, cash collateral receivables on derivative instruments, financial assets at FVOCI, irrevocable committed prolongation of existing loans and unconditionally revocable committed credit lines, and forward
starting reverse repurchase and securities borrowing agreements. As recommended by the TCFD, carbon-related assets are defined as assets tied to the energy and utilities sectors (Global Industry Classification
Standard). Non-carbon-related assets, such as renewables, water utilities, and nuclear power, are excluded. For grid utilities, the national grid mix is applied. UBS methodology for carbon-related assets has been
revised to analyze underlying commodities in our commodity trade finance business. As a result, we have restated the metric for 2018 and 2019 using the enhanced approach. 33 Banking products across the
Investment Bank and Personal & Corporate Banking (IFRS 9). Climate-sensitive sectors defined as business activities that are rated as having high, moderately high, moderate, or moderately low vulnerability to
transition risks. For more details, see “Scenario analysis“ and the “UBS corporate lending to climate-sensitive sectors 2020“ table in the “What“ section of our Sustainability Report 2020, available from 11 March
2021. UBS methodology for climate-sensitive sectors has been revised to analyze underlying commodities in our commodity trade finance business. As a result, we have restated the metric for 2018 and 2019 using
the enhanced approach. 44 Year-on-year decrease of carbon intensity is mainly driven by higher carbon targets of the investment strategy. Carbon intensity is based on scope 1 and 2 CO2 emissions of investee
companies, which often rely on third-party estimates. Metric has been expanded in 2020 to include all equity and fixed income funds with a proprietary Climate Aware strategy (active and rules-based). Metric is the
assets under management (AUM)-weighted average of the weighted average carbon intensities of the portfolios. 55 The metric is the AUM-weighted average of the weighted average carbon intensities of the
respective benchmarks. 66 This excludes proposals related to Japanese companies that included changes to the companies’ articles of association. 77 Invested assets of products such as sustainably managed
properties and infrastructure, and renewable energy. 88 Refer to “Calculating and reporting on climate change-related financing and advisory activities” in appendix 9 to our Sustainability Report 2020, available
from 11 March 2021. 99 GHG footprint equals gross GHG emissions minus GHG reductions from renewable energy and CO2e offsets (gross GHG emissions include: direct GHG emissions by UBS; indirect GHG
emissions associated with the generation of imported / purchased electricity (grid average emission factor), heat or steam; and other indirect GHG emissions associated with business travel, paper consumption and
waste disposal). A breakdown of our GHG emissions (scope 1, 2, 3) is provided in appendix 4 to our Sustainability Report 2020, available from 11 March 2021.
42
42
Our strategy, business model and environment | How we create value for our stakeholders
– Our exposure to carbon-related assets on our banking
– We were awarded top ratings and rankings by external
balance sheet is low, at 1.9%, or USD 5.4 billion, as of
experts. We were named climate industry group leader in the
31 December 2020, decreasing further from 2.3% at the end
Dow Jones Sustainability Indices and were included in CDP’s
of 2019 and 2.8% at the end of 2018.
Climate A List.
consumption.
– Our climate-related sustainable investments increased to
USD 160.8 billion in 2020, from USD 108 billion in 2019.
– We actively engaged on climate topics with 49 oil & gas and
utilities companies, and voted on 50 climate-related
shareholder resolutions, of which we supported 88%.
› Refer to the “Risk management and control” section of this
report for additional information about UBS’s management of
climate risks and to the Sustainability Report 2020, available
from 11 March 2021 under “Annual reporting” at
ubs.com/investors, for UBS’s full TCFD disclosures
Climate-related metrics 2020
Risk management
Identified significant climate-related financial risk on balance sheet1
Carbon-related assets (USD billion)2
Proportion of total banking products exposure, gross (%)
Total exposure to climate-sensitive sectors (USD billion)3
Proportion of total banking products exposure, gross (%)
Weighted carbon intensity of Climate Aware strategies (in tonnes CO2e per USD million of revenue)4
Compared to weighted carbon intensity of composite benchmark (%) 5
Number of climate-related shareholder resolutions voted upon6
Proportion of supported climate-related shareholder resolutions (%)
Opportunities
Climate-related sustainable investments (USD billion)7
Proportion of UBS clients’ total invested assets (%)
Total deal value in equity or debt capital market services related to climate change mitigation and adaptation
(CCMA) (USD billion)8
Total deal value of financial advisory services related to CCMA (USD billion)
Number of strategic transactions in support of Switzerland’s Energy Strategy 2050
Own operations
GHG footprint (kilotonnes CO2e)9
Percentage change from baseline 2004 (target: –75% by 2020) (%)
For the year ended
% change from
3311..1122..2200
31.12.19
31.12.18
31.12.19
NNoonnee
55..44
11..99
3388..77
1133..77
6688..22
((5511..00))
5500
8888..00
116600..88
33..88
6699..88
2299..11
1111
None
6.1
2.3
35.2
13.3
74.5
(54.0)
44
81.8
108.0
3.0
52.7
34.5
12
None
7.5
2.8
36.1
13.5
89.6
(54.0)
43
88.0
87.5
2.8
31.6
24.9
8
7755
((7799..00))
104
(71.2)
132
(63.4)
(10)
10
(9)
14
49
32
(16)
(8)
(28)
11 Methodologies for climate-related financial risk are emerging and may change over time, as will be described under “Scenario analysis“ in our Sustainability Report 2020, available from 11 March 2021.
22 Banking products across the Investment Bank and Personal & Corporate Banking. IFRS 9 gross exposure including other financial assets at amortized cost, but excluding cash, receivables from securities financing
transactions, cash collateral receivables on derivative instruments, financial assets at FVOCI, irrevocable committed prolongation of existing loans and unconditionally revocable committed credit lines, and forward
starting reverse repurchase and securities borrowing agreements. As recommended by the TCFD, carbon-related assets are defined as assets tied to the energy and utilities sectors (Global Industry Classification
Standard). Non-carbon-related assets, such as renewables, water utilities, and nuclear power, are excluded. For grid utilities, the national grid mix is applied. UBS methodology for carbon-related assets has been
revised to analyze underlying commodities in our commodity trade finance business. As a result, we have restated the metric for 2018 and 2019 using the enhanced approach. 33 Banking products across the
Investment Bank and Personal & Corporate Banking (IFRS 9). Climate-sensitive sectors defined as business activities that are rated as having high, moderately high, moderate, or moderately low vulnerability to
transition risks. For more details, see “Scenario analysis“ and the “UBS corporate lending to climate-sensitive sectors 2020“ table in the “What“ section of our Sustainability Report 2020, available from 11 March
2021. UBS methodology for climate-sensitive sectors has been revised to analyze underlying commodities in our commodity trade finance business. As a result, we have restated the metric for 2018 and 2019 using
the enhanced approach. 44 Year-on-year decrease of carbon intensity is mainly driven by higher carbon targets of the investment strategy. Carbon intensity is based on scope 1 and 2 CO2 emissions of investee
companies, which often rely on third-party estimates. Metric has been expanded in 2020 to include all equity and fixed income funds with a proprietary Climate Aware strategy (active and rules-based). Metric is the
assets under management (AUM)-weighted average of the weighted average carbon intensities of the portfolios. 55 The metric is the AUM-weighted average of the weighted average carbon intensities of the
respective benchmarks. 66 This excludes proposals related to Japanese companies that included changes to the companies’ articles of association. 77 Invested assets of products such as sustainably managed
properties and infrastructure, and renewable energy. 88 Refer to “Calculating and reporting on climate change-related financing and advisory activities” in appendix 9 to our Sustainability Report 2020, available
from 11 March 2021. 99 GHG footprint equals gross GHG emissions minus GHG reductions from renewable energy and CO2e offsets (gross GHG emissions include: direct GHG emissions by UBS; indirect GHG
emissions associated with the generation of imported / purchased electricity (grid average emission factor), heat or steam; and other indirect GHG emissions associated with business travel, paper consumption and
waste disposal). A breakdown of our GHG emissions (scope 1, 2, 3) is provided in appendix 4 to our Sustainability Report 2020, available from 11 March 2021.
Our climate strategy highlights in 2020
– We reached our goal of 100% renewable electricity
Our governance on sustainability
Our governance framework on sustainability supports the
creation of long-term value. Sustainability activities, including
sustainable finance, are overseen at the highest level of UBS (the
Board of Directors (the BoD) and the Group Executive Board (the
GEB)) and are grounded in our Code of Conduct and Ethics (the
Code).
Code of Conduct and Ethics
In our Code, the BoD and the GEB set out the principles and
practices that define our ethical standards and the way we do
business. These principles apply to all aspects of our business. All
employees must confirm annually that they have read and will
adhere to the Code and other key policies, supporting a culture
where ethical and responsible behavior is part of our everyday
operations. In our Code we make a commitment to integrating
financial and societal performance for the mutual benefit of our
clients and our firm – and that we are constantly looking for
better ways to do business in an environmentally sound and
socially responsible manner.
In 2020, we amended the Code to place a greater emphasis
on the importance of our firm’s culture. This is demonstrated by
the inclusion of a new section on culture, placed at the
beginning of the Code. In recognition of the pace of digital
change globally, our Code also includes a new section on the
lawful and ethical use of data.
› Refer to the Code of Conduct and Ethics of UBS, available at
ubs.com/code, for more information
Board of Directors and Group Executive Board
The BoD is responsible for setting UBS’s values and standards to
ensure the Group’s obligations to stakeholders are met. Both the
Chairman of the BoD and the Group CEO play a key role in
safeguarding our reputation and ensuring we communicate
effectively with all our stakeholders.
The BoD’s Corporate Culture and Responsibility Committee
(the CCRC) is the body primarily responsible for corporate
culture, responsibility and sustainability. The CCRC oversees our
sustainability strategy and activities.
The Group CEO supervises the execution of the strategy and
annual objectives of UBS in Society and provides the GEB and
the CCRC with updates about UBS in Society. Reporting to the
Group CEO, the Head UBS in Society is UBS’s senior-level
representative for sustainability issues and, on behalf of the
Group CEO, proposes the UBS in Society strategy and annual
objectives to the CCRC for approval.
Our Sustainable Finance Committee (the SFC) was founded in
2020, and the Chair of the SFC reports to the Group CEO. The
SFC brings together senior business leaders with relevant
expertise from across the firm in order to collaborate in the
further development of our commercial sustainable finance
business. The objective of the SFC is to help UBS achieve its
ambition of being a leader in sustainable finance for its clients
and, in particular, it helps provide leadership for cross-divisional
work streams and opportunities.
Our management of environmental and social risks (ESR) is
steered by the GEB. It defines the ESR framework and controls
that align UBS’s ESR appetite with that of UBS in Society.
› Refer to “Board of Directors” in the “Corporate governance”
section of this report for more information about the CCRC
UBS in Society
UBS in Society is a dedicated organization within UBS focused
on maximizing our positive effect and minimizing any negative
effects UBS has on society and the environment while still
delivering a desired performance. It covers all of the activities
and capabilities related to sustainable finance
(including
sustainable investing), philanthropy, environmental, climate and
human rights policies governing client and supplier relationships,
our environmental footprint, human resources, and community
investment.
› Refer to the Sustainability Report 2020, available from 11 March
2021 under “Annual reporting” at ubs.com/investors, for the
sustainability governance chart
Reporting to our stakeholders on our sustainability
strategy and activities
Information about all our sustainability efforts and commitments
is provided in our Sustainability Report 2020, available under
“Annual reporting” at ubs.com/investors. The content of the
Sustainability Report 2020 has been prepared in accordance
(the
with the Global Reporting
Initiative
“comprehensive” option) and with
rules
implementing the EU Directive on disclosure of non-financial and
reporting on
diversity
sustainability has been reviewed on a limited assurance basis by
Ernst & Young Ltd against the GRI Standards. Our Sustainability
Report 2020 also includes our full climate disclosure, which we
have aligned with the recommendations provided by the TCFD
since their introduction in 2017.
(GRI) Standards
the German
(2014/95/EU). Our
information
› Refer to the Sustainability Report 2020, available from 11 March
2021 under “Annual reporting” at ubs.com/investors, for an
overview of non-financial disclosures in accordance with the
German rules implementing EU Directive 2014/95
42
43
43
Our strategy, business model and environment
Our strategy, business model and environment | How we create value for our stakeholders
Shareholder returns
to
returning excess capital
The balance between cash dividends and share repurchases has
been adjusted from 2020 onward, with a greater weight toward
share repurchases as compared with prior years’ returns. We
remain committed
to our
shareholders and delivering total capital returns consistent with
our previous levels. We intend to propose an ordinary dividend
per share of USD 0.37 for the 2020 financial year, to be
approved at the 2021 general meeting of shareholders. In
addition, before COVID-19-related
share
repurchases were introduced we repurchased CHF 350 million
(USD 364 million) of our shares, and in the second half of 2020,
we built a capital reserve of USD 2.0 billion for potential share
repurchases. For reference, total capital returns to shareholders
for the 2019 financial year were USD 3.4 billion.
restrictions on
In the first quarter of 2021, we repurchased the remaining
CHF 100 million of our 2018–2021 USD 2 billion share
repurchase program, which is now complete and closed. On 8
February 2021, we commenced a new three-year share
repurchase program of up to CHF 4 billion, of which we expect
to execute up to USD 1 billion by the end of the first quarter of
2021. We consider business conditions and developments or
strategic opportunities when determining excess capital available
for share repurchases.
Communications
IR
regularly
interact with
Our Investor Relations (IR) function is the primary point of
contact between UBS and our shareholders. Our senior
institutional
management and
investors, financial analysts and other market participants, such
as credit rating agencies. Clear, transparent and relevant
disclosures, and regular direct interactions with existing and
prospective
our
communications. The IR team relays the views of and feedback
on UBS from institutional investors and other market participants
to our senior management.
shareholders,
basis
form
the
for
IR and Corporate Responsibility work together and interact
with any investors interested in sustainability topics relevant to
UBS and wider society.
› Refer to the first nine pages of the “Corporate governance”
section of this report and “Information policy” in that same
section for more information
› Refer to the Sustainability Report 2020, available from 11 March
2021 under “Annual reporting” at ubs.com/investors, for more
information
Investors
We generate long-term value for our investors by executing our
strategy with discipline, targeting cost- and capital-efficient
growth, long-term sustainable value creation, and attractive
shareholder returns.
Investor base
Our investor base is well diversified. A substantial proportion of
our institutional shareholders are based in the US, the UK and
Switzerland.
› Refer to the “Corporate governance” section of this report for
more information about disclosed shareholdings
Alignment of interests
We aim to align the interests of our employees with those of our
equity and debt investors, and reflect that approach in our
compensation philosophy and practices.
› Refer to “Our compensation philosophy” in the “Compensation”
section of this report for more information
Cost- and capital-efficient revenue growth
We aim for attractive shareholder returns by growing and
leveraging our unique, integrated and complementary business
portfolio and geographic footprint.
We aim to balance growth opportunities with cost and capital
efficiency in order to drive attractive risk-adjusted returns and
sustainable performance.
Our primary measurement of performance for the Group is
return on CET1, as regulatory capital is our binding constraint
and drives our ability to return capital to shareholders.
› Refer to the “Performance targets and capital guidance” section
of this report for more information
44
44
Our strategy, business model and environment | How we create value for our stakeholders
Investors
shareholder returns.
Investor base
We generate long-term value for our investors by executing our
Shareholder returns
strategy with discipline, targeting cost- and capital-efficient
growth, long-term sustainable value creation, and attractive
The balance between cash dividends and share repurchases has
been adjusted from 2020 onward, with a greater weight toward
share repurchases as compared with prior years’ returns. We
remain committed
to
returning excess capital
to our
shareholders and delivering total capital returns consistent with
Our investor base is well diversified. A substantial proportion of
our previous levels. We intend to propose an ordinary dividend
our institutional shareholders are based in the US, the UK and
per share of USD 0.37 for the 2020 financial year, to be
Switzerland.
› Refer to the “Corporate governance” section of this report for
more information about disclosed shareholdings
Alignment of interests
approved at the 2021 general meeting of shareholders. In
addition, before COVID-19-related
restrictions on
share
repurchases were introduced we repurchased CHF 350 million
(USD 364 million) of our shares, and in the second half of 2020,
we built a capital reserve of USD 2.0 billion for potential share
repurchases. For reference, total capital returns to shareholders
We aim to align the interests of our employees with those of our
for the 2019 financial year were USD 3.4 billion.
equity and debt investors, and reflect that approach in our
In the first quarter of 2021, we repurchased the remaining
compensation philosophy and practices.
› Refer to “Our compensation philosophy” in the “Compensation”
section of this report for more information
Cost- and capital-efficient revenue growth
CHF 100 million of our 2018–2021 USD 2 billion share
repurchase program, which is now complete and closed. On 8
February 2021, we commenced a new three-year share
repurchase program of up to CHF 4 billion, of which we expect
to execute up to USD 1 billion by the end of the first quarter of
2021. We consider business conditions and developments or
We aim for attractive shareholder returns by growing and
strategic opportunities when determining excess capital available
leveraging our unique, integrated and complementary business
for share repurchases.
portfolio and geographic footprint.
We aim to balance growth opportunities with cost and capital
Communications
efficiency in order to drive attractive risk-adjusted returns and
sustainable performance.
Our Investor Relations (IR) function is the primary point of
Our primary measurement of performance for the Group is
contact between UBS and our shareholders. Our senior
return on CET1, as regulatory capital is our binding constraint
management and
IR
regularly
interact with
institutional
and drives our ability to return capital to shareholders.
› Refer to the “Performance targets and capital guidance” section
of this report for more information
investors, financial analysts and other market participants, such
as credit rating agencies. Clear, transparent and relevant
disclosures, and regular direct interactions with existing and
prospective
shareholders,
form
the
basis
for
our
communications. The IR team relays the views of and feedback
on UBS from institutional investors and other market participants
to our senior management.
IR and Corporate Responsibility work together and interact
with any investors interested in sustainability topics relevant to
UBS and wider society.
› Refer to the first nine pages of the “Corporate governance”
section of this report and “Information policy” in that same
section for more information
› Refer to the Sustainability Report 2020, available from 11 March
2021 under “Annual reporting” at ubs.com/investors, for more
information
Employees
We are committed to being a place where our employees can
unlock their full potential. Our ability to meet clients’ needs,
solve complex problems and develop innovative and sustainable
solutions depends on the smart, talented, knowledgeable and
engaged people who partner across UBS. Our employees are
highly diverse in terms of experience, background, skills and
interests. Our shared success is built on a cultural foundation
emphasizing collaboration, inclusion, innovation and constant
improvement.
Our workforce at a glance1
71,551
employees (FTE)
72,887 employees (headcount)
Women
39%
28,409
Men
61%
44,478
~50
countries
141
nationalities
(by citizenship)
160+
languages
spoken
8
years of service,
on average
Age
age < 30
19%
Region
age 30–50
age > 50
60%
21%
30%
30%
21%
19%
Switzerland
Americas
Asia Pacific
EMEA
1 Calculated as of 31 December 2020 on a headcount basis of 72,887 internal employees only.
Our culture is the basis for our success
Our three keys to success are the foundation of our strategy and
culture. They define how we work together and what we stand
for as a firm and individuals; they drive our business strategy.
Our Pillars, Principles and Behaviors have long been embedded
in our core HR management processes. 2020 saw our culture
driven forward through divisional, regional and Group-wide
initiatives, such as the Group Franchise Awards (GFA) program,
which was developed in 2016, to reward employees for
collaboration and operational
improving
effectiveness. An
idea-sharing site encourages
employees to submit ideas for improvement and collaborate on
solutions.
cross-divisional
interactive
› Refer to the foldout pages of this report for more information
about our Pillars, Principles and Behaviors
A GFA submission led to a new peer-to-peer appreciation
program being launched in 2020 as an additional incentive for
employees to acknowledge colleagues’ exemplary collaboration,
commitment and behavior. As well as increasing empowerment
and
creates
connections among employees and teams, and we have seen a
lot of engagement, with 44,000 recognitions in the first month.
satisfaction, peer
appreciation
employee
In late 2020, we launched an initiative to define UBS’s
purpose, outlining why we do things the way we do. Once
established, our purpose will guide all our actions. It will be a
key element to future success and continue to inspire and
empower our employees.
We are convinced leaders play a key role, since leadership
drives culture and culture drives performance. Thus, our House
View on Leadership outlines the behavior toward employees,
clients and business activities expected from every leader at UBS.
Key concepts are embedded in line manager training, leadership
development programs, staff training and recruiting processes,
and a full set of Group-wide culture metrics promotes
accountability.
Our employees are the heart of our culture, and we seek their
input to help us advance. Regular surveys gather employee
feedback on engagement, enablement, work environment, line
manager effectiveness and expected behaviors. Conducted by
an external provider, our employee survey anonymously polls
permanent employees across the firm, measuring views on key
strategic and cultural measures; several questions added this
year solicited feedback on remote working and employee well-
being during the pandemic. Responses to the 2020 survey
confirmed that our employees feel their line managers are
effective, and employee engagement and pride in working at
UBS, as well as views of our talent management practices, were
above the norm for both high-performing and financial services
organizations.
› Refer to the Sustainability Report 2020, available from 11 March
2021 under “Annual reporting” at ubs.com/investors, for more
information about our employee survey
44
45
45
Our strategy, business model and environment
Our strategy, business model and environment | How we create value for our stakeholders
Diversity, equity and inclusion
In a global business such as ours, a diverse workforce is a
competitive advantage. Our strategy is to continue to shape a
diverse and inclusive organization that is innovative, provides
outstanding service to our clients, offers equitable opportunities
for all and is a great place to work for everyone. Our broad
approach focuses on gender, race, ethnicity, LGBTQ+, age,
disability, and mental health, among other aspects, with
inclusive leadership playing an important role. Increasing gender
and ethnic diversity are our highest near-term strategic diversity,
equity and inclusion priorities. Regarding gender, we seek to
hire, promote and retain more women across the firm, aspiring
to increase the percentage of Director level and above positions
filled by women to 30% by 2025. At the end of 2020, 26.0% of
all employees in roles at Director level and above were women,
up from 25.2% in 2019 and we are on track to achieve our
target.
Our award-winning UBS Career Comeback program,
launched in 2016, continues to increase our pipeline of female
senior leaders. Professionals looking to return to corporate jobs
after a career break are hired for permanent roles and supported
with targeted onboarding, coaching and mentoring. To date,
this global program has helped 169 women and 14 men
relaunch their careers.
We take a multi-faceted approach to increasing our ethnic
diversity, including setting aspirational ethnicity targets in
locations such as the US and UK. We have a global framework
and drive our initiatives regionally, supported by our recruitment,
training and employee network organizations, in particular. Our
multi-cultural employee networks play an integral part in
building a more ethnically inclusive culture across UBS, and a
new firm-wide network of more than 140 Diversity & Inclusion
Ambassadors provides employees with advice and coaching.
Personnel by region
Full-time equivalents
Americas
of which: USA
Asia Pacific
Europe, Middle East and Africa (excluding Switzerland)
of which: UK
of which: rest of Europe (excluding Switzerland)
of which: Middle East and Africa
Switzerland
TToottaall
46
46
Our commitment to pay fairness and fair treatment for all
We pay for performance, and a strong commitment to pay
fairness is embedded in our compensation policies. We conduct
both internal and independent external reviews aiming to ensure
that all employees are paid fairly and to address any unexplained
gaps. In April 2020, UBS was one of the first banks certified by
the EQUAL-SALARY Foundation for its equal pay practices in
Switzerland. This review included an independent audit across
our HR policies and practices including a statistical review of our
pay levels. In December, our US, UK, Hong Kong and Singapore
operations received the same certification. These certifications
are testament to our well-established equal opportunity
environment. Our commitment to pay fairness is further
demonstrated by the successful completion of the equal pay
analysis in Switzerland, as required by the newly introduced
Swiss Federal Act on Gender Equality. We had already
completed this important analysis by the end of the first year of
the three-year regulatory implementation period and the results
confirm that we are fully compliant with Swiss equal pay
standards. The analysis found that our statistical wage difference
in Switzerland is only 0.6% and thus significantly below the 5%
regulatory requirement. This achievement also reflects our
ongoing efforts to address any unexplained pay gaps as we
uncover them. Ernst & Young provided assurance regarding the
analysis and affirmed that we comply with the applicable legal
requirements for each legal entity in Switzerland.
We are committed to ensuring a workplace where employees
are fairly treated, with equal employment and advancement
opportunities for all. We do not tolerate harassment of any kind.
Our global measures include employee and line manager
training, specialist expertise in handling concerns, and a global
employee hotline. An internal anti-harassment officer appointed
by the Group Head Human Resources provides an independent
view of the firm’s various processes and procedures to prevent
harassment and sexual misconduct.
› Refer to ubs.com/diversity for additional information about our
priorities, commitments and progress, and the Sustainability
Report 2020, available from 11 March 2021 under “Annual
reporting” at ubs.com/investors, for our management practices
and detailed employee data, including gender- and region-
specific data
› Refer to the “Compensation” section of this report for more
information about reward-related topics
As of
% change from
3311..1122..2200
31.12.19
31.12.18
31.12.19
2211,,339944
2200,,552288
1155,,335533
1133,,889999
66,,006699
77,,665522
117788
2200,,990044
7711,,555511
21,036
20,232
13,956
12,918
5,704
7,048
166
20,691
68,601
21,309
20,495
12,119
12,620
5,782
6,670
168
20,840
66,888
2
1
10
8
6
9
7
1
4
more easily. The tool also identifies skill gaps with regard to new
roles and provides recommended learning.
Our in-house UBS University plays a central role in building
skills and capabilities for the future. The training offered includes
employee and leadership development, advisory and sales
training, industry-leading certification for client advisors, future
skills development, and health and well-being topics. We put
special focus in 2020 on future skills development and new ways
of working, providing dedicated and experiential online learning
offerings to develop agile and digital skills, but also to help our
employees thrive in a virtual environment. Our holistic health
and well-being initiative was expanded in 2020 to encompass
mental, physical, financial and social well-being, and we entered
into a partnership to offer an app-based solution for guided
mindfulness techniques, sleep, nutrition and physical activity to
all employees globally. Health and well-being,
including
resilience and positivity, were and will continue to be important
focus areas to help our employees manage the pandemic, which
is both professionally and personally demanding. Results from
our employee and pulse surveys underline the positive impact of
this initiative.
In 2020, our permanent employees completed almost 1.2
million learning activities, including mandatory training on
compliance, business and other topics. This equated to an
average of 1.9 training days per employee.
› Refer to ubs.com/employerawards and ubs.com/careers for more
information
Diversity, equity and inclusion
Our commitment to pay fairness and fair treatment for all
We pay for performance, and a strong commitment to pay
The future of work, with a workforce prepared for the
future
We believe that the future of work will require an agile and
connected workforce to respond to ever-changing circumstances
as well as evolving client behavior and requirements. Building on
our experience and capabilities, we embrace cultural and digital
transformation to enable our employees to succeed in new
environments and to remain a widely recognized employer of
choice.
To attract the right talent, we recruit for potential and for
cultural fit, using innovative technologies and assessing the
person’s experience, competencies, learning capabilities and
digital aptitude. We hired a total of 9,296 external candidates in
2020, with our junior talent programs hiring more than 1,700
graduate and other trainees, apprentices and interns. As part of
our integrated workforce strategy, we continued selective
in our Business
insourcing and hiring activities, primarily
Solutions Centers in China, India, Poland, Switzerland and the
US, while reducing external resources.
A key part of our talent management strategy is offering
career opportunities, not just jobs. Internal mobility leads to
collaboration,
greater employee engagement,
increased productivity and reduced attrition, all of which benefit
our employees, businesses and clients. To that end, our Career
Navigator tool enables employees to explore career paths, search
for jobs, and connect with colleagues working in roles matching
their interests, while helping our recruiters find internal talent
improved
Our strategy, business model and environment | How we create value for our stakeholders
In a global business such as ours, a diverse workforce is a
fairness is embedded in our compensation policies. We conduct
competitive advantage. Our strategy is to continue to shape a
both internal and independent external reviews aiming to ensure
diverse and inclusive organization that is innovative, provides
that all employees are paid fairly and to address any unexplained
outstanding service to our clients, offers equitable opportunities
gaps. In April 2020, UBS was one of the first banks certified by
for all and is a great place to work for everyone. Our broad
the EQUAL-SALARY Foundation for its equal pay practices in
approach focuses on gender, race, ethnicity, LGBTQ+, age,
Switzerland. This review included an independent audit across
disability, and mental health, among other aspects, with
our HR policies and practices including a statistical review of our
inclusive leadership playing an important role. Increasing gender
pay levels. In December, our US, UK, Hong Kong and Singapore
and ethnic diversity are our highest near-term strategic diversity,
operations received the same certification. These certifications
equity and inclusion priorities. Regarding gender, we seek to
are testament to our well-established equal opportunity
hire, promote and retain more women across the firm, aspiring
environment. Our commitment to pay fairness is further
to increase the percentage of Director level and above positions
demonstrated by the successful completion of the equal pay
filled by women to 30% by 2025. At the end of 2020, 26.0% of
analysis in Switzerland, as required by the newly introduced
all employees in roles at Director level and above were women,
Swiss Federal Act on Gender Equality. We had already
up from 25.2% in 2019 and we are on track to achieve our
completed this important analysis by the end of the first year of
target.
the three-year regulatory implementation period and the results
Our award-winning UBS Career Comeback program,
confirm that we are fully compliant with Swiss equal pay
launched in 2016, continues to increase our pipeline of female
standards. The analysis found that our statistical wage difference
senior leaders. Professionals looking to return to corporate jobs
in Switzerland is only 0.6% and thus significantly below the 5%
after a career break are hired for permanent roles and supported
regulatory requirement. This achievement also reflects our
with targeted onboarding, coaching and mentoring. To date,
ongoing efforts to address any unexplained pay gaps as we
this global program has helped 169 women and 14 men
uncover them. Ernst & Young provided assurance regarding the
relaunch their careers.
analysis and affirmed that we comply with the applicable legal
We take a multi-faceted approach to increasing our ethnic
requirements for each legal entity in Switzerland.
diversity, including setting aspirational ethnicity targets in
We are committed to ensuring a workplace where employees
locations such as the US and UK. We have a global framework
are fairly treated, with equal employment and advancement
and drive our initiatives regionally, supported by our recruitment,
opportunities for all. We do not tolerate harassment of any kind.
training and employee network organizations, in particular. Our
Our global measures include employee and line manager
multi-cultural employee networks play an integral part in
training, specialist expertise in handling concerns, and a global
building a more ethnically inclusive culture across UBS, and a
employee hotline. An internal anti-harassment officer appointed
new firm-wide network of more than 140 Diversity & Inclusion
by the Group Head Human Resources provides an independent
Ambassadors provides employees with advice and coaching.
view of the firm’s various processes and procedures to prevent
harassment and sexual misconduct.
› Refer to ubs.com/diversity for additional information about our
priorities, commitments and progress, and the Sustainability
Report 2020, available from 11 March 2021 under “Annual
reporting” at ubs.com/investors, for our management practices
and detailed employee data, including gender- and region-
specific data
› Refer to the “Compensation” section of this report for more
information about reward-related topics
As of
% change from
3311..1122..2200
31.12.19
31.12.18
31.12.19
2211,,339944
2200,,552288
1155,,335533
1133,,889999
66,,006699
77,,665522
117788
2200,,990044
7711,,555511
21,036
20,232
13,956
12,918
5,704
7,048
166
20,691
68,601
21,309
20,495
12,119
12,620
5,782
6,670
168
20,840
66,888
10
2
1
8
6
9
7
1
4
Personnel by region
Full-time equivalents
Americas
of which: USA
Asia Pacific
of which: UK
Switzerland
TToottaall
Europe, Middle East and Africa (excluding Switzerland)
of which: rest of Europe (excluding Switzerland)
of which: Middle East and Africa
46
47
47
Our strategy, business model and environment
Our strategy, business model and environment | How we create value for our stakeholders
Society
As a founding signatory of the Principles for Responsible
Banking, UBS has committed to aligning its business strategy to
be consistent with and contribute to society’s goals.
Engaging with society
We engage with representatives of wider society on a regular
basis and on a wide range of topics. This engagement yields
important information about society’s goals, expectations and
concerns. It makes a critical contribution to our understanding
and management of issues that have a potential impact
(whether positive or negative) on our firm, and on society. By
actively fostering such interactions, we are in a position to
address expectations and concerns in an informed and effective
manner. We also continue to set standards in our industry,
including through the management of environmental and social
risks, the management of our environmental footprint and
through our sustainability disclosure.
Doing business in a sustainable manner
the proper
We view
firm-wide management of our
environmental footprint and supply chain as important proof of
how we do business in a sustainable manner for the benefit of
society.
This
is equally true of our broad and wide-ranging
environmental and social risk framework that governs client and
vendor relationships and is applied firm-wide. We have set
environmental and social risk standards regarding environmental
and human rights topics in product development, investments,
financing and supply chain management. We have identified
certain controversial activities that we will not engage in at all,
or only under stringent criteria. As part of this process we
engage with clients and vendors to better understand their
processes and policies, and to explore how any environmental
and social risks may be mitigated.
In 2020, we achieved a major milestone in reducing our
environmental
footprint by meeting our global RE100
commitment of sourcing 100% of our electricity from renewable
sources. Accomplishing our commitment to the RE100 initiative
also means that we have reduced our greenhouse gas (GHG)
footprint by 79% compared with our 2004 baseline.
While business travel is a necessary part of how we work, and
an enabler for business, travel has almost come to a halt during
the COVID-19 pandemic, as stay-at-home restrictions have
required us to hold more virtual meetings. Compared with 2019
levels, in 2020 we saw a reduction of more than 80% in
business travel (with a concomitant reduction in GHG emissions),
mainly as a result of the COVID-19 pandemic.
› Refer to the Sustainability Report 2020, available from 11 March
2021 under “Annual reporting” at ubs.com/investors, for full
descriptions of our environmental management, our responsible
supply chain management and our environmental and social risk
management and framework
› Refer to “Our response to COVID-19” in the “Our environment”
section of this report for more information about our activities
supporting clients, the economies in which we operate,
employees and communities
Investing in our communities
Recognizing that our firm’s long-term success depends on the
health and prosperity of the communities we are part of, we
seek to address social issues through long-term investments in
education and entrepreneurship. We provide strategic financial
commitments and targeted employee volunteering to drive
impact across a number of SDGs.
With the onset of the COVID-19 pandemic and lockdowns in
many communities, our core principle of responding to issues
relevant to our local communities became of central importance
during 2020. For the most vulnerable members of our
communities, the pandemic posed life-changing challenges,
such as food insecurity, poverty, health and isolation. Our
community affairs teams supported grassroots organizations
working directly with the most vulnerable to distribute USD 10.6
million of the USD 30 million UBS COVID-19 relief fund.
› Refer to “UBS’s charitable contributions” in the “What we do for
societies and the environment” section of the Sustainability
Report 2020, available from 11 March 2021 under “Annual
reporting” at ubs.com/investors, for more information
11 The Sustainability Report is available from 11 March 2021, and is not deemed incorporated by reference into the SEC Form 20-F filing.
48
48
Our strategy, business model and environment | How we create value for our stakeholders
Society
Regulation and supervision
As a founding signatory of the Principles for Responsible
While business travel is a necessary part of how we work, and
Banking, UBS has committed to aligning its business strategy to
an enabler for business, travel has almost come to a halt during
be consistent with and contribute to society’s goals.
the COVID-19 pandemic, as stay-at-home restrictions have
We engage with representatives of wider society on a regular
mainly as a result of the COVID-19 pandemic.
Engaging with society
basis and on a wide range of topics. This engagement yields
important information about society’s goals, expectations and
concerns. It makes a critical contribution to our understanding
and management of issues that have a potential impact
(whether positive or negative) on our firm, and on society. By
actively fostering such interactions, we are in a position to
address expectations and concerns in an informed and effective
manner. We also continue to set standards in our industry,
including through the management of environmental and social
risks, the management of our environmental footprint and
required us to hold more virtual meetings. Compared with 2019
levels, in 2020 we saw a reduction of more than 80% in
business travel (with a concomitant reduction in GHG emissions),
› Refer to the Sustainability Report 2020, available from 11 March
2021 under “Annual reporting” at ubs.com/investors, for full
descriptions of our environmental management, our responsible
supply chain management and our environmental and social risk
management and framework
› Refer to “Our response to COVID-19” in the “Our environment”
section of this report for more information about our activities
supporting clients, the economies in which we operate,
employees and communities
through our sustainability disclosure.
Investing in our communities
Doing business in a sustainable manner
Recognizing that our firm’s long-term success depends on the
health and prosperity of the communities we are part of, we
We view
the proper
firm-wide management of our
seek to address social issues through long-term investments in
environmental footprint and supply chain as important proof of
education and entrepreneurship. We provide strategic financial
how we do business in a sustainable manner for the benefit of
commitments and targeted employee volunteering to drive
society.
impact across a number of SDGs.
This
is equally true of our broad and wide-ranging
With the onset of the COVID-19 pandemic and lockdowns in
environmental and social risk framework that governs client and
many communities, our core principle of responding to issues
vendor relationships and is applied firm-wide. We have set
relevant to our local communities became of central importance
environmental and social risk standards regarding environmental
during 2020. For the most vulnerable members of our
and human rights topics in product development, investments,
communities, the pandemic posed life-changing challenges,
financing and supply chain management. We have identified
such as food insecurity, poverty, health and isolation. Our
certain controversial activities that we will not engage in at all,
community affairs teams supported grassroots organizations
or only under stringent criteria. As part of this process we
working directly with the most vulnerable to distribute USD 10.6
engage with clients and vendors to better understand their
million of the USD 30 million UBS COVID-19 relief fund.
processes and policies, and to explore how any environmental
and social risks may be mitigated.
In 2020, we achieved a major milestone in reducing our
environmental
footprint by meeting our global RE100
commitment of sourcing 100% of our electricity from renewable
sources. Accomplishing our commitment to the RE100 initiative
also means that we have reduced our greenhouse gas (GHG)
footprint by 79% compared with our 2004 baseline.
› Refer to “UBS’s charitable contributions” in the “What we do for
societies and the environment” section of the Sustainability
Report 2020, available from 11 March 2021 under “Annual
reporting” at ubs.com/investors, for more information
As a financial services provider based in Switzerland, UBS is subject
to consolidated supervision by the Swiss Financial Market
Supervisory Authority (FINMA). Our entities are also regulated and
supervised by authorities in each country where they conduct
business. Through UBS AG and UBS Switzerland AG, both licensed
as banks in Switzerland, UBS may engage in a full range of
financial services activities in Switzerland and abroad, including
personal banking, commercial banking, investment banking and
asset management.
As a global systemically important bank (G-SIB), as designated
by the Financial Stability Board, and a systemically relevant bank
(SRB) in Switzerland, we are subject to stricter regulatory
requirements and supervision than most other Swiss banks.
› Refer to the “Our evolution” section of this report for more
information
› Refer to the “Regulatory and legal developments” and “Risk
factors” sections of this report for more information
Regulation and supervision in Switzerland
Supervision
UBS Group AG and subsidiaries are subject to consolidated
supervision by FINMA under the Swiss Banking Act and related
ordinances, which impose standards for matters such as minimum
capital, liquidity, risk concentration and internal organization
standards. FINMA meets its statutory supervisory responsibilities
through licensing, regulation, supervision and enforcement. It is
responsible for prudential supervision and mandates audit firms to
perform regulatory audits and other supervisory tasks on its
behalf.
Capital adequacy and liquidity regulation
As an internationally active Swiss SRB, we are subject to capital
and total loss-absorbing capacity requirements that are based on
both RWA and LRD and among the most stringent in the world.
We are also subject to short-term liquidity coverage ratio rules,
and after the net stable funding ratio has become effective in
Switzerland on 1 July 2021, we will be subject to long-term
minimum funding requirements.
› Refer to the “Capital, liquidity and funding, and balance sheet”
section of this report for more information about the Swiss SRB
framework and the Swiss too-big-to-fail requirements
› Refer to “Liquidity coverage ratio” in the “Capital, liquidity and
funding, and balance sheet” section of this report for more
information about liquidity coverage ratio requirements
› Refer to the “Regulatory and legal developments” section of this
report for more information about the introduction of the net
stable funding ratio
Regulation and supervision outside Switzerland
Regulation and supervision in the US
In the US, UBS is subject to regulation and supervision by the
Board of Governors of the Federal Reserve System (the Federal
Reserve Board) under a number of laws. UBS Group AG and
UBS AG are both subject to the Bank Holding Company Act,
under which the Federal Reserve Board has supervisory authority
over the US operations of both UBS Group AG and UBS AG.
UBS’s US operations are also subject to oversight by the Federal
Reserve Board’s Large
Institution Supervision Coordinating
Committee.
In addition to being a financial holding company under the
Bank Holding Company Act, UBS AG has several US branches
and representative offices, which are authorized and supervised
by the Office of the Comptroller of the Currency. UBS AG is
registered as a swap dealer with the Commodity Futures Trading
Commission (the CFTC) and we expect UBS AG will be required
to register as a security-based swap dealer with the Securities
and Exchange Commission (the SEC) by 6 October 2021.
UBS Americas Holding LLC – the intermediate holding
company for our non-UBS AG branch operations in the US, as
required under the Dodd–Frank Act – is subject to requirements
established by the Federal Reserve Board related to risk-based
capital, liquidity, the Comprehensive Capital Analysis and Review
stress testing and capital planning process, and resolution
planning and governance.
UBS Bank USA, a Federal Deposit Insurance Corporation-
licensed and
institution subsidiary,
is
insured depository
regulated by state regulators in Utah.
UBS Financial Services Inc., UBS Securities LLC and several other
US subsidiaries are subject to regulation by a number of different
government agencies and self-regulatory organizations, including
the SEC, the Financial Industry Regulatory Authority, the CFTC, the
Municipal Securities Rulemaking Board and national securities
exchanges, depending on the nature of their business.
Regulation and supervision in the UK
Our regulated UK operations are mainly subject to the authority
of the Prudential Regulation Authority (the PRA), which is part of
the Bank of England, and the Financial Conduct Authority (the
FCA). We are also subject to the rules of the London Stock
Exchange and other securities and commodities exchanges of
which UBS AG is a member.
UBS AG has a UK-registered branch in London. UBS AG
London Branch serves as a global booking center for our
Investment Bank. Our regulated subsidiaries in the UK that
provide asset management services are authorized and regulated
mainly by the FCA, with one entity also subject to the authority
of the PRA.
11 The Sustainability Report is available from 11 March 2021, and is not deemed incorporated by reference into the SEC Form 20-F filing.
48
49
49
Our strategy, business model and environment
Our strategy, business model and environment | Regulation and supervision
Regulation and supervision in Germany
In 2019, certain parts of the businesses of UBS Limited were
transferred via cross-border merger to UBS Europe SE, a
Frankfurt-based subsidiary of UBS AG. The businesses not
merged into UBS Europe SE were transferred to UBS AG London
Branch. The cross-border merger
led to UBS Europe SE
becoming a significant entity and subject to the direct
supervision of the European Central Bank, as well as to
continued conduct, consumer protection and anti-money
laundering-related supervision by the German BaFin and
supervisory support by the German Bundesbank. The entity is
subject to EU and German laws and regulations. UBS Europe SE
maintains branches
Italy,
Luxembourg, the Netherlands, Poland, Spain, Sweden and
Switzerland and is subject to conduct supervision by authorities
in all those countries.
in Austria, Denmark, France,
Regulation and supervision in Singapore and Hong Kong
We operate 13 Asia Pacific locations and are subject to the
regulation and supervision by local financial regulators. Our Asia
Pacific regional hubs are Singapore and Hong Kong.
In Singapore, we conduct our operations primarily through
UBS AG Singapore Branch and UBS Securities Pte. Ltd., which
are supervised by the Monetary Authority of Singapore and the
Singapore Exchange.
UBS AG Hong Kong Branch is primarily supervised by the
Hong Kong Monetary Authority. UBS Securities Hong Kong
Limited, UBS Securities Asia Limited and UBS Asset Management
(Hong Kong) Limited are primarily supervised by the Hong Kong
Securities and Futures Commission. In addition, UBS Securities
Hong Kong Limited is supervised by the Hong Kong Stock
Exchange and the Hong Kong Futures Exchange.
Financial crime prevention
Combating money laundering and terrorist financing has been a
major focus of many governments in recent years. The US Bank
Secrecy Act and other laws and regulations require the
maintaining of effective policies, procedures and controls to
detect, prevent and report money laundering and terrorist
financing, and to verify the identity of clients. Failure to
introduce and maintain adequate programs to prevent money
laundering and terrorist financing can result in significant legal
and reputation risk and fines.
We are also subject to laws and regulations prohibiting
corrupt or illegal payments to government officials and other
persons, including the US Foreign Corrupt Practices Act and the
UK Bribery Act. We maintain policies, procedures and internal
controls intended to comply with those regulations.
Data protection
We are subject to regulations concerning the use and protection
of customer, employee, and other personal and confidential
information. This includes provisions under Swiss law, the EU
General Data Protection Regulation (the GDPR) and laws of
other jurisdictions.
The Swiss Parliament passed a revised Swiss data protection
law in 2020. The consultation on the corresponding ordinance
50
50
was launched in February 2021 and we expect both the revised
law and the ordinance to become effective as of 1 January
2022. The revision seeks to improve data protection for
individuals by enhancing the transparency and accountability
rules for companies processing data, among other measures.
This is intended to result in the equivalence necessary for the
continued cross-border transmission of data.
› Refer to the “Risk factors” section of this report for more
information about regulatory change
Recovery and resolution
Swiss too-big-to-fail (TBTF) legislation requires each Swiss SRB to
establish an emergency plan to avoid impending insolvency
while maintaining systemic functions. In response to these Swiss
requirements, and similar ones in other jurisdictions, UBS has
developed recovery plans and resolution strategies, as well as
plans for restructuring or winding down businesses if the firm
could not be stabilized otherwise.
In 2013, FINMA stated its preference for a single point of
entry (SPE) strategy for globally active SRBs, such as UBS, with a
bail-in at the group holding-company level. UBS has made
structural, financial and operational changes to facilitate an SPE
strategy and is confident that a resolution of the bank is
operationally executable and legally enforceable. In February
2020, FINMA published its assessment of Swiss SRBs’ emergency
and recovery and resolution plans, which confirmed our Swiss
emergency plan is effective, subject to further reduction of joint
and several liabilities. FINMA attested that UBS has completed
key measures and made good progress with respect to its global
resolvability. UBS understands that FINMA expects to publish an
updated assessment of the resolvability of Swiss SRBs in the first
half of 2021.
includes
framework
UBS’s crisis management framework
three key
Our crisis management
governance bodies (see chart below), which take responsibility
and action depending on the nature of the stress incident and
the scale of the response needed.
– For incident, risk and crisis management, the Group Crisis
Management Committee works with incident management
teams that provide monitoring and early warning indicators at
local / regional level, without needing to activate protocols at
the Group level. If a local response is insufficient, global task
forces and crisis management teams provide decision-making
guidance and coordination, including crisis management
plans, protocols and playbooks, and contingency funding
plans.
– The Group Executive Board and the Board of Directors would
evaluate and decide upon the need to activate the Global
Recovery Plan (the GRP) if a stress event reached a severity
requiring that, based on the GRP’s risk indicators.
– FINMA has the authority to determine whether the point of
impending insolvency as defined by Swiss law has been
reached and, in such cases, as part of the resolution strategy,
has the power to order the bail-in of creditors to recapitalize
and stabilize the Group, limit payments of dividends and
interest, alter our legal structure, take actions to reduce
business risk, and order a restructuring of the bank.
Our strategy, business model and environment | Regulation and supervision
In 2019, certain parts of the businesses of UBS Limited were
law and the ordinance to become effective as of 1 January
transferred via cross-border merger to UBS Europe SE, a
2022. The revision seeks to improve data protection for
Frankfurt-based subsidiary of UBS AG. The businesses not
individuals by enhancing the transparency and accountability
merged into UBS Europe SE were transferred to UBS AG London
rules for companies processing data, among other measures.
Branch. The cross-border merger
led to UBS Europe SE
This is intended to result in the equivalence necessary for the
becoming a significant entity and subject to the direct
continued cross-border transmission of data.
supervision of the European Central Bank, as well as to
› Refer to the “Risk factors” section of this report for more
continued conduct, consumer protection and anti-money
information about regulatory change
laundering-related supervision by the German BaFin and
supervisory support by the German Bundesbank. The entity is
Recovery and resolution
subject to EU and German laws and regulations. UBS Europe SE
maintains branches
in Austria, Denmark, France,
Italy,
Swiss too-big-to-fail (TBTF) legislation requires each Swiss SRB to
Luxembourg, the Netherlands, Poland, Spain, Sweden and
establish an emergency plan to avoid impending insolvency
Switzerland and is subject to conduct supervision by authorities
while maintaining systemic functions. In response to these Swiss
in all those countries.
requirements, and similar ones in other jurisdictions, UBS has
developed recovery plans and resolution strategies, as well as
Regulation and supervision in Singapore and Hong Kong
plans for restructuring or winding down businesses if the firm
We operate 13 Asia Pacific locations and are subject to the
could not be stabilized otherwise.
regulation and supervision by local financial regulators. Our Asia
In 2013, FINMA stated its preference for a single point of
Pacific regional hubs are Singapore and Hong Kong.
entry (SPE) strategy for globally active SRBs, such as UBS, with a
In Singapore, we conduct our operations primarily through
bail-in at the group holding-company level. UBS has made
UBS AG Singapore Branch and UBS Securities Pte. Ltd., which
structural, financial and operational changes to facilitate an SPE
are supervised by the Monetary Authority of Singapore and the
strategy and is confident that a resolution of the bank is
Singapore Exchange.
operationally executable and legally enforceable. In February
UBS AG Hong Kong Branch is primarily supervised by the
2020, FINMA published its assessment of Swiss SRBs’ emergency
Hong Kong Monetary Authority. UBS Securities Hong Kong
and recovery and resolution plans, which confirmed our Swiss
Limited, UBS Securities Asia Limited and UBS Asset Management
emergency plan is effective, subject to further reduction of joint
(Hong Kong) Limited are primarily supervised by the Hong Kong
and several liabilities. FINMA attested that UBS has completed
Securities and Futures Commission. In addition, UBS Securities
key measures and made good progress with respect to its global
Hong Kong Limited is supervised by the Hong Kong Stock
resolvability. UBS understands that FINMA expects to publish an
Exchange and the Hong Kong Futures Exchange.
updated assessment of the resolvability of Swiss SRBs in the first
Financial crime prevention
half of 2021.
UBS’s crisis management framework
Combating money laundering and terrorist financing has been a
Our crisis management
framework
includes
three key
major focus of many governments in recent years. The US Bank
governance bodies (see chart below), which take responsibility
Secrecy Act and other laws and regulations require the
and action depending on the nature of the stress incident and
maintaining of effective policies, procedures and controls to
the scale of the response needed.
detect, prevent and report money laundering and terrorist
– For incident, risk and crisis management, the Group Crisis
financing, and to verify the identity of clients. Failure to
Management Committee works with incident management
introduce and maintain adequate programs to prevent money
teams that provide monitoring and early warning indicators at
laundering and terrorist financing can result in significant legal
local / regional level, without needing to activate protocols at
and reputation risk and fines.
the Group level. If a local response is insufficient, global task
We are also subject to laws and regulations prohibiting
forces and crisis management teams provide decision-making
corrupt or illegal payments to government officials and other
guidance and coordination, including crisis management
persons, including the US Foreign Corrupt Practices Act and the
plans, protocols and playbooks, and contingency funding
UK Bribery Act. We maintain policies, procedures and internal
plans.
controls intended to comply with those regulations.
– The Group Executive Board and the Board of Directors would
Data protection
evaluate and decide upon the need to activate the Global
Recovery Plan (the GRP) if a stress event reached a severity
requiring that, based on the GRP’s risk indicators.
We are subject to regulations concerning the use and protection
– FINMA has the authority to determine whether the point of
of customer, employee, and other personal and confidential
impending insolvency as defined by Swiss law has been
information. This includes provisions under Swiss law, the EU
reached and, in such cases, as part of the resolution strategy,
General Data Protection Regulation (the GDPR) and laws of
has the power to order the bail-in of creditors to recapitalize
other jurisdictions.
and stabilize the Group, limit payments of dividends and
The Swiss Parliament passed a revised Swiss data protection
interest, alter our legal structure, take actions to reduce
law in 2020. The consultation on the corresponding ordinance
business risk, and order a restructuring of the bank.
Regulation and supervision in Germany
was launched in February 2021 and we expect both the revised
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(cid:41)(cid:81)(cid:88)(cid:71)(cid:84)(cid:80)(cid:67)(cid:80)(cid:69)(cid:71)(cid:2)(cid:68)(cid:81)(cid:70)(cid:91)
(cid:39)(cid:90)(cid:71)(cid:69)(cid:87)(cid:86)(cid:75)(cid:81)(cid:80)(cid:2)(cid:68)(cid:81)(cid:70)(cid:91)
(cid:43)(cid:80)(cid:69)(cid:75)(cid:70)(cid:71)(cid:80)(cid:86)(cid:2)(cid:79)(cid:67)(cid:80)(cid:67)(cid:73)(cid:71)(cid:79)(cid:71)(cid:80)(cid:86)(cid:2)(cid:86)(cid:71)(cid:67)(cid:79)(cid:85)(cid:2)
(cid:41)(cid:78)(cid:81)(cid:68)(cid:67)(cid:78)(cid:2)(cid:86)(cid:67)(cid:85)(cid:77)(cid:2)(cid:72)(cid:81)(cid:84)(cid:69)(cid:71)(cid:85)
(cid:52)(cid:71)(cid:69)(cid:81)(cid:88)(cid:71)(cid:84)(cid:91)(cid:2)(cid:86)(cid:67)(cid:85)(cid:77)(cid:2)(cid:72)(cid:81)(cid:84)(cid:69)(cid:71)(cid:85)
(cid:53)(cid:87)(cid:82)(cid:82)(cid:81)(cid:84)(cid:86)(cid:2)(cid:17)(cid:2)(cid:43)(cid:80)(cid:72)(cid:84)(cid:67)(cid:85)(cid:86)(cid:84)(cid:87)(cid:69)(cid:86)(cid:87)(cid:84)(cid:71)
(cid:36)(cid:87)(cid:85)(cid:75)(cid:80)(cid:71)(cid:85)(cid:85)(cid:2)(cid:67)(cid:85)(cid:2)(cid:87)(cid:85)(cid:87)(cid:67)(cid:78)
(cid:36)(cid:87)(cid:85)(cid:75)(cid:80)(cid:71)(cid:85)(cid:85)(cid:2)(cid:69)(cid:81)(cid:80)(cid:86)(cid:75)(cid:80)(cid:87)(cid:75)(cid:86)(cid:91)(cid:2)(cid:79)(cid:67)(cid:80)(cid:67)(cid:73)(cid:71)(cid:79)(cid:71)(cid:80)(cid:86)(cid:2)(cid:86)(cid:71)(cid:67)(cid:79)(cid:85)
(cid:50)(cid:78)(cid:67)(cid:80)(cid:85)
(cid:47)(cid:81)(cid:80)(cid:75)(cid:86)(cid:81)(cid:84)(cid:75)(cid:80)(cid:73)(cid:2)(cid:67)(cid:80)(cid:70)(cid:2)(cid:71)(cid:67)(cid:84)(cid:78)(cid:91)
(cid:89)(cid:67)(cid:84)(cid:80)(cid:75)(cid:80)(cid:73)(cid:2)(cid:75)(cid:80)(cid:70)(cid:75)(cid:69)(cid:67)(cid:86)(cid:81)(cid:84)(cid:85)
(cid:37)(cid:84)(cid:75)(cid:85)(cid:75)(cid:85)(cid:2)(cid:79)(cid:67)(cid:80)(cid:67)(cid:73)(cid:71)(cid:79)(cid:71)(cid:80)(cid:86)
(cid:82)(cid:84)(cid:81)(cid:86)(cid:81)(cid:69)(cid:81)(cid:78)(cid:85)(cid:2)(cid:67)(cid:80)(cid:70)(cid:2)(cid:82)(cid:78)(cid:67)(cid:91)(cid:68)(cid:81)(cid:81)(cid:77)(cid:85)
(cid:37)(cid:81)(cid:80)(cid:86)(cid:75)(cid:80)(cid:73)(cid:71)(cid:80)(cid:69)(cid:91)
(cid:72)(cid:87)(cid:80)(cid:70)(cid:75)(cid:80)(cid:73)(cid:2)(cid:82)(cid:78)(cid:67)(cid:80)(cid:85)
(cid:52)(cid:71)(cid:69)(cid:81)(cid:88)(cid:71)(cid:84)(cid:91)
(cid:82)(cid:78)(cid:67)(cid:80)(cid:85)
(cid:52)(cid:71)(cid:85)(cid:81)(cid:78)(cid:87)(cid:86)(cid:75)(cid:81)(cid:80)
(cid:85)(cid:86)(cid:84)(cid:67)(cid:86)(cid:71)(cid:73)(cid:75)(cid:71)(cid:85)
(cid:85)
(cid:85)
(cid:71)
(cid:84)
(cid:86)
(cid:85)
(cid:2)
(cid:72)
(cid:81)
(cid:2)
(cid:78)
(cid:71)
(cid:88)
(cid:71)
(cid:46)
(cid:49)(cid:82)(cid:71)(cid:84)(cid:67)(cid:86)(cid:75)(cid:81)(cid:80)(cid:67)(cid:78)(cid:2)(cid:84)(cid:75)(cid:85)(cid:77)(cid:2)
(cid:72)(cid:84)(cid:67)(cid:79)(cid:71)(cid:89)(cid:81)(cid:84)(cid:77)(cid:2)(cid:86)(cid:84)(cid:75)(cid:73)(cid:73)(cid:71)(cid:84)(cid:85)
(cid:52)(cid:71)(cid:69)(cid:81)(cid:88)(cid:71)(cid:84)(cid:91)
(cid:86)(cid:84)(cid:75)(cid:73)(cid:73)(cid:71)(cid:84)(cid:85)
(cid:46)(cid:75)(cid:83)(cid:87)(cid:75)(cid:70)(cid:75)(cid:86)(cid:91)
(cid:86)(cid:84)(cid:75)(cid:73)(cid:73)(cid:71)(cid:84)(cid:85)
(cid:53)(cid:69)(cid:67)(cid:78)(cid:71)(cid:2)(cid:81)(cid:72)(cid:2)(cid:84)(cid:71)(cid:85)(cid:82)(cid:81)(cid:80)(cid:85)(cid:71)(cid:2)(cid:80)(cid:71)(cid:71)(cid:70)(cid:71)(cid:70)
(cid:50)(cid:81)(cid:75)(cid:80)(cid:86)(cid:2)(cid:81)(cid:72)(cid:2)(cid:80)(cid:81)(cid:80)(cid:15)(cid:88)(cid:75)(cid:67)(cid:68)(cid:75)(cid:78)(cid:75)(cid:86)(cid:91)
(cid:52)(cid:71)(cid:69)(cid:81)(cid:88)(cid:71)(cid:84)(cid:91)
(cid:52)(cid:71)(cid:85)(cid:81)(cid:78)(cid:87)(cid:86)(cid:75)(cid:81)(cid:80)
Global Recovery Plan
The GRP gives senior management a tool to respond to early
warning signs, identifying measures to restore financial strength
if UBS comes under severe capital and / or liquidity stress.
Defined quantitative and qualitative triggers are monitored
daily and subject to predefined governance and escalation
processes. Fully actionable recovery options are available and
provide a basis for decisions regarding recovery. Recovery
options have defined execution owners and playbooks with the
following objectives:
– capital preservation;
– capital raising; and
– raising funding, and disposal or wind-down of businesses.
Global Resolution Strategy
The Global Resolution Strategy (the GRS) is submitted to FINMA
by UBS and sets out measures that FINMA can take to resolve UBS
in an orderly manner if the recovery process is not successful and
the Group enters into resolution. FINMA has the ultimate
authority and responsibility to execute the resolution,
in
cooperation with the Swiss National Bank, the Federal Department
of Finance and other key authorities through a Crisis Management
Group. The SPE bail-in strategy would involve writing down the
Group’s remaining equity, and additional tier 1 and tier 2
instruments, as well as bail-in of total loss-absorbing (TLAC)-
eligible senior unsecured bonds at the UBS Group AG level. An
internal recapitalization of affected subsidiaries would be made
simultaneously, enabling them to transmit incurred losses to
parent bank UBS AG and, ultimately, UBS Group AG. Post-
resolution restructuring measures could include disposal and
winding down of businesses and assets. FINMA noted that we
have already taken key preparatory steps and made good
progress regarding global resolvability.
Local plans
Our US resolution plan sets out the steps that could be taken to
resolve the UBS Americas Holding LLC group if it suffered
material financial distress and the Group was unable or unwilling
to provide financial support. As required by US regulations, our
US plan contemplates that UBS Americas Holding LLC will
commence US bankruptcy proceedings. Prior to commencement
thereof, the plan envisages UBS Americas Holding LLC
downstreaming financial resources to subsidiaries to facilitate
orderly wind-down or disposal of businesses.
Following the cross-border merger of UBS Limited into UBS
Europe SE, the enlarged European operating subsidiary has
developed resolution plans based on Single Resolution Board
requirements. Given the relatively small size of UBS Europe SE
compared with the overall Group, emphasis is placed on the
GRP and GRS to provide the tools necessary to recapitalize and
restructure the firm in case of material financial distress.
The Swiss emergency plan demonstrates how UBS’s
systemically important functions and critical operations in
Switzerland can continue if a restructuring of the Group is
deemed not to be successful. This is achieved mainly by
maintaining UBS Switzerland AG as a separate legal entity.
FINMA has confirmed the Swiss emergency plan is effective,
subject to further reduction of joint and several liabilities.
Other local recovery and resolution plans exist for various
Group entities and jurisdictions. They show how local operations
benefit from the GRP and the GRS, and also support the global
plans. Our operational continuity planning is intended to ensure
uninterrupted provision of critical services even if certain Group
entities are discontinued in a crisis.
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Our strategy, business model and environment
Our strategy, business model and environment | Regulatory and legal developments
Regulatory and legal developments
distribution. As of 31 December 2020, these exclusions resulted
in a temporary reduction of our LRD for going concern
requirement purposes of USD 93 billion. Given our existing
buffers to capital requirements and the temporary nature of this
measure, this had no impact on our capacity to provide funding
to our clients or the Swiss economy.
Regulators in key jurisdictions outside of Switzerland have
taken measures intended to encourage banks to take an
accommodative stance when dealing with customers facing
financial stress, and also to support liquidity in markets. These
measures include a temporary relaxation of capital buffer and
Pillar 2 capital requirements, temporary modifications to the LRD
and the establishment of special lending or financing facilities.
The Basel Committee on Banking Supervision (the BCBS) has
delayed the implementation deadline of Basel III rules by one
year, to 1 January 2023. The accompanying transitional
arrangement for the output floor has also been extended by one
year, to 1 January 2028. Separately, the BCBS and the
International Organization of Securities Commissions (IOSCO)
have extended the final implementation phase of the framework
for margin requirements for non-centrally cleared derivatives by
one year, to 1 September 2022.
In May 2020, the Federal Reserve made a temporary change
to permit the exclusion of US Treasury securities and deposits at
Federal Reserve Banks from the calculation of the supplementary
(BHCs) and
leverage
intermediate holding companies (IHCs), including UBS Americas
Holding LLC; this temporary change will be in effect until
31 March 2021.
for bank holding companies
ratio
The EU and the European Central Bank (the ECB) have also
communicated a series of regulatory measures to stabilize the
economy in Europe. None of those measures had a significant
impact on UBS Group during 2020.
International action regarding capital distributions
During 2020, regulators in several jurisdictions implemented
measures restricting bank capital distributions and share
repurchase programs. These measures were
intended to
maintain capital resilience and lending capacity following the
outbreak of the COVID-19 pandemic. As of 31 December, no
such measures were in place in Switzerland.
In June 2020, the European Systemic Risk Board issued a
recommendation to prevent EU financial institutions from
running share buyback
making capital distributions and
programs, which was extended in July 2020 until 1 January
2021. In December 2020, the ECB announced that EU banks
under its supervision, including UBS Europe SE, should exercise
to dividends and share
regard
extreme prudence with
repurchases from 1 January until 30 September 2021.
Regulatory and legal developments related to COVID-19
Swiss COVID-19 loans
In March 2020, the Swiss Federal Council adopted provisional
emergency legislation to support small and medium-sized Swiss
companies suffering from substantial reductions in revenue due
to the COVID-19 pandemic.
In December 2020, the Swiss Parliament approved the
COVID-19 Joint and Several Guarantee Act, which became
effective on 19 December 2020. This Act codified the measures
adopted under emergency legislation into ordinary law and
provides for regulation of the loan programs and guarantees
over their life cycle. The new Act extends the standard
amortization period of loans from five to eight years.
› Refer to “Our response to COVID-19” in the “Our environment”
section of this report for more information
COVID-19 regulatory measures
To support the lending capacity of banks, the Swiss Federal
Council deactivated the countercyclical buffer on residential real
estate loans in March 2020 until further notice, at the request of
the Swiss National Bank (the SNB). Several other countries
similarly reduced their countercyclical buffers. This led to a
reduction of 29 basis points of our common equity tier 1 (CET1)
capital requirement as of 31 December 2020, with no impact on
our capital ratios.
Banks that have model-based market risk RWA calculations,
such as UBS, have experienced an
increased number of
backtesting exceptions driven by the higher volatility in the
markets throughout 2020. These exceptions could ultimately
result in higher bank-specific minimum capital requirements. To
prevent procyclicality in capital requirements, the Swiss Financial
Market Supervisory Authority (FINMA) introduced a temporary
exemption, freezing the number of backtesting exceptions from
1 February 2020 until 1 July 2020, and subsequently introduced
this exemption
the exemption
into supervisory practice:
therefore continued to apply beyond 1 July 2020, subject to
future withdrawal by the regulator. For UBS, the number of
negative backtesting exceptions within a 250-business-day
window increased from 0 to 3 by the end of 2020. The resulting
FINMA VaR multiplier for market risk RWA remained unchanged
at 3 as of 31 December 2020; UBS did not benefit from the
exemption in 2020.
In addition, FINMA permitted banks to temporarily exclude
central bank sight deposits from the leverage ratio denominator
(the LRD) for the purpose of calculating going concern ratios. This
exemption applied until 1 January 2021. Applicable dividends or
similar distributions approved by shareholders after 25 March
2020 reduced the relief by the LRD equivalent of the capital
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Our strategy, business model and environment | Regulatory and legal developments
Regulatory and legal developments
Regulatory and legal developments related to COVID-19
distribution. As of 31 December 2020, these exclusions resulted
Swiss COVID-19 loans
in a temporary reduction of our LRD for going concern
requirement purposes of USD 93 billion. Given our existing
In March 2020, the Swiss Federal Council adopted provisional
buffers to capital requirements and the temporary nature of this
emergency legislation to support small and medium-sized Swiss
measure, this had no impact on our capacity to provide funding
companies suffering from substantial reductions in revenue due
to our clients or the Swiss economy.
to the COVID-19 pandemic.
Regulators in key jurisdictions outside of Switzerland have
COVID-19 Joint and Several Guarantee Act, which became
accommodative stance when dealing with customers facing
effective on 19 December 2020. This Act codified the measures
financial stress, and also to support liquidity in markets. These
adopted under emergency legislation into ordinary law and
measures include a temporary relaxation of capital buffer and
provides for regulation of the loan programs and guarantees
Pillar 2 capital requirements, temporary modifications to the LRD
over their life cycle. The new Act extends the standard
and the establishment of special lending or financing facilities.
amortization period of loans from five to eight years.
› Refer to “Our response to COVID-19” in the “Our environment”
section of this report for more information
The Basel Committee on Banking Supervision (the BCBS) has
delayed the implementation deadline of Basel III rules by one
year, to 1 January 2023. The accompanying transitional
arrangement for the output floor has also been extended by one
year, to 1 January 2028. Separately, the BCBS and the
COVID-19 regulatory measures
To support the lending capacity of banks, the Swiss Federal
International Organization of Securities Commissions (IOSCO)
Council deactivated the countercyclical buffer on residential real
have extended the final implementation phase of the framework
estate loans in March 2020 until further notice, at the request of
for margin requirements for non-centrally cleared derivatives by
the Swiss National Bank (the SNB). Several other countries
one year, to 1 September 2022.
similarly reduced their countercyclical buffers. This led to a
In May 2020, the Federal Reserve made a temporary change
reduction of 29 basis points of our common equity tier 1 (CET1)
to permit the exclusion of US Treasury securities and deposits at
capital requirement as of 31 December 2020, with no impact on
Federal Reserve Banks from the calculation of the supplementary
our capital ratios.
leverage
ratio
for bank holding companies
(BHCs) and
Banks that have model-based market risk RWA calculations,
intermediate holding companies (IHCs), including UBS Americas
such as UBS, have experienced an
increased number of
Holding LLC; this temporary change will be in effect until
backtesting exceptions driven by the higher volatility in the
31 March 2021.
markets throughout 2020. These exceptions could ultimately
The EU and the European Central Bank (the ECB) have also
result in higher bank-specific minimum capital requirements. To
communicated a series of regulatory measures to stabilize the
prevent procyclicality in capital requirements, the Swiss Financial
economy in Europe. None of those measures had a significant
Market Supervisory Authority (FINMA) introduced a temporary
impact on UBS Group during 2020.
exemption, freezing the number of backtesting exceptions from
1 February 2020 until 1 July 2020, and subsequently introduced
International action regarding capital distributions
this exemption
into supervisory practice:
the exemption
therefore continued to apply beyond 1 July 2020, subject to
future withdrawal by the regulator. For UBS, the number of
negative backtesting exceptions within a 250-business-day
window increased from 0 to 3 by the end of 2020. The resulting
During 2020, regulators in several jurisdictions implemented
measures restricting bank capital distributions and share
repurchase programs. These measures were
intended to
maintain capital resilience and lending capacity following the
outbreak of the COVID-19 pandemic. As of 31 December, no
FINMA VaR multiplier for market risk RWA remained unchanged
such measures were in place in Switzerland.
at 3 as of 31 December 2020; UBS did not benefit from the
exemption in 2020.
In June 2020, the European Systemic Risk Board issued a
recommendation to prevent EU financial institutions from
In addition, FINMA permitted banks to temporarily exclude
making capital distributions and
running share buyback
central bank sight deposits from the leverage ratio denominator
(the LRD) for the purpose of calculating going concern ratios. This
exemption applied until 1 January 2021. Applicable dividends or
similar distributions approved by shareholders after 25 March
programs, which was extended in July 2020 until 1 January
2021. In December 2020, the ECB announced that EU banks
under its supervision, including UBS Europe SE, should exercise
extreme prudence with
regard
to dividends and share
2020 reduced the relief by the LRD equivalent of the capital
repurchases from 1 January until 30 September 2021.
In December 2020, the Swiss Parliament approved the
taken measures intended to encourage banks to take an
distributions.
In the US, the Federal Reserve Board (the FRB) has taken
several actions, including a prohibition on increasing dividends
and share repurchases, that started in the third quarter of 2020,
keeping these restrictions largely unchanged throughout the
fourth quarter. As a result, UBS Americas Holding LLC was
restricted from distributing cash dividends on common equity in
excess of the firm’s average net income over the four preceding
quarters. In December 2020, the FRB announced that it would
continue capital distribution constraints for supervised firms for
the first quarter of 2021 and would review the need to renew
such constraints at a later date.
UBS continues to monitor policy developments regarding
› Refer to the “Our strategy” and “How we create value for our
stakeholders” sections of this report for more information about
the capital distributions of UBS Group AG
IFRS 9 and COVID-19: accounting for expected credit losses
In March 2020, the International Accounting Standards Board
(the IASB) emphasized that entities should apply appropriate
judgment when determining the effects of COVID-19 on
expected credit losses under IFRS 9, given that significant
uncertainty exists, particularly related to the assessment of
future macroeconomic conditions.
FINMA, the ECB and other banking regulators issued similar
statements emphasizing the need for appropriate judgment with
losses.
to COVID-19 effects on expected credit
regard
Notwithstanding the measures taken by regulators and clarifying
statements, deteriorating economic forecasts have caused an
increase in credit loss expenses and hence greater volatility in the
income statement.
Deferrals and moratoria of payments
In March 2020, the Coronavirus Aid, Relief and Economic
Security Act of 2020 (the CARES Act) came into effect in the US,
providing certain borrowers relief from mortgage foreclosures by
enabling them to benefit from moratoria on payments for
defined federally or government-sponsored enterprise insured,
guaranteed, owned or funded mortgages and student loans.
In April 2020, the European Banking Authority (the EBA)
published its guidelines on legislative and non-legislative loan
repayment moratoria, allowing banks to grant payment holidays
to customers. UBS Europe SE has experienced a negligible
number of such requests under the moratoria.
Other regulatory and legal developments
Revision of the Swiss Banking Act
In June 2020, the Swiss Federal Council adopted a dispatch on
the partial revision of the Banking Act. The proposed measures
would strengthen the Swiss depositor protection scheme by
requiring banks to deposit half of their contribution obligations
for the deposit protection scheme in securities or cash with a
custodian. A related adjustment to the Intermediated Securities
Act would require custodians of securities to separate their own
portfolios from the portfolios of their clients. Furthermore, the
revision would amend the section of the Swiss Banking Act on
bank insolvency provisions, including the ranking of claims in
case of a bail-in and the required subordination of bail-in bonds,
except those issued by a holding company with pari passu
liabilities of less than 5% of the total bail-in bond capital.
As the next step, both chambers of the Parliament will debate
the bill; the revised Banking Act is not anticipated to come into
force until the start of 2022. We expect moderate additional
costs for all Switzerland-based Group entities in scope.
Swiss Withholding Tax Act
In April 2020, the Swiss Federal Council launched a consultation
on various suggested amendments to the Withholding Tax Act.
Based on the consultation results, the Federal Council proposed
in September 2020 to maintain the withholding tax on interest
carried on bank accounts by natural persons with tax domicile in
Switzerland and to abolish the tax on all other interest
payments. As the next step, the Federal Council will submit a
dispatch to Parliament in the second quarter of 2021.
Furthermore, the Swiss Federal Council has proposed to
extend the current withholding tax exemption for total loss-
absorbing capacity and additional tier 1 instruments from 2021
until the end of 2026. This extension will be subject to
parliamentary debate in 2021.
Climate-related risks; environmental, social and governance
(ESG) matters
We actively participate in discussions on corporate responsibility
and sustainability issues with authorities and policymakers and
contribute our experience and knowledge to their efforts to
define corresponding regulatory and reporting frameworks.
(the
Foundation
In September 2020, the International Financial Reporting
Standards
issued a
consultation to assess the demand for global sustainability
reporting standards and the contribution the IFRS Foundation
itself could make in developing such standards, including the
possibility of establishing a new Sustainability Standards Board.
Foundation)
IFRS
In Switzerland, the Federal Council published a report in June
2020 on sustainable finance assessing 10 recommendations to
further develop Switzerland as a hub for sustainable finance.
the
Overall,
government to a market-led approach to sustainable finance.
the commitment of
report underpins
the
In September 2020, the Swiss Parliament adopted the revised
CO2 Act, mandating FINMA and the SNB to regularly assess the
climate-related financial risks in the financial sector. As a
referendum has been successfully called for, the next step will be
a public vote on the revised law on 13 June 2021.
In November 2020, FINMA launched a consultation on new
climate-related financial disclosure requirements, based on the
recommendations of the Financial Stability Board (FSB) Task
Force on Climate-related Financial Disclosures (the TCFD). The
requirements include principles-based elements on governance,
strategy, risk management and quantitative information on
climate-related financial risks and apply to Swiss systemically
relevant banks, including UBS. The new circular is expected to
become applicable for the 2021 reporting year.
In January 2021, the Swiss government officially expressed
launch of the TCFD
support for the TCFD. Since the
recommendations in 2017, we have continuously improved and
expanded our climate-related disclosures to demonstrate our
active engagement for an orderly transition to a low-carbon
economy.
52
53
53
Our strategy, business model and environment Our strategy, business model and environment | Regulatory and legal developments
a lower gone concern requirement effective 1 January 2020,
corresponding
the Group’s gone concern
requirement (before applicable reductions).
to 62% of
US CCAR
In June 2020, the Federal Reserve released the results of its
annual Dodd–Frank Act Stress Tests (DFAST) and Comprehensive
Capital Analysis and Review (CCAR).
Our intermediate holding company, UBS Americas Holding
LLC, exceeded minimum capital requirements under the severely
adverse scenario and the Federal Reserve did not object to its
capital plan. As a result, UBS Americas Holding LLC will no
longer be subject to the qualitative assessment component of
CCAR.
Following the completion of the annual DFAST and CCAR,
UBS Americas Holding LLC was assigned a stress capital buffer
(an SCB) of 6.7% under the SCB rule (based on Dodd–Frank Act
stress test results and planned future dividends), which results in
the imposition of restrictions if the SCB is not maintained above
specified regulatory minimum capital requirements.
The Federal Reserve also conducted sensitivity analyses to
model the economic effects of the COVID-19 pandemic. As a
result of these supplementary analyses, the Federal Reserve
determined that firms should resubmit revised capital plans
based on a new stress scenario. In December 2020, the Federal
Reserve released the results of this second CCAR of 2020. UBS
Americas Holding LLC’s projected stress capital ratios exceeded
regulatory capital minima under the updated supervisory
scenarios.
Brexit
Following the UK’s withdrawal from the EU on 31 January 2020,
a regulation granting equivalence to Switzerland’s stock
exchanges was approved by the UK Parliament and came into
force on 3 February 2021. In response, Switzerland granted
recognition for UK trading venues that allows shares issued by
Swiss-incorporated companies to be admitted to trading on UK
trading venues.
Also, the negotiation on the Trade and Cooperation
Agreement, which governs the relationship between the EU and
the UK on free trade in certain goods and mutual market access,
among other matters, was finalized on 24 December 2020.
In September 2020, the EC adopted a temporary equivalence
decision for UK central counterparties (CCPs) for the purpose of
facilitating derivatives clearing. The temporary equivalence
decision, applicable from 1 January 2021 until 30 June 2022,
does not require UBS Europe SE to migrate its exposures to an
EU CCP before the end of the transition period.
In March 2019, UBS completed a business transfer and cross-
border merger of UBS Limited and UBS Europe SE in order to
continue serving EEA clients following the end of the transition
period. We continue to align our Investment Bank activities to
respond to ongoing regulatory guidance.
In December 2020, the US Federal Reserve joined the
Network of Central Banks and Supervisors for Greening the
Financial System (the NGFS). As a result, all global systemically
important banks (G-SIBs) are now supervised by members of the
NGFS. The NGFS advocates for a more sustainable financial
system and issued a range of prudential supervisory practices for
climate- and environment-related topics in 2020.
Furthermore, the Federal Reserve has indicated that it will
work closely with other agencies and authorities, including the
BCBS Task Force on Climate-related Financial Risks and the FSB,
to better understand, measure and mitigate climate-related
financial risks.
In Europe, the ECB has issued a guide on climate-related and
environmental risks and announced plans for a 2022 climate
stress test. Also, the EBA has consulted on the inclusion of ESG
matters in supervisory practices, and the European Securities and
(ESMA) has consulted on Disclosure
Markets Authority
impact
Regulation
requirements. The EU has formally adopted the Taxonomy
Regulation with a legislative base for technical standards to
define a green taxonomy.
technical standards,
including adverse
NSFR implementation
In September 2020, the Swiss Federal Council adopted an
amendment to the Liquidity Ordinance for the implementation
of the net stable funding ratio (the NSFR). The NSFR regulation
was finalized in the fourth quarter of 2020 with the release of
the revised FINMA liquidity circular, and will become effective on
1 July 2021. It applies to UBS Group AG at the consolidated level
and to UBS AG, UBS Switzerland AG and UBS Swiss Financial
Advisers AG at the standalone level. UBS is on schedule to
operationalize the NSFR regulation; its overall effect on UBS is
expected to be limited.
In October 2020, the US banking regulators finalized the
NSFR rule for supervised firms to ensure a minimum level of
stable funding. The rule becomes effective as of 1 July 2021 and
will require semi-annual disclosure from 1 January 2023. As a
Category III firm under the Federal Reserve’s Tailoring Rule
(2019), UBS’s intermediate holding company, UBS Americas
Holding LLC, and its subsidiary bank, UBS Bank USA, will be
subject to an NSFR requirement of 85%.
In the European Union, the European Commission (the EC)
adopted the updated Capital Requirements Regulation in June
2019, which will become effective from 28 June 2021. The
regulation requires UBS Europe SE to provide a detailed annual
NSFR disclosure and a semi-annual NSFR key metrics disclosure.
Gone concern capital requirements
As of 1 January 2020, the amendments to the Swiss Capital
Adequacy Ordinance came into force. The revisions introduce
gone concern capital
for Switzerland-based
requirements
intermediate parent banks of G-SIBs on a standalone basis,
impacting UBS AG standalone. UBS Switzerland AG is subject to
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Our strategy, business model and environment | Regulatory and legal developments
In December 2020, the US Federal Reserve joined the
a lower gone concern requirement effective 1 January 2020,
Network of Central Banks and Supervisors for Greening the
corresponding
to 62% of
the Group’s gone concern
Financial System (the NGFS). As a result, all global systemically
requirement (before applicable reductions).
important banks (G-SIBs) are now supervised by members of the
NGFS. The NGFS advocates for a more sustainable financial
US CCAR
system and issued a range of prudential supervisory practices for
In June 2020, the Federal Reserve released the results of its
climate- and environment-related topics in 2020.
annual Dodd–Frank Act Stress Tests (DFAST) and Comprehensive
Furthermore, the Federal Reserve has indicated that it will
Capital Analysis and Review (CCAR).
work closely with other agencies and authorities, including the
Our intermediate holding company, UBS Americas Holding
BCBS Task Force on Climate-related Financial Risks and the FSB,
LLC, exceeded minimum capital requirements under the severely
to better understand, measure and mitigate climate-related
adverse scenario and the Federal Reserve did not object to its
financial risks.
capital plan. As a result, UBS Americas Holding LLC will no
In Europe, the ECB has issued a guide on climate-related and
longer be subject to the qualitative assessment component of
environmental risks and announced plans for a 2022 climate
CCAR.
stress test. Also, the EBA has consulted on the inclusion of ESG
Following the completion of the annual DFAST and CCAR,
matters in supervisory practices, and the European Securities and
UBS Americas Holding LLC was assigned a stress capital buffer
Markets Authority
(ESMA) has consulted on Disclosure
(an SCB) of 6.7% under the SCB rule (based on Dodd–Frank Act
Regulation
technical standards,
including adverse
impact
stress test results and planned future dividends), which results in
requirements. The EU has formally adopted the Taxonomy
the imposition of restrictions if the SCB is not maintained above
Regulation with a legislative base for technical standards to
specified regulatory minimum capital requirements.
define a green taxonomy.
NSFR implementation
The Federal Reserve also conducted sensitivity analyses to
model the economic effects of the COVID-19 pandemic. As a
result of these supplementary analyses, the Federal Reserve
In September 2020, the Swiss Federal Council adopted an
determined that firms should resubmit revised capital plans
amendment to the Liquidity Ordinance for the implementation
based on a new stress scenario. In December 2020, the Federal
of the net stable funding ratio (the NSFR). The NSFR regulation
Reserve released the results of this second CCAR of 2020. UBS
was finalized in the fourth quarter of 2020 with the release of
Americas Holding LLC’s projected stress capital ratios exceeded
the revised FINMA liquidity circular, and will become effective on
regulatory capital minima under the updated supervisory
1 July 2021. It applies to UBS Group AG at the consolidated level
scenarios.
and to UBS AG, UBS Switzerland AG and UBS Swiss Financial
Advisers AG at the standalone level. UBS is on schedule to
Brexit
operationalize the NSFR regulation; its overall effect on UBS is
Following the UK’s withdrawal from the EU on 31 January 2020,
expected to be limited.
a regulation granting equivalence to Switzerland’s stock
In October 2020, the US banking regulators finalized the
exchanges was approved by the UK Parliament and came into
NSFR rule for supervised firms to ensure a minimum level of
force on 3 February 2021. In response, Switzerland granted
stable funding. The rule becomes effective as of 1 July 2021 and
recognition for UK trading venues that allows shares issued by
will require semi-annual disclosure from 1 January 2023. As a
Swiss-incorporated companies to be admitted to trading on UK
Category III firm under the Federal Reserve’s Tailoring Rule
trading venues.
(2019), UBS’s intermediate holding company, UBS Americas
Also, the negotiation on the Trade and Cooperation
Holding LLC, and its subsidiary bank, UBS Bank USA, will be
Agreement, which governs the relationship between the EU and
subject to an NSFR requirement of 85%.
the UK on free trade in certain goods and mutual market access,
In the European Union, the European Commission (the EC)
among other matters, was finalized on 24 December 2020.
adopted the updated Capital Requirements Regulation in June
In September 2020, the EC adopted a temporary equivalence
2019, which will become effective from 28 June 2021. The
decision for UK central counterparties (CCPs) for the purpose of
regulation requires UBS Europe SE to provide a detailed annual
facilitating derivatives clearing. The temporary equivalence
NSFR disclosure and a semi-annual NSFR key metrics disclosure.
decision, applicable from 1 January 2021 until 30 June 2022,
does not require UBS Europe SE to migrate its exposures to an
Gone concern capital requirements
EU CCP before the end of the transition period.
As of 1 January 2020, the amendments to the Swiss Capital
In March 2019, UBS completed a business transfer and cross-
Adequacy Ordinance came into force. The revisions introduce
border merger of UBS Limited and UBS Europe SE in order to
gone concern capital
requirements
for Switzerland-based
continue serving EEA clients following the end of the transition
intermediate parent banks of G-SIBs on a standalone basis,
period. We continue to align our Investment Bank activities to
impacting UBS AG standalone. UBS Switzerland AG is subject to
respond to ongoing regulatory guidance.
Developments related to the transition away from LIBOR
The ICE Benchmark Administration (IBA), the FCA-regulated and
authorized administrator of LIBOR, is consulting on the timing of
the cessation of LIBOR. IBA expects that one-week and two-
month USD LIBOR settings, and all GBP, JPY, EUR and CHF
LIBOR settings, will cease by the end of 2021, and that the
remaining USD LIBOR settings will cease by the end of June
2023. The UK Government announced that the FCA will be
given additional powers to ensure a smooth wind-down of
LIBOR and deal with certain legacy contracts that cannot easily
transition from LIBOR.
interest-rate derivatives
In October 2020, the International Swaps and Derivatives
Association (ISDA) launched the IBOR Fallbacks Supplement and
IBOR Fallbacks Protocol, amending the ISDA standard definitions
for
for
derivatives linked to certain interbank offered rates (IBORs). The
changes came into effect on 25 January 2021 and, from that
date, all new cleared and non-cleared derivatives between
adhering parties that reference the definitions now include these
fallbacks. UBS adhered to the protocol since November 2020,
ahead of the effective date in January 2021.
incorporate
fallbacks
to
law. The consultation on
Digitalization
In 2020, the Swiss Parliament passed a revised Swiss data
protection
the corresponding
ordinance is expected to be launched in the second quarter of
2021 and we anticipate both the law and the ordinance to
become effective as of 1 January 2022. The revision seeks to
improve data protection for individuals by enhancing the
transparency and accountability rules for companies processing
data, among other measures. This is intended to result in the
equivalence necessary for the continued cross-border transmission
of data with EU member states.
The Swiss Parliament also adopted the Federal Act on the
Adaptation of Federal Law to Developments in Distributed
Ledger Technology
(the DLT Act), among other matters,
enabling the introduction of ledger-based securities that are
represented in a blockchain. Part of the DLT Act has become
effective as of February 2021, the remainder is expected to enter
into force in the second half of 2021.
(the e-ID Act),
Identification Services
The Swiss Parliament also passed the Federal Act on
Electronic
thereby
introducing a federally recognized electronic identity. As a
referendum has been successfully called for, the law will be
subject to a public vote in March 2021. In the EU, the EC has
outlined its Digital Finance Package, which is focused on crypto-
assets, digital identities, digital operational resilience and retail
payments strategy, among other matters. Furthermore, the ECB
has launched a consultation on a possible future digital euro.
Operational resilience
On the international level, in 2020, the BCBS finished its
consultation on new Principles for Operational Resilience, as well
as on the revisions to the existing BCBS Principles for the Sound
Management of Operational Risk. Final guidelines are expected
to be released in the course of 2021.
In the UK, the PRA and FCA completed their
joint
consultations on the new UK operational resilience framework,
with final rules expected in March 2021.
US banking regulators have further issued a whitepaper on
operational resilience that broadly aligns with the BCBS and UK
proposals but is not applicable to foreign banks, at present.
EU institutions are also considering legislative proposals in
relation to digital operational resilience.
Addressing the emerging requirements across jurisdictions,
we have established a global program to enhance our
capabilities on operational resilience and enable alignment with
relevant regulatory requirements and legislation.
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Our strategy, business model and environment
Our strategy, business model and environment | Risk factors
Risk factors
Certain risks, including those described below, may affect our
ability to execute our strategy or our business activities, financial
condition, results of operations and prospects. We are inherently
exposed to multiple risks, many of which may become apparent
only with the benefit of hindsight. As a result, risks that we do
not consider to be material or of which we are not currently
aware could also adversely affect us. Within each category, the
risks that we consider to be most material are presented first.
Market, credit and macroeconomic risks
Our results of operations and financial condition may be
adversely affected by the COVID-19 pandemic and the response
to it
The continued widespread COVID-19 pandemic and the
governmental measures taken to contain it have adversely
affected, and will likely continue to adversely affect, global
economic conditions, resulting in meaningful contraction in the
global economy, substantial volatility in the financial markets,
increased unemployment, increased credit and counterparty risk,
and operational challenges, such as the temporary closures of
businesses, sheltering-in-place directives and increased remote
work protocols. Governments and central banks around the
world have reacted to the economic crisis caused by the
pandemic by implementing stimulus and liquidity programs and
cutting interest rates. While these programs have had initial
success in mitigating the economic consequences of the
pandemic, it is unclear whether these or future actions will be
successful in countering the economic disruption caused by the
pandemic. If the pandemic is prolonged, vaccine distribution is
delayed, or available vaccines prove ineffective against evolving
strains of the coronavirus, or the actions of governments and
central banks are unsuccessful, the adverse impact on the global
economy will deepen, our results of operations and financial
condition in future quarters may be adversely affected.
COVID-19 and related lockdown measures have significantly
impacted major economies across the world. Uncertainties are
still at a high level, making predictions difficult. The COVID-19
pandemic has affected all of our businesses, and these effects
could be greater in the future if adverse conditions persist or
worsen. These effects have included declines in some asset
prices, spikes in volatility, lower or negative interest rates,
widening of credit spreads and credit deterioration. These
effects have resulted in decreases in the valuation of loans and
commitments, an increase in the allowance for credit losses and
lower valuations of certain classes of trading assets. While these
effects were offset by high levels of client activity in 2020 and a
rebound in asset prices in some sectors, this level of activity may
not persist.
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56
losses
in our
loan portfolios,
Should these global market conditions continue or worsen, or
the pandemic lead to additional market disruptions, we may
experience reduced client activity and demand for our products
and services, increased utilization of lending commitments,
significantly increased client defaults, continued and increasing
credit and valuation
loan
commitments and other assets, and impairments of other
financial assets. Declines in interest rates have decreased net
interest margins and such declines may continue to sharpen. A
decline in invested assets would also reduce recurring fee
income
in our Global Wealth Management and Asset
Management businesses. These factors and other consequences
of the COVID-19 pandemic may negatively affect our financial
condition, including possible constraints on capital and liquidity,
as well as a higher cost of capital, and possible changes or
downgrades to our credit ratings.
Although we moved a substantial portion of our workforce to
work-from-home solutions, including client-facing and trading
staff, if significant portions of our workforce, including key
personnel, are unable to work effectively because of illness,
government actions, or other restrictions in connection with the
pandemic, the adverse effects of the pandemic on our
businesses could be exacerbated. In addition, with staff working
from outside the offices, we face new challenges and
operational risks, including maintenance of supervisory and
surveillance controls, as well as increased fraud and data security
risks. While we have taken measures to manage these risks, such
measures have never been tested on the scale or duration that
we are currently experiencing, and there is risk that these
measures will not be effective in the current unprecedented
operating environment.
The extent to which the pandemic, and the related adverse
economic conditions, affect our businesses, results of operations
and financial condition, as well as our regulatory capital and
liquidity ratios, will depend on future developments, including
the scope and duration of the pandemic and any recovery
period, the adequacy of vaccine distribution plans and execution
of those plans, as well as the efficacy of vaccines against
potential virus variants, future actions taken by governmental
authorities, central banks and other third parties in response to
the pandemic, and the effects on our customers, counterparties,
employees and third-party service providers.
Performance in the financial services industry is affected by
market conditions and the macroeconomic climate
Our businesses are materially affected by market and
macroeconomic conditions. Adverse changes in interest rates,
credit spreads, securities prices, market volatility and liquidity,
foreign exchange rates, commodity prices, and other market
fluctuations, as well as changes in investor sentiment, can affect
our earnings and ultimately our financial and capital positions.
Our strategy, business model and environment | Risk factors
Risk factors
Certain risks, including those described below, may affect our
Should these global market conditions continue or worsen, or
ability to execute our strategy or our business activities, financial
the pandemic lead to additional market disruptions, we may
condition, results of operations and prospects. We are inherently
experience reduced client activity and demand for our products
exposed to multiple risks, many of which may become apparent
and services, increased utilization of lending commitments,
only with the benefit of hindsight. As a result, risks that we do
significantly increased client defaults, continued and increasing
not consider to be material or of which we are not currently
credit and valuation
losses
in our
loan portfolios,
loan
aware could also adversely affect us. Within each category, the
commitments and other assets, and impairments of other
risks that we consider to be most material are presented first.
financial assets. Declines in interest rates have decreased net
Market, credit and macroeconomic risks
Our results of operations and financial condition may be
interest margins and such declines may continue to sharpen. A
decline in invested assets would also reduce recurring fee
income
in our Global Wealth Management and Asset
Management businesses. These factors and other consequences
adversely affected by the COVID-19 pandemic and the response
of the COVID-19 pandemic may negatively affect our financial
to it
condition, including possible constraints on capital and liquidity,
The continued widespread COVID-19 pandemic and the
as well as a higher cost of capital, and possible changes or
governmental measures taken to contain it have adversely
downgrades to our credit ratings.
affected, and will likely continue to adversely affect, global
Although we moved a substantial portion of our workforce to
economic conditions, resulting in meaningful contraction in the
work-from-home solutions, including client-facing and trading
global economy, substantial volatility in the financial markets,
staff, if significant portions of our workforce, including key
increased unemployment, increased credit and counterparty risk,
personnel, are unable to work effectively because of illness,
and operational challenges, such as the temporary closures of
government actions, or other restrictions in connection with the
businesses, sheltering-in-place directives and increased remote
pandemic, the adverse effects of the pandemic on our
work protocols. Governments and central banks around the
businesses could be exacerbated. In addition, with staff working
world have reacted to the economic crisis caused by the
from outside the offices, we face new challenges and
pandemic by implementing stimulus and liquidity programs and
operational risks, including maintenance of supervisory and
cutting interest rates. While these programs have had initial
surveillance controls, as well as increased fraud and data security
success in mitigating the economic consequences of the
risks. While we have taken measures to manage these risks, such
pandemic, it is unclear whether these or future actions will be
measures have never been tested on the scale or duration that
successful in countering the economic disruption caused by the
we are currently experiencing, and there is risk that these
pandemic. If the pandemic is prolonged, vaccine distribution is
measures will not be effective in the current unprecedented
delayed, or available vaccines prove ineffective against evolving
operating environment.
strains of the coronavirus, or the actions of governments and
The extent to which the pandemic, and the related adverse
central banks are unsuccessful, the adverse impact on the global
economic conditions, affect our businesses, results of operations
economy will deepen, our results of operations and financial
and financial condition, as well as our regulatory capital and
condition in future quarters may be adversely affected.
liquidity ratios, will depend on future developments, including
COVID-19 and related lockdown measures have significantly
the scope and duration of the pandemic and any recovery
impacted major economies across the world. Uncertainties are
period, the adequacy of vaccine distribution plans and execution
still at a high level, making predictions difficult. The COVID-19
of those plans, as well as the efficacy of vaccines against
pandemic has affected all of our businesses, and these effects
potential virus variants, future actions taken by governmental
could be greater in the future if adverse conditions persist or
authorities, central banks and other third parties in response to
worsen. These effects have included declines in some asset
the pandemic, and the effects on our customers, counterparties,
prices, spikes in volatility, lower or negative interest rates,
employees and third-party service providers.
widening of credit spreads and credit deterioration. These
effects have resulted in decreases in the valuation of loans and
Performance in the financial services industry is affected by
commitments, an increase in the allowance for credit losses and
market conditions and the macroeconomic climate
lower valuations of certain classes of trading assets. While these
Our businesses are materially affected by market and
effects were offset by high levels of client activity in 2020 and a
macroeconomic conditions. Adverse changes in interest rates,
rebound in asset prices in some sectors, this level of activity may
credit spreads, securities prices, market volatility and liquidity,
not persist.
foreign exchange rates, commodity prices, and other market
fluctuations, as well as changes in investor sentiment, can affect
our earnings and ultimately our financial and capital positions.
A market downturn and weak macroeconomic conditions can
be precipitated by a number of factors, including geopolitical
events, global trade disruption, changes in monetary or fiscal
policy, changes in trade policies, natural disasters, pandemics,
terrorism. Such
civil unrest, acts of violence, war or
developments can have unpredictable and destabilizing effects
and, because
financial markets are global and highly
interconnected, even local and regional events can have
widespread effects well beyond the countries in which they
occur. Any of these developments may adversely affect our
business or financial results.
If individual countries impose restrictions on cross-border
payments, trade, or other exchange or capital controls, or
change their currency (for example, if one or more countries
should leave the Eurozone), we could suffer losses from
enforced default by counterparties, be unable to access our own
assets, or be unable to effectively manage our risks.
Should the market experience significant volatility, a decrease
in business and client activity and market volumes could result,
which would adversely affect our ability to generate transaction
fees, commissions and margins, particularly in Global Wealth
Management and the Investment Bank, as we experienced in
the fourth quarter of 2018. A market downturn would likely
reduce the volume and valuation of assets that we manage on
behalf of clients, which would reduce recurring fee income that
is charged based on
in Global Wealth
Management and Asset Management and performance-based
fees in Asset Management. Such a downturn could also cause a
decline in the value of assets that we own and account for as
investments or trading positions. In addition, reduced market
liquidity or volatility may limit trading opportunities and may
therefore reduce transaction-based income and may also impede
our ability to manage risks.
invested assets
We could be materially affected if a crisis develops, regionally
or globally, as a result of disruptions in markets due to
macroeconomic or political developments, or as a result of the
failure of a major market participant. Over time, our strategic
plans have become more heavily dependent on our ability to
generate growth and revenue in emerging markets, including
China, causing us to be more exposed to the risks associated
with such markets.
Global Wealth Management derives revenues from all the
principal regions, but has a greater concentration in Asia than
many peers and a substantial presence in the US, unlike many
European peers. The Investment Bank’s business is more heavily
weighted to Europe and Asia than our peers, while its derivatives
business is more heavily weighted to structured products for
wealth management clients, in particular with European and
Asian underlyings. Our performance may therefore be more
affected by political, economic and market developments in
these regions and businesses, including the effects of the
COVID-19 outbreak, than some other financial service providers.
Our credit risk exposure to clients, trading counterparties and
other financial institutions would increase under adverse
economic conditions
Credit risk is an integral part of many of our activities, including
lending, underwriting and derivatives activities. Adverse
economic or market conditions may lead to impairments and
defaults on these credit exposures. Losses may be exacerbated
by declines in the value of collateral securing loans and other
exposures. In our prime brokerage, securities finance and
Lombard lending businesses, we extend substantial amounts of
credit against securities collateral, the value or liquidity of which
may decline rapidly. Our Swiss mortgage and corporate lending
portfolios are a large part of our overall lending. We are
therefore exposed to the risk of adverse economic developments
in Switzerland, including property valuations in the housing
market, the strength of the Swiss franc and its effect on Swiss
exports, prevailing negative interest rates applied by the Swiss
National Bank, economic conditions within the Eurozone or the
EU, and the evolution of agreements between Switzerland and
the EU or European Economic Area, which
represent
Switzerland’s largest export market. We have exposures related
to real estate in various countries, including a substantial Swiss
mortgage portfolio. Although we believe this portfolio is
prudently managed, we could nevertheless be exposed to losses
if a substantial deterioration in the Swiss real estate market were
to occur.
As we experienced in 2020, under the IFRS 9 expected credit
loss (ECL) regime, credit loss expenses may increase rapidly at
the onset of an economic downturn as a result of higher levels
of credit impairments (stage 3), as well as higher ECL from
stages 1 and 2. These increases may only gradually diminish
once the economic outlook improves. Substantial increases in
ECL could exceed expected loss for regulatory capital purposes
and adversely affect our common equity tier 1 (CET1) capital and
regulatory capital ratios.
Low and negative interest rates in Switzerland, the US and the
Eurozone and elsewhere could continue to negatively affect our
net interest income
The continuing low or negative interest rate environment,
particularly in Switzerland, the US and the Eurozone, may
further erode interest margins and adversely affect the net
interest income generated by the Personal & Corporate Banking
and Global Wealth Management businesses. The Swiss National
Bank permits Swiss banks to make deposits up to a threshold at
zero interest. Any reduction in or limitation on the use of this
exemption from the otherwise applicable negative interest rates
would exacerbate the effect of negative interest rates in
Switzerland on our business.
Low and negative interest rates may also affect customer
behavior and hence our overall balance sheet structure.
Mitigating actions that we have taken, or may take in the future,
such as the introduction of selective deposit fees or minimum
lending rates, have resulted and may further result in the loss of
customer deposits (a key source of funding for us), net new
money outflows and a declining market share in our Swiss
lending business.
Our shareholders’ equity and capital are also affected by
changes in interest rates. In particular, the calculation of our
Swiss pension plan’s net defined benefit assets and liabilities is
sensitive to the applied discount rate and to fluctuations in the
value of pension plan assets. Any further reduction in interest
rates may lower the discount rates and result in pension plan
deficits as a result of the long duration of corresponding
liabilities. This could lead to a corresponding reduction in our
equity and CET1 capital.
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Our strategy, business model and environment cause us to record additional provisions for the matter even when
we believe we have substantial defenses and expect to ultimately
achieve a more favorable outcome. This risk is illustrated by the
award of aggregate penalties and damages of EUR 4.5 billion by
the court of first instance in France, which we have appealed and
is scheduled to be retried in the Court of Appeal in March 2021.
Resolution of regulatory proceedings may require us to obtain
waivers of regulatory disqualifications to maintain certain
operations; may entitle regulatory authorities to limit, suspend or
terminate licenses and regulatory authorizations; and may permit
financial market utilities to limit, suspend or terminate our
participation in them. Failure to obtain such waivers, or any
limitation, suspension or termination of licenses, authorizations or
participations, could have material adverse consequences for us.
interest rates starkly
Our settlements with governmental authorities in connection
with foreign exchange, London Interbank Offered Rates (LIBOR)
and other benchmark
illustrate the
significantly increased level of financial and reputational risk now
associated with regulatory matters in major jurisdictions. In
connection with investigations related to LIBOR and other
benchmark rates and to foreign exchange and precious metals,
very large fines and disgorgement amounts were assessed
against us, and we were required to enter guilty pleas despite
our full cooperation with the authorities in the investigations,
and despite our receipt of conditional leniency or conditional
immunity from anti-trust authorities in a number of jurisdictions,
including the US and Switzerland.
Ever since our material losses arising from the 2007–2009
financial crisis, we have been subject to a very high level of
regulatory scrutiny and to certain regulatory measures that
constrain our strategic flexibility. While we believe we have
remediated the deficiencies that led to those losses, as well as to
the unauthorized trading incident announced in September
2011, the effects on our reputation, as well as on relationships
with regulatory authorities of the LIBOR-related settlements of
2012 and settlements with some regulators of matters related to
our foreign exchange and precious metals business, as well as
the extensive efforts required to implement new regulatory
expectations, have resulted in continued scrutiny.
We are in active dialog with regulators concerning the actions
we are taking to improve our operational risk management, risk
control, anti-money laundering, data management and other
frameworks, and otherwise
supervisory
expectations, but there can be no assurance that our efforts will
have the desired effects. As a result of this history, our level of
risk with respect to regulatory enforcement may be greater than
that of some of our peers.
to meet
seek
Our strategy, business model and environment | Risk factors
Our plans to ensure uninterrupted business dealings as the UK
withdraws from the EU may not be effective
To prepare our business for the UK withdrawal from the EU, in
2019, we completed a merger of UBS Limited, our UK-based
subsidiary, into UBS Europe SE, our Germany-headquartered
European subsidiary, which is under the direct supervision of the
European Central Bank. Our plans to ensure uninterrupted
business dealings now that the UK has withdrawn from the EU
may not be effective if the EU and the UK do not conclude
effective negotiations regarding the handling of the financial
sector before temporary equivalence decisions expire or significant
divergence in regulatory regimes emerges.
Currency fluctuation may have an adverse effect on our profits,
balance sheet and regulatory capital
We are subject to currency fluctuation risks. Although our
change from the Swiss franc to the US dollar as our functional
and presentation currency in 2018 reduces our exposure to
currency fluctuation risks with respect to the Swiss franc, a
substantial portion of our assets and liabilities are denominated
in currencies other than the US dollar. Additionally, in order to
hedge our CET1 capital ratio, our CET1 capital must have
foreign currency exposure, which leads to currency sensitivity. As
a consequence, it is not possible to simultaneously fully hedge
both the amount of capital and the capital ratio. Accordingly,
changes in foreign exchange rates may continue to adversely
affect our profits, balance sheet and capital, leverage and
liquidity coverage ratios.
Regulatory and legal risks
Material legal and regulatory risks arise in the conduct of our
business
As a global financial services firm operating in more than 50
countries, we are subject to many different legal, tax and
regulatory regimes, including extensive regulatory oversight, and
are exposed to significant liability risk. We are subject to a large
number of claims, disputes, legal proceedings and government
investigations, and we expect that our ongoing business activities
will continue to give rise to such matters in the future. The extent
of our financial exposure to these and other matters is material
and could substantially exceed the level of provisions that we have
established. We are not able to predict the financial and non-
financial consequences these matters may have when resolved.
We may be subject to adverse preliminary determinations or
court decisions that may negatively affect public perception and
our reputation, result in prudential actions from regulators, and
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Our strategy, business model and environment | Risk factors
Our plans to ensure uninterrupted business dealings as the UK
cause us to record additional provisions for the matter even when
withdraws from the EU may not be effective
we believe we have substantial defenses and expect to ultimately
To prepare our business for the UK withdrawal from the EU, in
achieve a more favorable outcome. This risk is illustrated by the
2019, we completed a merger of UBS Limited, our UK-based
award of aggregate penalties and damages of EUR 4.5 billion by
subsidiary, into UBS Europe SE, our Germany-headquartered
the court of first instance in France, which we have appealed and
European subsidiary, which is under the direct supervision of the
is scheduled to be retried in the Court of Appeal in March 2021.
European Central Bank. Our plans to ensure uninterrupted
Resolution of regulatory proceedings may require us to obtain
business dealings now that the UK has withdrawn from the EU
waivers of regulatory disqualifications to maintain certain
may not be effective if the EU and the UK do not conclude
operations; may entitle regulatory authorities to limit, suspend or
effective negotiations regarding the handling of the financial
terminate licenses and regulatory authorizations; and may permit
sector before temporary equivalence decisions expire or significant
financial market utilities to limit, suspend or terminate our
divergence in regulatory regimes emerges.
participation in them. Failure to obtain such waivers, or any
limitation, suspension or termination of licenses, authorizations or
Currency fluctuation may have an adverse effect on our profits,
participations, could have material adverse consequences for us.
balance sheet and regulatory capital
Our settlements with governmental authorities in connection
We are subject to currency fluctuation risks. Although our
with foreign exchange, London Interbank Offered Rates (LIBOR)
change from the Swiss franc to the US dollar as our functional
and other benchmark
interest rates starkly
illustrate the
and presentation currency in 2018 reduces our exposure to
significantly increased level of financial and reputational risk now
currency fluctuation risks with respect to the Swiss franc, a
associated with regulatory matters in major jurisdictions. In
substantial portion of our assets and liabilities are denominated
connection with investigations related to LIBOR and other
in currencies other than the US dollar. Additionally, in order to
benchmark rates and to foreign exchange and precious metals,
hedge our CET1 capital ratio, our CET1 capital must have
very large fines and disgorgement amounts were assessed
foreign currency exposure, which leads to currency sensitivity. As
against us, and we were required to enter guilty pleas despite
a consequence, it is not possible to simultaneously fully hedge
our full cooperation with the authorities in the investigations,
both the amount of capital and the capital ratio. Accordingly,
and despite our receipt of conditional leniency or conditional
changes in foreign exchange rates may continue to adversely
immunity from anti-trust authorities in a number of jurisdictions,
affect our profits, balance sheet and capital, leverage and
including the US and Switzerland.
liquidity coverage ratios.
Regulatory and legal risks
Ever since our material losses arising from the 2007–2009
financial crisis, we have been subject to a very high level of
regulatory scrutiny and to certain regulatory measures that
constrain our strategic flexibility. While we believe we have
Material legal and regulatory risks arise in the conduct of our
remediated the deficiencies that led to those losses, as well as to
business
the unauthorized trading incident announced in September
As a global financial services firm operating in more than 50
2011, the effects on our reputation, as well as on relationships
countries, we are subject to many different legal, tax and
with regulatory authorities of the LIBOR-related settlements of
regulatory regimes, including extensive regulatory oversight, and
2012 and settlements with some regulators of matters related to
are exposed to significant liability risk. We are subject to a large
our foreign exchange and precious metals business, as well as
number of claims, disputes, legal proceedings and government
the extensive efforts required to implement new regulatory
investigations, and we expect that our ongoing business activities
expectations, have resulted in continued scrutiny.
will continue to give rise to such matters in the future. The extent
We are in active dialog with regulators concerning the actions
of our financial exposure to these and other matters is material
we are taking to improve our operational risk management, risk
and could substantially exceed the level of provisions that we have
control, anti-money laundering, data management and other
established. We are not able to predict the financial and non-
frameworks, and otherwise
seek
to meet
supervisory
financial consequences these matters may have when resolved.
expectations, but there can be no assurance that our efforts will
We may be subject to adverse preliminary determinations or
have the desired effects. As a result of this history, our level of
court decisions that may negatively affect public perception and
risk with respect to regulatory enforcement may be greater than
our reputation, result in prudential actions from regulators, and
that of some of our peers.
Our financial results may be negatively affected by changes to
assumptions and valuations, as well as changes to accounting
standards
We prepare our consolidated financial statements in accordance
with International Financial Reporting Standards (IFRS). The
application of these accounting standards requires the use of
judgment based on estimates and assumptions that may involve
significant uncertainty at the time they are made. This is the
case, for example, with respect to the measurement of fair value
of financial instruments, the recognition of deferred tax assets,
the assessment of the impairment of goodwill, expected credit
losses and estimation of provisions for contingencies, including
litigation, regulatory and similar matters. Such judgments,
including the underlying estimates and assumptions, which
encompass historical experience, expectations of the future and
other factors, are regularly evaluated to determine their
continuing relevance based on current conditions. Using
different assumptions could cause the reported results to differ.
Changes in assumptions, or failure to make the changes
necessary to reflect evolving market conditions, may have a
significant effect on the financial statements in the periods when
changes occur. Estimates of provisions for contingencies may be
subject to a wide range of potential outcomes and significant
uncertainty. For example, the broad range of potential outcomes
in UBS AG’s proceeding in France increases the uncertainty
associated with assessing the appropriate provision. If the
estimates and assumptions in future periods deviate from the
current outlook, UBS AG’s financial results may also be
negatively affected.
Changes to IFRS or interpretations thereof may cause future
reported results and financial position to differ from current
expectations, or historical results to differ from those previously
reported due to the adoption of accounting standards on a
retrospective basis. Such changes may also affect our regulatory
capital and ratios. For example, the introduction of the expected
credit loss (ECL) framework under IFRS 9 in 2018 fundamentally
changed how credit risk arising from loans, loan commitments,
guarantees and certain revocable facilities is accounted for.
Under the regime, credit loss expenses may increase rapidly at
the onset of an economic downturn as a result of higher levels
of credit impairments (stage 3), as well as higher ECL from
stages 1 and 2, only gradually diminishing once the economic
outlook improves. As we observed in the first and second
quarters of 2020, this effect may be more pronounced in a
deteriorating economic environment. Substantial increases in
ECL could exceed expected loss for regulatory capital purposes
and adversely affect our CET1 capital and regulatory capital
ratios.
If we experience financial difficulties, FINMA has the power to
open restructuring or liquidation proceedings or impose
protective measures in relation to UBS Group AG, UBS AG or
UBS Switzerland AG, and such proceedings or measures may
have a material adverse effect on our shareholders and creditors
Under the Swiss Banking Act, FINMA is able to exercise broad
statutory powers with respect to Swiss banks and Swiss parent
companies of financial groups, such as UBS Group AG, UBS AG
and UBS Switzerland AG, if there is justified concern that the
entity is over-indebted, has serious liquidity problems or, after
the expiration of any relevant deadline, no longer fulfills capital
adequacy requirements. Such powers include ordering protective
measures, instituting restructuring proceedings (and exercising
any Swiss resolution powers in connection therewith), and
instituting liquidation proceedings, all of which may have a
material adverse effect on shareholders and creditors or may
prevent UBS Group AG, UBS AG or UBS Switzerland AG from
paying dividends or making payments on debt obligations.
UBS would have limited ability to challenge any such
protective measures, and creditors and shareholders would have
no right under Swiss law or in Swiss courts to reject them, seek
their suspension, or challenge their
including
measures that require or result in the deferment of payments.
imposition,
If restructuring proceedings are opened with respect to UBS
Group AG, UBS AG or UBS Switzerland AG, the resolution
powers that FINMA may exercise include the power to:
(i) transfer all or some of the assets, debt and other liabilities,
and contracts of the entity subject to proceedings to another
entity; (ii) stay for a maximum of two business days (a) the
termination of, or the exercise of rights to terminate, netting
rights, (b) rights to enforce or dispose of certain types of
collateral or (c) rights to transfer claims, liabilities or certain
collateral, under contracts to which the entity subject to
proceedings is a party; and / or (iii) partially or fully write down
the equity capital and, if such equity capital is fully written
down, convert into equity or write down the capital and other
to proceedings.
debt
Shareholders and creditors would have no right to reject, or to
seek the suspension of, any restructuring plan pursuant to which
such resolution powers are exercised. They would have only
limited rights to challenge any decision to exercise resolution
powers or to have that decision reviewed by a judicial or
administrative process or otherwise.
the entity subject
instruments of
to
the
restructuring proceedings,
Upon full or partial write-down of the equity and debt of the
entity subject
relevant
shareholders and creditors would receive no payment in respect
of the equity and debt that is written down, the write-down
would be permanent, and the investors would not, at such time
or at any time thereafter, receive any shares or other
participation rights, or be entitled to any write-up or any other
compensation in the event of a potential recovery of the debtor.
If FINMA orders the conversion of debt of the entity subject to
restructuring proceedings into equity, the securities received by
the investors may be worth significantly less than the original
debt and may have a significantly different risk profile, and such
conversion would also dilute the ownership of existing
shareholders. In addition, creditors receiving equity would be
effectively subordinated to all creditors of the restructured entity
in the event of a subsequent winding up, liquidation or
dissolution of the restructured entity, which would increase the
risk that investors would lose all or some of their investment.
FINMA has significant discretion in the exercise of its powers
in connection with restructuring proceedings. Furthermore,
certain categories of debt obligations, such as certain types of
deposits, are subject to preferential treatment. As a result,
holders of obligations of an entity subject to a Swiss
restructuring proceeding may have their obligations written
down or converted into equity even though obligations ranking
on par with or junior to such obligations are not written down
or converted.
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Our strategy, business model and environment operate, we are required to prepare credible recovery and
resolution plans detailing the measures that would be taken to
recover in a significant adverse event or in the event of winding
down the Group or the operations in a host country through
resolution or insolvency proceedings. If a recovery or resolution
plan that we produce is determined by the relevant authority to
be inadequate or not credible, relevant regulation may permit
the authority to place limitations on the scope or size of our
business in that jurisdiction, or oblige us to hold higher amounts
of capital or liquidity or to change our legal structure or business
in order to remove the relevant impediments to resolution.
Capital and prudential standards: As an internationally active
Swiss systemically relevant bank (an SRB), we are subject to
capital and total loss-absorbing capacity (TLAC) requirements
that are among the most stringent in the world. Moreover,
many of our subsidiaries must comply with minimum capital,
liquidity and similar requirements and, as a result, UBS Group
AG and UBS AG have contributed a significant portion of their
capital and provide substantial liquidity to these subsidiaries.
These funds are available to meet funding and collateral needs
in the relevant entities, but are generally not readily available for
use by the Group as a whole.
the effective date
We expect our risk-weighted assets (RWA) to further increase
as
standards
promulgated by the Basel Committee on Banking Supervision
(the BCBS) draws nearer.
for additional capital
Increases in capital and liquidity standards could significantly
curtail our ability to pursue strategic opportunities and to
distribute risk.
Market regulation and fiduciary standards: Our wealth and
asset management businesses operate in an environment of
increasing regulatory scrutiny and changing standards with
respect to fiduciary and other standards of care and the focus on
mitigating or eliminating conflicts of
interest between a
manager or advisor and the client, which require effective
implementation across the global systems and processes of
investment managers and other
industry participants. For
example, we have made material changes to our business
processes, policies and the terms on which we interact with
these clients in order to comply with SEC Regulation Best
Interest, which is intended to enhance and clarify the duties of
brokers and investment advisers to retail customers, the Volcker
Rule, which limits our ability to engage in proprietary trading, as
well as changes in European and Swiss market conduct
regulation. Future changes in the regulation of our duties to
customers may require us to make further changes to our
businesses, which would result in additional expense and may
adversely affect our business. We may also become subject to
other similar regulations substantively limiting the types of
activities in which we may engage or the way we conduct our
operations.
Our strategy, business model and environment | Risk factors
Substantial changes in regulation may adversely affect our
businesses and our ability to execute our strategic plans
We are subject to significant new regulatory requirements,
including recovery and resolution planning, changes in capital
and prudential standards, changes in taxation regimes as a result
of changes in governmental administrations, as well as new and
revised market standards and fiduciary duties. Notwithstanding
attempts by regulators to align their efforts, the measures
adopted or proposed for banking regulation differ significantly
across the major jurisdictions, making it increasingly difficult to
manage a global institution. In addition, Swiss regulatory
changes with regard to such matters as capital and liquidity have
often proceeded more quickly than those in other major
for major
jurisdictions, and Switzerland’s
international banks are among the strictest of the major financial
centers. This could put Swiss banks, such as UBS, at a
disadvantage when competing with peer financial institutions
subject to more lenient regulation or with unregulated non-bank
competitors.
requirements
Our implementation of additional regulatory requirements
and changes in supervisory standards, as well as our compliance
with existing
laws and regulations, continue to receive
heightened scrutiny from supervisors. If we do not meet
supervisory expectations in relation to these or other matters, or
if additional supervisory or regulatory issues arise, we would
likely be subject to further regulatory scrutiny as well as
measures that may further constrain our strategic flexibility.
into subsidiaries to
Resolvability and resolution and recovery planning: We have
moved significant operations
improve
resolvability and meet other regulatory requirements, and this
has resulted in substantial implementation costs, increased our
capital and funding costs and reduced operational flexibility. For
example, we have transferred all of our US subsidiaries under a
US intermediate holding company to meet US regulatory
requirements, and have
the
operations of Personal & Corporate Banking and Global Wealth
Management booked in Switzerland to UBS Switzerland AG to
improve resolvability.
transferred substantially all
These changes require significant time and resources to
implement, and create operational, capital, liquidity, funding
and tax inefficiencies. Our operations in subsidiaries are subject
to local capital, liquidity, stable funding, capital planning and
stress testing requirements. These requirements have resulted in
in affected
increased capital and
subsidiaries, which limit our operational flexibility and negatively
affect our ability to benefit from synergies between business
units and to distribute earnings to the Group.
requirements
liquidity
Under the Swiss too-big-to-fail (TBTF) framework, we are
required to put in place viable emergency plans to preserve the
operation of systemically important functions in the event of a
failure. Moreover, under this framework and similar regulations
in the US, the UK, the EU and other jurisdictions in which we
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Our strategy, business model and environment | Risk factors
Substantial changes in regulation may adversely affect our
operate, we are required to prepare credible recovery and
businesses and our ability to execute our strategic plans
resolution plans detailing the measures that would be taken to
We are subject to significant new regulatory requirements,
recover in a significant adverse event or in the event of winding
including recovery and resolution planning, changes in capital
down the Group or the operations in a host country through
and prudential standards, changes in taxation regimes as a result
resolution or insolvency proceedings. If a recovery or resolution
of changes in governmental administrations, as well as new and
plan that we produce is determined by the relevant authority to
revised market standards and fiduciary duties. Notwithstanding
be inadequate or not credible, relevant regulation may permit
attempts by regulators to align their efforts, the measures
the authority to place limitations on the scope or size of our
adopted or proposed for banking regulation differ significantly
business in that jurisdiction, or oblige us to hold higher amounts
across the major jurisdictions, making it increasingly difficult to
of capital or liquidity or to change our legal structure or business
manage a global institution. In addition, Swiss regulatory
in order to remove the relevant impediments to resolution.
changes with regard to such matters as capital and liquidity have
Capital and prudential standards: As an internationally active
often proceeded more quickly than those in other major
Swiss systemically relevant bank (an SRB), we are subject to
jurisdictions, and Switzerland’s
requirements
for major
capital and total loss-absorbing capacity (TLAC) requirements
international banks are among the strictest of the major financial
that are among the most stringent in the world. Moreover,
centers. This could put Swiss banks, such as UBS, at a
many of our subsidiaries must comply with minimum capital,
disadvantage when competing with peer financial institutions
liquidity and similar requirements and, as a result, UBS Group
subject to more lenient regulation or with unregulated non-bank
AG and UBS AG have contributed a significant portion of their
competitors.
capital and provide substantial liquidity to these subsidiaries.
Our implementation of additional regulatory requirements
These funds are available to meet funding and collateral needs
and changes in supervisory standards, as well as our compliance
in the relevant entities, but are generally not readily available for
with existing
laws and regulations, continue to receive
use by the Group as a whole.
heightened scrutiny from supervisors. If we do not meet
We expect our risk-weighted assets (RWA) to further increase
supervisory expectations in relation to these or other matters, or
as
the effective date
for additional capital
standards
if additional supervisory or regulatory issues arise, we would
promulgated by the Basel Committee on Banking Supervision
likely be subject to further regulatory scrutiny as well as
(the BCBS) draws nearer.
measures that may further constrain our strategic flexibility.
Increases in capital and liquidity standards could significantly
Resolvability and resolution and recovery planning: We have
curtail our ability to pursue strategic opportunities and to
moved significant operations
into subsidiaries to
improve
distribute risk.
resolvability and meet other regulatory requirements, and this
Market regulation and fiduciary standards: Our wealth and
has resulted in substantial implementation costs, increased our
asset management businesses operate in an environment of
capital and funding costs and reduced operational flexibility. For
increasing regulatory scrutiny and changing standards with
example, we have transferred all of our US subsidiaries under a
respect to fiduciary and other standards of care and the focus on
US intermediate holding company to meet US regulatory
mitigating or eliminating conflicts of
interest between a
requirements, and have
transferred substantially all
the
manager or advisor and the client, which require effective
operations of Personal & Corporate Banking and Global Wealth
implementation across the global systems and processes of
Management booked in Switzerland to UBS Switzerland AG to
investment managers and other
industry participants. For
improve resolvability.
example, we have made material changes to our business
These changes require significant time and resources to
processes, policies and the terms on which we interact with
implement, and create operational, capital, liquidity, funding
these clients in order to comply with SEC Regulation Best
and tax inefficiencies. Our operations in subsidiaries are subject
Interest, which is intended to enhance and clarify the duties of
to local capital, liquidity, stable funding, capital planning and
brokers and investment advisers to retail customers, the Volcker
stress testing requirements. These requirements have resulted in
Rule, which limits our ability to engage in proprietary trading, as
increased capital and
liquidity
requirements
in affected
well as changes in European and Swiss market conduct
subsidiaries, which limit our operational flexibility and negatively
regulation. Future changes in the regulation of our duties to
affect our ability to benefit from synergies between business
customers may require us to make further changes to our
units and to distribute earnings to the Group.
businesses, which would result in additional expense and may
Under the Swiss too-big-to-fail (TBTF) framework, we are
adversely affect our business. We may also become subject to
required to put in place viable emergency plans to preserve the
other similar regulations substantively limiting the types of
operation of systemically important functions in the event of a
activities in which we may engage or the way we conduct our
failure. Moreover, under this framework and similar regulations
operations.
in the US, the UK, the EU and other jurisdictions in which we
Some of the regulations applicable to UBS AG as a registered
swap dealer with the Commodity Futures Trading Commission
(the CFTC) in the US, and certain regulations that will be
applicable when UBS AG registers as a security-based swap
dealer with the US Securities and Exchange Commission (the
SEC), apply to UBS AG globally, including those relating to swap
data reporting, record-keeping, compliance and supervision. As
a result, in some cases, US rules duplicate or may conflict with
legal requirements applicable to us elsewhere, including in
Switzerland, and may place us at a competitive disadvantage to
firms that are not required to register in the US with the SEC or
CFTC.
In many instances, we provide services on a cross-border
basis, and we are therefore sensitive to barriers restricting
market access for third-country firms. In particular, efforts in the
EU to harmonize the regime for third-country firms to access the
European market may have the effect of creating new barriers
that adversely affect our ability to conduct business in these
jurisdictions from Switzerland.
In addition, a number of
jurisdictions are increasingly regulating cross-border activities
based on determinations of equivalence of home country
regulation, substituted compliance or similar principles of
comity. A negative determination with respect to Swiss
equivalence could limit our access to the market in those
jurisdictions and may negatively influence our ability to act as a
global firm. For example, the EU declined to extend its
equivalence determination for Swiss exchanges, which lapsed as
of 30 June 2019.
investment and fiscal amnesty programs,
UBS experienced cross-border outflows over a number of
years as a result of heightened focus by fiscal authorities on
in
cross-border
anticipation of the implementation in Switzerland of the global
automatic exchange of tax information, and as a result of the
measures UBS has implemented in response to these changes.
Further changes in local tax laws or regulations and their
tax
cross-border
implementation of
enforcement,
information exchange
tax amnesty or
regimes, national
enforcement programs or similar actions may affect our clients’
ability or willingness to do business with us and could result in
additional cross-border outflows.
the
Capital strength is a key component of our business model
Capital strength enables us to grow our businesses, and absorb
increases in regulatory and capital requirements. It reassures our
clients and stakeholders, allows us to maintain our capital return
policy and contributes to our credit ratings. Our capital ratios are
driven primarily by RWA, the leverage ratio denominator and
eligible capital, all of which may fluctuate based on a number of
factors, some of which are outside our control. Our ability to
maintain our capital ratios is subject to numerous risks, including
the financial results of our businesses, the effect of changes to
capital standards, methodologies and interpretations that may
adversely affect the calculation of our CET1 ratios, the
imposition of risk add-ons or capital buffers, and the application
of additional capital, liquidity and similar requirements to
subsidiaries. The results of our businesses may be adversely
affected by events arising from other factors described herein. In
some cases, such as litigation and regulatory risk and operational
risk events, losses may be sudden and large. These risks could
reduce the amount of capital available for return to shareholders
and hinder our ability to achieve our capital returns target of a
progressive cash dividend coupled with a share repurchase
program.
Our eligible capital may be reduced by losses recognized
within net profit or other comprehensive income. Eligible capital
may also be reduced for other reasons, including acquisitions
which change the level of goodwill, changes in temporary
differences related to deferred tax assets included in capital,
adverse currency movements affecting the value of equity,
prudential adjustments that may be required due to the
valuation uncertainty associated with certain types of positions,
and changes in the value of certain pension fund assets and
liabilities or in the interest rate and other assumptions used to
calculate the changes in our net defined benefit obligation
recognized in other comprehensive income.
in
the economic environment or
RWA are driven by our business activities, by changes in the risk
profile of our exposures, by changes in our foreign currency
exposures and foreign exchange rates, and by regulation. For
instance, substantial market volatility, a widening of credit
spreads, adverse currency movements, increased counterparty risk,
deterioration
increased
operational risk could result in an increase in RWA. We have
significantly reduced our market risk and credit risk RWA in recent
years. However, increases in operational risk RWA, particularly
those arising from litigation, regulatory and similar matters, and
regulatory changes in the calculation of RWA, and regulatory add-
ons to RWA, have offset a substantial portion of this reduction.
Changes in the calculation of RWA, the imposition of additional
supplemental RWA charges or multipliers applied to certain
exposures and other methodology changes, as well as the
implementation of the capital standards promulgated by the Basel
Committee on Banking Supervision, which will take effect in
2023, are expected to increase our RWA.
The leverage ratio is a balance sheet-driven measure and
limits balance sheet-intensive activities, such as
therefore
lending, more than activities that are less balance sheet
intensive, and it may constrain our business even if we satisfy
other risk-based capital requirements. Our
leverage ratio
denominator is driven by, among other things, the level of client
activity, including deposits and loans, foreign exchange rates,
interest rates and other market factors. Many of these factors
are wholly or partly outside of our control.
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Our strategy, business model and environment Our strategy, business model and environment | Risk factors
The effect of taxes on our financial results is significantly
influenced by tax law changes and reassessments of our
deferred tax assets
Our effective tax rate is highly sensitive to our performance, our
expectation of future profitability and any potential increases or
decreases in statutory tax rates, such as the potential increases in
corporate tax rates under discussion in the United States.
Further, based on prior years’ tax losses, we have recognized
deferred tax assets (DTAs) reflecting the probable recoverable
level based on future taxable profit as informed by our business
plans. If our performance is expected to produce diminished
taxable profit in future years, particularly in the US, we may be
required to write down all or a portion of the currently
recognized DTAs through the income statement in excess of
anticipated amortization. This would have the effect of
increasing our effective tax rate in the year in which any write-
downs are taken. Conversely, if we expect the performance of
entities in which we have unrecognized tax losses to improve,
particularly in the US or the UK, we could potentially recognize
additional DTAs. The effect of doing so would be to reduce our
effective tax rate in years in which additional DTAs are
recognized and to increase our effective tax rate in future years.
Our effective tax rate is also sensitive to any future reductions in
statutory tax rates, particularly in the US, which would cause the
expected future tax benefit from items such as tax loss carry-
forwards in the affected locations to diminish in value. This, in
turn, would cause a write-down of the associated DTAs. For
example, the reduction in the US federal corporate tax rate to
21% from 35% introduced by the US Tax Cuts and Jobs Act
resulted in a USD 2.9 billion net write-down in the Group’s DTAs
in the fourth quarter of 2017.
We generally revalue our DTAs in the fourth quarter of the
financial year based on a reassessment of future profitability
taking into account our updated business plans. We consider the
performance of our businesses and the accuracy of historical
in evaluating the
forecasts, tax rates and other factors
recoverability of our DTAs, including the remaining tax loss
carry-forward period and our assessment of expected future
taxable profits over the
life of DTAs. Estimating future
profitability is inherently subjective and is particularly sensitive to
future economic, market and other conditions, which are
difficult to predict.
Our results in past years have demonstrated that changes in
the recognition of DTAs can have a very significant effect on our
reported results. Any future change in the manner in which UBS
remeasures DTAs could affect UBS’s effective
rate,
particularly in the year in which the change is made.
tax
Our full-year effective tax rate could change if aggregate tax
expenses in respect of profits from branches and subsidiaries
without loss coverage differ from what is expected, or if
branches and subsidiaries generate tax losses that we cannot
benefit from through the income statement. In particular, losses
at entities or branches that cannot offset for tax purposes
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taxable profits in other group entities, and which do not result in
additional DTA recognition, may increase our effective tax rate.
In addition, tax laws or the tax authorities in countries where we
have undertaken legal structure changes may cause entities to
be subject to taxation as permanent establishments or may
prevent the transfer of tax losses incurred in one legal entity to
newly organized or reorganized subsidiaries or affiliates or may
impose limitations on the utilization of tax losses that relate to
businesses formerly conducted by the transferor. Were this to
occur in situations where there were also limited planning
opportunities to utilize the tax losses in the originating entity,
the DTAs associated with such tax losses may be required to be
written down through the income statement.
Changes in tax law may materially affect our effective tax
rate, and, in some cases, may substantially affect the profitability
of certain activities. In addition, statutory and regulatory
changes, as well as changes to the way in which courts and tax
authorities interpret tax laws, including assertions that we are
required to pay taxes in a jurisdiction as a result of activities
connected
jurisdiction constituting a permanent
establishment or similar theory, and changes in our assessment
of uncertain tax positions, could cause the amount of taxes we
ultimately pay to materially differ from the amount accrued.
that
to
Discontinuance of, or changes to, benchmark rates may require
adjustments to our agreements with clients and other market
participants, as well as to our systems and processes
Since April 2013, the UK Financial Conduct Authority (the FCA)
has regulated LIBOR, and regulators in other jurisdictions have
increased oversight of other interbank offered rates (IBORs) and
similar benchmark rates.
The UK Prudential Regulation Authority (the PRA) has
confirmed the end-of-2021 deadline for transitioning away from
LIBOR for most currencies. The ICE Benchmark Administration
(IBA), the FCA-regulated and authorized administrator of LIBOR,
is consulting on the timing of the cessation of USD LIBOR. IBA
expects that one-week and two-month USD LIBOR settings will
cease by the end of 2021, and that the remaining USD LIBOR
settings will cease by the end of June 2023.
We have a substantial number of contracts linked to IBORs. In
some cases, contracts may contain provisions intended to
provide a fallback interest rate in the event of a brief
unavailability of the relevant IBOR. These provisions may not be
effective or may produce arbitrary results in the event of a
permanent cessation of the relevant IBOR. While efforts to
transition outstanding new
transactions, and historical
transactions, as well as operational systems, from IBORs to
alternative reference rates
(ARRs) have made substantial
progress, including through industry-wide protocols such as the
International Swaps and Derivatives Association (ISDA) IBOR
Fallbacks Supplement and IBOR Fallbacks Protocol, there remain
substantial volumes of transactions that require modification to
effectively transition to ARRs.
Our strategy, business model and environment | Risk factors
influenced by tax law changes and reassessments of our
additional DTA recognition, may increase our effective tax rate.
deferred tax assets
In addition, tax laws or the tax authorities in countries where we
Our effective tax rate is highly sensitive to our performance, our
have undertaken legal structure changes may cause entities to
expectation of future profitability and any potential increases or
be subject to taxation as permanent establishments or may
decreases in statutory tax rates, such as the potential increases in
prevent the transfer of tax losses incurred in one legal entity to
corporate tax rates under discussion in the United States.
newly organized or reorganized subsidiaries or affiliates or may
Further, based on prior years’ tax losses, we have recognized
impose limitations on the utilization of tax losses that relate to
deferred tax assets (DTAs) reflecting the probable recoverable
businesses formerly conducted by the transferor. Were this to
level based on future taxable profit as informed by our business
occur in situations where there were also limited planning
plans. If our performance is expected to produce diminished
opportunities to utilize the tax losses in the originating entity,
taxable profit in future years, particularly in the US, we may be
the DTAs associated with such tax losses may be required to be
required to write down all or a portion of the currently
written down through the income statement.
recognized DTAs through the income statement in excess of
Changes in tax law may materially affect our effective tax
anticipated amortization. This would have the effect of
rate, and, in some cases, may substantially affect the profitability
increasing our effective tax rate in the year in which any write-
of certain activities. In addition, statutory and regulatory
downs are taken. Conversely, if we expect the performance of
changes, as well as changes to the way in which courts and tax
entities in which we have unrecognized tax losses to improve,
authorities interpret tax laws, including assertions that we are
particularly in the US or the UK, we could potentially recognize
required to pay taxes in a jurisdiction as a result of activities
additional DTAs. The effect of doing so would be to reduce our
connected
to
that
jurisdiction constituting a permanent
effective tax rate in years in which additional DTAs are
establishment or similar theory, and changes in our assessment
recognized and to increase our effective tax rate in future years.
of uncertain tax positions, could cause the amount of taxes we
Our effective tax rate is also sensitive to any future reductions in
ultimately pay to materially differ from the amount accrued.
statutory tax rates, particularly in the US, which would cause the
expected future tax benefit from items such as tax loss carry-
Discontinuance of, or changes to, benchmark rates may require
forwards in the affected locations to diminish in value. This, in
adjustments to our agreements with clients and other market
turn, would cause a write-down of the associated DTAs. For
participants, as well as to our systems and processes
example, the reduction in the US federal corporate tax rate to
Since April 2013, the UK Financial Conduct Authority (the FCA)
21% from 35% introduced by the US Tax Cuts and Jobs Act
has regulated LIBOR, and regulators in other jurisdictions have
resulted in a USD 2.9 billion net write-down in the Group’s DTAs
increased oversight of other interbank offered rates (IBORs) and
in the fourth quarter of 2017.
similar benchmark rates.
We generally revalue our DTAs in the fourth quarter of the
The UK Prudential Regulation Authority (the PRA) has
financial year based on a reassessment of future profitability
confirmed the end-of-2021 deadline for transitioning away from
taking into account our updated business plans. We consider the
LIBOR for most currencies. The ICE Benchmark Administration
performance of our businesses and the accuracy of historical
(IBA), the FCA-regulated and authorized administrator of LIBOR,
forecasts, tax rates and other factors
in evaluating the
is consulting on the timing of the cessation of USD LIBOR. IBA
recoverability of our DTAs, including the remaining tax loss
expects that one-week and two-month USD LIBOR settings will
carry-forward period and our assessment of expected future
cease by the end of 2021, and that the remaining USD LIBOR
taxable profits over the
life of DTAs. Estimating future
settings will cease by the end of June 2023.
profitability is inherently subjective and is particularly sensitive to
We have a substantial number of contracts linked to IBORs. In
future economic, market and other conditions, which are
some cases, contracts may contain provisions intended to
difficult to predict.
provide a fallback interest rate in the event of a brief
Our results in past years have demonstrated that changes in
unavailability of the relevant IBOR. These provisions may not be
the recognition of DTAs can have a very significant effect on our
effective or may produce arbitrary results in the event of a
reported results. Any future change in the manner in which UBS
permanent cessation of the relevant IBOR. While efforts to
remeasures DTAs could affect UBS’s effective
tax
rate,
transition outstanding new
transactions, and historical
particularly in the year in which the change is made.
transactions, as well as operational systems, from IBORs to
Our full-year effective tax rate could change if aggregate tax
alternative reference rates
(ARRs) have made substantial
expenses in respect of profits from branches and subsidiaries
progress, including through industry-wide protocols such as the
without loss coverage differ from what is expected, or if
International Swaps and Derivatives Association (ISDA) IBOR
branches and subsidiaries generate tax losses that we cannot
Fallbacks Supplement and IBOR Fallbacks Protocol, there remain
benefit from through the income statement. In particular, losses
substantial volumes of transactions that require modification to
at entities or branches that cannot offset for tax purposes
effectively transition to ARRs.
The effect of taxes on our financial results is significantly
taxable profits in other group entities, and which do not result in
Strategy, management and operational risks
We may not be successful in the ongoing execution of our
strategic plans
We have transformed UBS to focus on our Global Wealth
Management business and our universal bank in Switzerland,
complemented by Asset Management and a significantly smaller
and more capital-efficient
Investment Bank; we have
substantially reduced the risk-weighted assets and leverage ratio
denominator usage in Group Functions; and made significant
cost reductions. Risk remains that going forward we may not
succeed in executing our strategy or achieving our performance
targets, or may be delayed in doing so. Macroeconomic
conditions, geopolitical uncertainty, changes to regulatory
requirements and the continuing costs of meeting these
requirements have prompted us to adapt our targets and
ambitions in the past and we may need to do so again in the
future.
To achieve our strategic plans, we expect to continue to make
significant expenditures on technology and infrastructure to
improve client experience, improve and further enable digital
offerings and increase efficiency. Our investments in new
technology may not fully achieve our objectives or improve our
ability to attract and retain customers. In addition, we face
competition in providing digitally enabled offerings from both
existing competitors and new financial service providers in
various portions of the value chain. For example, technological
advances and the growth of e-commerce have made it possible
for e-commerce firms and other companies to offer products
and services that were traditionally offered only by banks. These
advances have also allowed financial institutions and other
companies
financial solutions,
including electronic securities trading, payments processing and
online automated algorithmic-based investment advice at a low
cost to their customers. We may have to lower our prices, or risk
losing customers as a result. Our ability to develop and
implement competitive digitally enabled offerings and processes
will be an important factor in our ability to compete.
to provide digitally based
As part of our strategy, we seek to improve our operating
efficiency, in part by controlling our costs. We may not be able
to
identify feasible cost reduction opportunities that are
consistent with our business goals and cost reductions may be
realized later or may be smaller than we anticipate. Higher
temporary and permanent regulatory costs and higher business
demand than anticipated have partly offset cost reductions and
delayed the achievement of our past cost reduction targets, and
we could continue to be challenged in the execution of our
ongoing efforts to improve operating efficiency.
Changes in our workforce as a result of outsourcing,
nearshoring, offshoring, insourcing or staff reductions may
introduce new operational risks that, if not effectively addressed,
could affect our ability to achieve cost and other benefits from
such changes, or could result in operational losses.
As we implement effectiveness and efficiency programs, we
may also experience unintended consequences, such as the
unintended loss or degradation of capabilities that we need in
order to maintain our competitive position, achieve our targeted
returns or meet existing or new regulatory requirements and
expectations.
third parties,
Operational risks affect our business
Our businesses depend on our ability to process a large number
of transactions, many of which are complex, across multiple and
diverse markets
in different currencies, to comply with
requirements of many different legal and regulatory regimes to
which we are subject and to prevent, or promptly detect and
stop, unauthorized, fictitious or fraudulent transactions. We also
rely on access to, and on the functioning of, systems maintained
by
including clearing systems, exchanges,
information processors and central counterparties. Any failure of
our or third-party systems could have an adverse effect on us.
Our operational risk management and control systems and
processes are designed to help ensure that the risks associated
with our activities – including those arising from process error,
failed execution, misconduct, unauthorized trading, fraud,
system failures, financial crime, cyberattacks, breaches of
information security, inadequate or ineffective access controls
and failure of security and physical protection – are appropriately
controlled. If our internal controls fail or prove ineffective in
identifying and
risks, we could suffer
operational failures that might result in material losses, such as
the substantial loss we incurred from the unauthorized trading
incident announced in September 2011.
remedying
these
We use automation as part of our efforts to improve
efficiency, reduce the risk of error and improve our client
experience. We intend to expand the use of robotic processing,
machine learning and artificial intelligence to further these goals.
Use of these tools presents their own risks, including the need
for effective design and testing; the quality of the data used for
development and operation of machine learning and artificial
intelligence tools may adversely affect their functioning and
result in errors and other operational risks.
We and other financial services firms have been subject to
breaches of security and to cyber- and other forms of attack,
some of which are sophisticated and targeted attacks intended
to gain access to confidential information or systems, disrupt
service or destroy data. These attacks may be attempted through
the introduction of viruses or malware, phishing and other forms
of social engineering, distributed denial of service attacks and
other means. These attempts may occur directly, or using
equipment or security passwords of our employees, third-party
service providers or other users. In addition to external attacks,
we have experienced loss of client data from failure by
employees and others to follow internal policies and procedures
and from misappropriation of our data by employees and others.
We may not be able to anticipate, detect or recognize threats to
our systems or data and our preventative measures may not be
effective to prevent an attack or a security breach. In the event
of a security breach, notwithstanding our preventative measures,
we may not immediately detect a particular breach or attack.
Once a particular attack is detected, time may be required to
investigate and assess the nature and extent of the attack. A
successful breach or circumvention of security of our systems or
data could have significant negative consequences for us,
including disruption of our operations, misappropriation of
confidential
information concerning us or our customers,
damage to our systems, financial losses for us or our customers,
violations of data privacy and similar laws, litigation exposure
and damage to our reputation.
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Our strategy, business model and environment Our strategy, business model and environment | Risk factors
information
transfer personal
We are subject to complex and frequently changing laws and
regulations governing the protection of client and personal data,
such as the EU General Data Protection Regulation. Ensuring
that we comply with applicable laws and regulations when we
requires
collect, use and
substantial resources and may affect the ways in which we
conduct our business. In the event that we fail to comply with
applicable laws, we may be exposed to regulatory fines and
penalties and other sanctions. We may also incur such penalties
if our vendors or other service providers or clients or
counterparties fail to comply with these laws or to maintain
appropriate controls over protected data. In addition, any loss or
exposure of client or other data may adversely damage our
reputation and adversely affect our business.
such
to comply with
A major focus of US and other countries’ governmental
policies relating to financial institutions in recent years has been
on fighting money laundering and terrorist financing. We are
required to maintain effective policies, procedures and controls
to detect, prevent and report money laundering and terrorist
financing, and to verify the identity of our clients under the laws
of many of the countries in which we operate. We are also
subject to laws and regulations related to corrupt and illegal
payments to government officials by others, such as the US
Foreign Corrupt Practices Act and the UK Bribery Act. We have
implemented policies, procedures and internal controls that are
designed
regulations.
Notwithstanding this, US regulators have found deficiencies in
the design and operation of anti-money laundering programs in
our US operations. We have undertaken a significant program to
address these regulatory findings with the objective of fully
meeting regulatory expectations for our programs. Failure to
maintain and implement adequate programs to combat money
laundering, terrorist financing or corruption, or any failure of our
programs in these areas, could have serious consequences both
from legal enforcement action and from damage to our
imposed and
reputation. Frequent changes
increasingly complex sanctions imposed on countries, entities
and individuals increase our cost of monitoring and complying
with sanctions requirements and increase the risk that we will
not identify in a timely manner previously permissible client
activity that is subject to a sanction.
in sanctions
laws and
regarding our
As a result of new and changed regulatory requirements and
the changes we have made in our legal structure, the volume,
frequency and complexity of our regulatory and other reporting
has remained elevated. Regulators have also significantly increased
expectations
reporting and data
aggregation, as well as management reporting. We have incurred
and continue to incur significant costs to implement infrastructure
to meet these requirements. Failure to meet external reporting
requirements accurately and in a timely manner or failure to meet
regulatory expectations of internal reporting, data aggregation
and management reporting could result in enforcement action or
other adverse consequences for us.
internal
Certain types of operational control weaknesses and failures
could also adversely affect our ability to prepare and publish
accurate and timely financial reports.
In addition, despite the contingency plans that we have in
place, our ability to conduct business may be adversely affected
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by a disruption in the infrastructure that supports our businesses
and the communities in which we operate. This may include a
disruption due to natural disasters, pandemics, civil unrest, war
or
communications,
transportation or other services that we use or that are used by
third parties with whom we conduct business.
electrical,
terrorism
involve
and
We may not be successful in implementing changes in our
wealth management businesses to meet changing market,
regulatory and other conditions
In recent years, inflows from lower-margin segments and
markets have been replacing outflows from higher-margin
segments and markets, in particular for cross-border clients. This
dynamic, combined with changes in client product preferences
as a result of which low-margin products account for a larger
share of our revenues than in the past, has put downward
pressure on Global Wealth Management’s margins.
We are exposed to possible outflows of client assets in our
asset-gathering businesses and to changes affecting the
profitability of Global Wealth Management,
in particular.
Initiatives that we may implement to overcome the effects of
changes in the business environment on our profitability,
balance sheet and capital positions may not succeed in
counteracting those effects and may cause net new money
outflows and reductions in client deposits, as happened with our
balance sheet and capital optimization program in 2015. There
is no assurance that we will be successful in our efforts to offset
the adverse effect of these or similar trends and developments.
We may be unable to identify or capture revenue or competitive
opportunities, or retain and attract qualified employees
The financial services industry is characterized by intense
competition, continuous innovation, restrictive, detailed, and
sometimes fragmented regulation and ongoing consolidation.
We face competition at the level of local markets and individual
business lines, and from global financial institutions that are
comparable to us in their size and breadth. Barriers to entry in
individual markets and pricing levels are being eroded by new
technology. We expect
to continue and
these
competition to increase. Our competitive strength and market
position could be eroded if we are unable to identify market
trends and developments, do not respond to such trends and
developments by devising and implementing adequate business
strategies, do not adequately develop or update our technology
including our digital channels and tools, or are unable to attract
or retain the qualified people needed.
trends
The amount and structure of our employee compensation is
affected not only by our business results, but also by competitive
factors and regulatory considerations.
In recent years, in response to the demands of various
stakeholders, including regulatory authorities and shareholders,
and in order to better align the interests of our staff with other
stakeholders, we have increased average deferral periods for
stock awards, expanded forfeiture provisions and, to a more
limited extent, introduced clawback provisions for certain
awards
to business performance. We have also
introduced individual caps on the proportion of fixed to variable
pay for the Group Executive Board (GEB) members, as well as
certain other employees.
linked
Constraints on the amount or structure of employee
compensation, higher levels of deferral, performance conditions
and other circumstances triggering the forfeiture of unvested
awards may adversely affect our ability to retain and attract key
employees. The loss of key staff and the inability to attract
qualified replacements could seriously compromise our ability to
execute our strategy and to successfully improve our operating
and control environment, and could affect our business
performance. Swiss law requires that shareholders approve the
compensation of the Board of Directors (the BoD) and the GEB
each year. If our shareholders fail to approve the compensation for
the GEB or the BoD, this could have an adverse effect on our
ability to retain experienced directors and our senior management.
We depend on our risk management and control processes to
avoid or limit potential losses in our businesses
Controlled risk-taking is a major part of the business of a
financial services firm. Some losses from risk-taking activities are
inevitable, but to be successful over time, we must balance the
risks we take against the returns generated. Therefore we must
diligently identify, assess, manage and control our risks, not only
in normal market conditions but also as they might develop
under more extreme, stressed conditions, when concentrations
of exposures can lead to severe losses.
As seen during the financial crisis of 2007–2009, we have not
always been able to prevent serious losses arising from extreme
or sudden market events that are not anticipated by our risk
measures and systems. Our risk measures, concentration
controls and the dimensions in which we aggregated risk to
identify correlated exposures proved inadequate in a historically
severe deterioration in financial markets. As a result, we
recorded substantial losses on fixed-income trading positions,
particularly in 2008 and 2009. We have substantially revised and
strengthened our risk management and control framework and
increased the capital that we hold relative to the risks that we
take. Nonetheless, we could suffer further losses in the future if,
for example:
– we do not fully identify the risks in our portfolio, in particular
with sanctions requirements and increase the risk that we will
technology. We expect
these
trends
to continue and
risk concentrations and correlated risks;
Our strategy, business model and environment | Risk factors
We are subject to complex and frequently changing laws and
by a disruption in the infrastructure that supports our businesses
regulations governing the protection of client and personal data,
and the communities in which we operate. This may include a
such as the EU General Data Protection Regulation. Ensuring
disruption due to natural disasters, pandemics, civil unrest, war
that we comply with applicable laws and regulations when we
or
terrorism
and
involve
electrical,
communications,
collect, use and
transfer personal
information
requires
transportation or other services that we use or that are used by
substantial resources and may affect the ways in which we
third parties with whom we conduct business.
conduct our business. In the event that we fail to comply with
applicable laws, we may be exposed to regulatory fines and
We may not be successful in implementing changes in our
penalties and other sanctions. We may also incur such penalties
wealth management businesses to meet changing market,
if our vendors or other service providers or clients or
regulatory and other conditions
counterparties fail to comply with these laws or to maintain
In recent years, inflows from lower-margin segments and
appropriate controls over protected data. In addition, any loss or
markets have been replacing outflows from higher-margin
exposure of client or other data may adversely damage our
segments and markets, in particular for cross-border clients. This
reputation and adversely affect our business.
dynamic, combined with changes in client product preferences
A major focus of US and other countries’ governmental
as a result of which low-margin products account for a larger
policies relating to financial institutions in recent years has been
share of our revenues than in the past, has put downward
on fighting money laundering and terrorist financing. We are
pressure on Global Wealth Management’s margins.
required to maintain effective policies, procedures and controls
We are exposed to possible outflows of client assets in our
to detect, prevent and report money laundering and terrorist
asset-gathering businesses and to changes affecting the
financing, and to verify the identity of our clients under the laws
profitability of Global Wealth Management,
in particular.
of many of the countries in which we operate. We are also
Initiatives that we may implement to overcome the effects of
subject to laws and regulations related to corrupt and illegal
changes in the business environment on our profitability,
payments to government officials by others, such as the US
balance sheet and capital positions may not succeed in
Foreign Corrupt Practices Act and the UK Bribery Act. We have
counteracting those effects and may cause net new money
implemented policies, procedures and internal controls that are
outflows and reductions in client deposits, as happened with our
designed
to comply with
such
laws and
regulations.
balance sheet and capital optimization program in 2015. There
Notwithstanding this, US regulators have found deficiencies in
is no assurance that we will be successful in our efforts to offset
the design and operation of anti-money laundering programs in
the adverse effect of these or similar trends and developments.
our US operations. We have undertaken a significant program to
address these regulatory findings with the objective of fully
We may be unable to identify or capture revenue or competitive
meeting regulatory expectations for our programs. Failure to
opportunities, or retain and attract qualified employees
maintain and implement adequate programs to combat money
The financial services industry is characterized by intense
laundering, terrorist financing or corruption, or any failure of our
competition, continuous innovation, restrictive, detailed, and
programs in these areas, could have serious consequences both
sometimes fragmented regulation and ongoing consolidation.
from legal enforcement action and from damage to our
We face competition at the level of local markets and individual
reputation. Frequent changes
in sanctions
imposed and
business lines, and from global financial institutions that are
increasingly complex sanctions imposed on countries, entities
comparable to us in their size and breadth. Barriers to entry in
and individuals increase our cost of monitoring and complying
individual markets and pricing levels are being eroded by new
not identify in a timely manner previously permissible client
competition to increase. Our competitive strength and market
activity that is subject to a sanction.
position could be eroded if we are unable to identify market
As a result of new and changed regulatory requirements and
trends and developments, do not respond to such trends and
has remained elevated. Regulators have also significantly increased
including our digital channels and tools, or are unable to attract
expectations
regarding our
internal
reporting and data
or retain the qualified people needed.
aggregation, as well as management reporting. We have incurred
The amount and structure of our employee compensation is
and continue to incur significant costs to implement infrastructure
affected not only by our business results, but also by competitive
to meet these requirements. Failure to meet external reporting
factors and regulatory considerations.
requirements accurately and in a timely manner or failure to meet
In recent years, in response to the demands of various
regulatory expectations of internal reporting, data aggregation
stakeholders, including regulatory authorities and shareholders,
and management reporting could result in enforcement action or
and in order to better align the interests of our staff with other
other adverse consequences for us.
stakeholders, we have increased average deferral periods for
Certain types of operational control weaknesses and failures
stock awards, expanded forfeiture provisions and, to a more
could also adversely affect our ability to prepare and publish
limited extent, introduced clawback provisions for certain
accurate and timely financial reports.
awards
linked
to business performance. We have also
In addition, despite the contingency plans that we have in
introduced individual caps on the proportion of fixed to variable
place, our ability to conduct business may be adversely affected
pay for the Group Executive Board (GEB) members, as well as
certain other employees.
the changes we have made in our legal structure, the volume,
developments by devising and implementing adequate business
– our risk models prove insufficient to predict the scale of
frequency and complexity of our regulatory and other reporting
strategies, do not adequately develop or update our technology
financial risks the bank faces;
– markets move in ways that we do not expect – in terms of
their speed, direction, severity or correlation – and our ability
to manage risks in the resulting environment is, therefore,
affected;
– third parties to whom we have credit exposure or whose
securities we hold are severely affected by events and we
suffer defaults and impairments beyond the level implied by
our risk assessment; or
– collateral or other security provided by our counterparties and
clients proves inadequate to cover their obligations at the
time of default.
– our assessment of the risks identified, or our response to
inadequate,
negative
insufficient or incorrect;
to be untimely,
trends, proves
We also hold legacy risk positions, primarily in Group
Functions, that, in many cases, are illiquid and may again
deteriorate in value.
We also manage risk on behalf of our clients. The
performance of assets we hold for our clients may be adversely
affected by the same factors mentioned above. If clients suffer
losses or the performance of their assets held with us is not in
line with relevant benchmarks against which clients assess
investment performance, we may suffer reduced fee income and
a decline in assets under management, or withdrawal of
mandates.
Investment positions, such as equity investments made as part
of strategic initiatives and seed investments made at the
inception of funds that we manage, may also be affected by
market risk factors. These investments are often not liquid and
generally are intended or required to be held beyond a normal
trading horizon. Deteriorations in the fair value of these
positions would have a negative effect on our earnings.
in
restrictions
financing agreements and
As UBS Group AG is a holding company, its operating results,
financial condition and ability to pay dividends and other
distributions and / or to pay its obligations in the future depend
on funding, dividends and other distributions received directly or
indirectly from its subsidiaries, which may be subject to
restrictions
UBS Group AG’s ability to pay dividends and other distributions
and to pay its obligations in the future will depend on the level
of funding, dividends and other distributions, if any, received
from UBS AG and other subsidiaries. The ability of such
subsidiaries to make loans or distributions, directly or indirectly,
to UBS Group AG may be restricted as a result of several factors,
including
the
requirements of applicable law and regulatory, fiscal or other
restrictions. In particular, UBS Group AG’s direct and indirect
subsidiaries, including UBS AG, UBS Switzerland AG, UBS
Americas Holding LLC and UBS Europe SE, are subject to laws
and regulations that restrict dividend payments, authorize
regulatory bodies to block or reduce the flow of funds from
those subsidiaries to UBS Group AG, or could affect their ability
to repay any loans made to, or other investments in, such
subsidiary by UBS Group AG or another member of the Group.
For example, in the early stages of the COVID-19 pandemic, the
European Central Bank ordered all banks under its supervision to
cease dividend distributions and the Federal Reserve Board has
limited capital distributions by bank holding companies and
intermediate holding companies. Restrictions and regulatory
actions of this kind could impede access to funds that UBS
Group AG may need to meet its obligations or to pay dividends
to shareholders. In addition, UBS Group AG’s right to participate
in a distribution of assets upon a subsidiary’s liquidation or
reorganization is subject to all prior claims of the subsidiary’s
creditors.
Our capital instruments may contractually prevent UBS Group
AG from proposing the distribution of dividends to shareholders,
other than in the form of shares, if we do not pay interest on
these instruments.
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Our strategy, business model and environment Our strategy, business model and environment | Risk factors
Furthermore, UBS Group AG may guarantee some of the
payment obligations of certain of the Group’s subsidiaries from
time to time. These guarantees may require UBS Group AG to
provide substantial funds or assets to subsidiaries or their
creditors or counterparties at a time when UBS Group AG is in
need of liquidity to fund its own obligations.
The credit ratings of UBS Group AG or its subsidiaries used
for funding purposes could be lower than the ratings of the
Group’s operating subsidiaries, which may adversely affect the
market value of the securities and other obligations of UBS
Group AG or those subsidiaries on a standalone basis.
Our reputation is critical to our success
Our reputation is critical to the success of our strategic plans,
business and prospects. Reputational damage is difficult to
reverse, and improvements tend to be slow and difficult to
measure. Our reputation has been adversely affected by our
losses during the financial crisis, investigations into our cross-
border private banking services, criminal resolutions of LIBOR-
related and foreign exchange matters, as well as other matters.
We believe that reputational damage as a result of these events
was an important factor in our loss of clients and client assets
across our asset-gathering businesses. New events that cause
reputational damage could have a material adverse effect on our
results of operation and financial condition, as well as our ability
to achieve our strategic goals and financial targets.
Liquidity and funding risk
Liquidity and funding management are critical to UBS’s ongoing
performance
The viability of our business depends on the availability of
funding sources, and our success depends on our ability to
obtain funding at times, in amounts, for tenors and at rates that
enable us to efficiently support our asset base in all market
conditions. Our funding sources have generally been stable, but
could change in the future because of, among other things,
general market disruptions or widening credit spreads, which
could also influence the cost of funding. A substantial part of
our liquidity and funding requirements are met using short-term
unsecured funding sources, including retail and wholesale
deposits and the regular issuance of money market securities. A
change in the availability of short-term funding could occur
quickly.
Moreover, more stringent capital and liquidity and funding
requirements will likely lead to increased competition for both
secured funding and deposits as a stable source of funding, and
to higher funding costs. The addition of loss-absorbing debt as a
component of capital requirements, the regulatory requirements
to maintain minimum TLAC at UBS’s holding company and at
subsidiaries, as well as the power of resolution authorities to bail
in TLAC and other debt obligations, and uncertainty as to how
such powers will be exercised, will increase our cost of funding
and could potentially increase the total amount of funding
required, in the absence of other changes in our business.
In addition, as experienced
Reductions in our credit ratings may adversely affect the
market value of the securities and other obligations and increase
our funding costs, in particular with regard to funding from
wholesale unsecured sources, and could affect the availability of
certain kinds of funding.
in
connection with Moody’s downgrade of UBS AG’s long-term
debt rating in June 2012, rating downgrades can require us to
post additional collateral or make additional cash payments
under trading agreements. Our credit ratings, together with our
capital strength and reputation, also contribute to maintaining
client and counterparty confidence, and it is possible that rating
changes could influence the performance of some of our
businesses.
liquidity and
The requirement to maintain a liquidity coverage ratio of
high-quality liquid assets to estimated stressed short-term net
funding
cash outflows, and other similar
requirements, oblige us to maintain high levels of overall
liquidity, limit our ability to optimize interest income and
expense, make certain lines of business less attractive and
reduce our overall ability to generate profits. In particular, UBS
AG is subjected to increased liquidity coverage requirements
under the direction of FINMA. Regulators may consider it
necessary to increase these requirements in light of the
anticipated economic stresses resulting from the COVID-19
pandemic. The liquidity coverage ratio and net stable funding
ratio requirements are intended to ensure that we are not overly
reliant on short-term funding and that we have sufficient long-
term funding for illiquid assets. The relevant calculations make
assumptions about the relative likelihood and amount of
outflows of funding and available sources of additional funding
in market-wide and firm-specific stress situations. There can be
no assurance that in an actual stress situation our funding
outflows would not exceed the assumed amounts.
66
66
Financial and
operating
performance
Management report
2
Financial and operating performance | Accounting and financial reporting
Accounting and financial reporting
Critical accounting estimates and judgments
In preparing our financial statements in accordance with
International Financial Reporting Standards (IFRS), as issued by
the International Accounting Standards Board (the IASB), we
apply judgment and make estimates and assumptions that may
involve significant uncertainty at the time they are made. We
regularly reassess those estimates and assumptions, which
encompass historical experience, expectations of the future and
other pertinent factors, to determine their continuing relevance
based on current conditions, and update them as necessary.
Changes in estimates and assumptions may have significant
effects on the financial statements. Furthermore, actual results
may differ significantly from our estimates, which could result in
significant losses to the Group, beyond what we expected or
provided for.
Key areas involving a high degree of judgment and areas
where estimates and assumptions are significant to the
consolidated financial statements include:
– expected credit loss measurement;
– fair value measurement;
– income taxes;
– provisions and contingent liabilities;
– post-employment benefit plans;
– goodwill; and
– consolidation of structured entities.
› Refer to “Note 1a Significant accounting policies” in the
“Consolidated financial statements” section of this report for
more information
› Refer to the “Risk factors” section of this report for more
information
Significant accounting and financial reporting changes in
2020
Presentation of reported results only
Effective from 1 January 2020, we no longer report adjusted
results in our financial reports, as the effects of legacy cost
programs have been phased out and all of our financial targets
are now based on reported results. We will continue to disclose
material restructuring and litigation expenses for each business
division and other material profit or loss items that management
believes are neither representative of underlying business
performance nor expected to routinely recur in the “Group
performance” sections of our financial reports.
Streamlining of business division expense reporting and
renaming of Corporate Center to Group Functions
Effective from 1 January 2020, we have streamlined our business
division expense reporting to better reflect how the Group is
managed. We no longer disclose a detailed cost breakdown by
business division. We continue to provide more detailed
information on operating expenses at the Group level, and
explain the drivers of changes in divisional operating expenses in
our divisional management discussion and analysis.
Corporate Center has been renamed Group Functions and
includes Group Treasury, Non-core and Legacy Portfolio, and
Group Services. These changes had no effect on business
division or Group operating income, operating expenses or profit
before tax.
› Refer to the “Global Wealth Management,” “Personal &
Corporate Banking,” Asset Management,” “Investment Bank”
and “Group Functions” sections of this report for more
information
› Refer to “Note 2 Segment reporting” in the “Consolidated
financial statements” section of this report for more information
about segment reporting
Adoption of hedge accounting requirements of IFRS 9, Financial
Instruments
Effective from 1 January 2020, we have adopted the hedge
accounting requirements of IFRS 9, Financial Instruments, for all
our existing hedge accounting programs, except for fair value
hedges of portfolio interest rate risk related to loans, which, as
permitted under IFRS 9, continue to be accounted for under
IAS 39, Financial Instruments: Recognition and Measurement.
The adoption of these requirements as of 1 January 2020 had
no financial effect on our financial statements.
Under the new guidance, and to reduce income statement
volatility, we have designated cross-currency swaps and foreign
currency debt in fair value hedge relationships, applying the cost
of hedging approach to the foreign currency basis spread.
› Refer to “Note 1b Changes in accounting policies, comparability
and other adjustments” and “Statement of comprehensive
income” in the “Consolidated financial statements” section of
this report for more information
68
68
Significant accounting and financial reporting changes in
2021
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
(Interest Rate Benchmark Reform – Phase 2)
In August 2020, the IASB issued Interest Rate Benchmark
Reform – Phase 2, addressing a number of financial reporting
areas that arise when IBOR rates are reformed or replaced. UBS
adopted these amendments on 1 January 2021 and does not
expect a material effect on the Group’s financial statements.
› Refer to “Note 1c International Financial Reporting Standards
and Interpretations to be adopted in 2021 and later and other
changes” in the “Consolidated financial statements” section of
this report for more information
Modification of deferred compensation awards
During 2020, we modified the forfeiture conditions of certain
outstanding deferred compensation awards
for eligible
employees, in order to provide additional career flexibility during
times of uncertainty. As a result, UBS accelerated the expense
recognition related to these awards. Outstanding deferred
compensation awards granted to Group Executive Board
members and those granted under the Long-Term Incentive
Plan, as well as those granted to financial advisors in the US, are
not affected by these changes.
› Refer to “Note 1b Changes in accounting policies, comparability
and other adjustments” in the “Consolidated financial
statements” section of this report for more information
Restatement of compensation-related liabilities
During 2020, UBS restated its balance sheet and statement of
changes in equity as of 1 January 2018 to correct a liability
understatement in connection with a legacy Global Wealth
Management deferred compensation plan in the Americas
region, resulting
in equity attributable to
shareholders of USD 32 million. The restatement had no effect
on Net profit / (loss) or basic and diluted earnings per share for
the current period or for any comparative periods.
in a decrease
› Refer to “Note 1b Changes in accounting policies, comparability
and other adjustments” in the “Consolidated financial
statements” section of this report for more information
Financial and operating performance | Accounting and financial reporting
Accounting and financial reporting
Critical accounting estimates and judgments
Streamlining of business division expense reporting and
In preparing our financial statements in accordance with
International Financial Reporting Standards (IFRS), as issued by
the International Accounting Standards Board (the IASB), we
apply judgment and make estimates and assumptions that may
involve significant uncertainty at the time they are made. We
regularly reassess those estimates and assumptions, which
encompass historical experience, expectations of the future and
other pertinent factors, to determine their continuing relevance
based on current conditions, and update them as necessary.
Changes in estimates and assumptions may have significant
effects on the financial statements. Furthermore, actual results
renaming of Corporate Center to Group Functions
Effective from 1 January 2020, we have streamlined our business
division expense reporting to better reflect how the Group is
managed. We no longer disclose a detailed cost breakdown by
business division. We continue to provide more detailed
information on operating expenses at the Group level, and
explain the drivers of changes in divisional operating expenses in
our divisional management discussion and analysis.
Corporate Center has been renamed Group Functions and
includes Group Treasury, Non-core and Legacy Portfolio, and
Group Services. These changes had no effect on business
division or Group operating income, operating expenses or profit
may differ significantly from our estimates, which could result in
before tax.
significant losses to the Group, beyond what we expected or
provided for.
Key areas involving a high degree of judgment and areas
where estimates and assumptions are significant to the
information
› Refer to the “Global Wealth Management,” “Personal &
Corporate Banking,” Asset Management,” “Investment Bank”
and “Group Functions” sections of this report for more
“Consolidated financial statements” section of this report for
hedges of portfolio interest rate risk related to loans, which, as
consolidated financial statements include:
– expected credit loss measurement;
– fair value measurement;
– income taxes;
– provisions and contingent liabilities;
– post-employment benefit plans;
– goodwill; and
– consolidation of structured entities.
› Refer to “Note 1a Significant accounting policies” in the
› Refer to the “Risk factors” section of this report for more
more information
information
Significant accounting and financial reporting changes in
2020
Presentation of reported results only
Effective from 1 January 2020, we no longer report adjusted
results in our financial reports, as the effects of legacy cost
programs have been phased out and all of our financial targets
are now based on reported results. We will continue to disclose
material restructuring and litigation expenses for each business
division and other material profit or loss items that management
believes are neither representative of underlying business
performance nor expected to routinely recur in the “Group
performance” sections of our financial reports.
› Refer to “Note 2 Segment reporting” in the “Consolidated
financial statements” section of this report for more information
about segment reporting
Adoption of hedge accounting requirements of IFRS 9, Financial
Instruments
Effective from 1 January 2020, we have adopted the hedge
accounting requirements of IFRS 9, Financial Instruments, for all
our existing hedge accounting programs, except for fair value
permitted under IFRS 9, continue to be accounted for under
IAS 39, Financial Instruments: Recognition and Measurement.
The adoption of these requirements as of 1 January 2020 had
no financial effect on our financial statements.
Under the new guidance, and to reduce income statement
volatility, we have designated cross-currency swaps and foreign
currency debt in fair value hedge relationships, applying the cost
of hedging approach to the foreign currency basis spread.
› Refer to “Note 1b Changes in accounting policies, comparability
and other adjustments” and “Statement of comprehensive
income” in the “Consolidated financial statements” section of
this report for more information
68
69
69
Financial and operating performance Financial and operating performance | Group performance
Group performance
Income statement
USD million
Net interest income
Other net income from financial instruments measured at fair value through profit or loss
Credit loss (expense) / release
Fee and commission income
Fee and commission expense
Net fee and commission income
Other income
Total operating income
Personnel expenses
General and administrative expenses
Depreciation and impairment of property, equipment and software
Amortization and impairment of goodwill and intangible assets
Total operating expenses
Operating profit / (loss) before tax
Tax expense / (benefit)
Net profit / (loss)
Net profit / (loss) attributable to non-controlling interests
NNeett pprrooffiitt // ((lloossss)) aattttrriibbuuttaabbllee ttoo sshhaarreehhoollddeerrss
Comprehensive income
Total comprehensive income
Total comprehensive income attributable to non-controlling interests
TToottaall ccoommpprreehheennssiivvee iinnccoommee aattttrriibbuuttaabbllee ttoo sshhaarreehhoollddeerrss
For the year ended
% change from
3311..1122..2200
31.12.19
31.12.18
31.12.19
55,,886622
66,,996600
((669944))
2200,,996611
((11,,777755))
1199,,118866
11,,007766
3322,,339900
1177,,222244
44,,888855
22,,006699
5577
2244,,223355
88,,115555
11,,558833
66,,557722
1155
66,,555577
88,,331122
3366
88,,227766
4,501
6,842
(78)
19,110
(1,696)
17,413
212
28,889
16,084
5,288
1,765
175
23,312
5,577
1,267
4,310
6
4,304
5,091
2
5,089
5,048
6,960
(118)
19,598
(1,703)
17,895
428
30,213
16,132
6,797
1,228
65
24,222
5,991
1,468
4,522
7
4,516
4,231
5
4,225
30
2
790
10
5
10
409
12
7
(8)
17
(67)
4
46
25
52
156
52
63
63
70
70
Financial and operating performance | Group performance
Group performance
Other net income from financial instruments measured at fair value through profit or loss
Income statement
USD million
Net interest income
Credit loss (expense) / release
Fee and commission income
Fee and commission expense
Net fee and commission income
Other income
Total operating income
Personnel expenses
General and administrative expenses
Depreciation and impairment of property, equipment and software
Amortization and impairment of goodwill and intangible assets
Total operating expenses
Operating profit / (loss) before tax
Tax expense / (benefit)
Net profit / (loss)
Net profit / (loss) attributable to non-controlling interests
NNeett pprrooffiitt // ((lloossss)) aattttrriibbuuttaabbllee ttoo sshhaarreehhoollddeerrss
Comprehensive income
Total comprehensive income
Total comprehensive income attributable to non-controlling interests
TToottaall ccoommpprreehheennssiivvee iinnccoommee aattttrriibbuuttaabbllee ttoo sshhaarreehhoollddeerrss
55,,886622
66,,996600
((669944))
2200,,996611
((11,,777755))
1199,,118866
11,,007766
3322,,339900
1177,,222244
44,,888855
22,,006699
5577
2244,,223355
88,,115555
11,,558833
66,,557722
1155
66,,555577
88,,331122
3366
88,,227766
4,501
6,842
(78)
19,110
(1,696)
17,413
212
28,889
16,084
5,288
1,765
175
23,312
5,577
1,267
4,310
6
4,304
5,091
2
5,089
5,048
6,960
(118)
19,598
(1,703)
17,895
428
30,213
16,132
6,797
1,228
65
24,222
5,991
1,468
4,522
7
4,516
4,231
5
4,225
790
30
2
10
5
10
409
12
7
(8)
17
(67)
4
46
25
52
156
52
63
63
Performance of our business divisions and Group Functions1
FFoorr tthhee yyeeaarr eennddeedd 3311..1122..2200
For the year ended
% change from
3311..1122..2200
31.12.19
31.12.18
31.12.19
USD million
Operating income
of which: net gain from the sale of a majority stake in Fondcenter AG
of which: gain on the sale of intellectual property rights
of which: net gains from properties sold or held for sale
GGlloobbaall WWeeaalltthh
MMaannaaggeemmeenntt
1177,,004455
6600
PPeerrssoonnaall &&
CCoorrppoorraattee
BBaannkkiinngg
33,,665511
AAsssseett
MMaannaaggee--
mmeenntt
22,,997744
557711
of which: valuation gain on auction rate securities in the fourth quarter of 2020 2
of which: gain related to investment in associates
of which: gain on the sale of equity investment measured at fair value through profit or loss
66
44
1199
1188
IInnvveessttmmeenntt
BBaannkk
99,,221144
GGrroouupp
FFuunnccttiioonnss
((449944))
TToottaall
3322,,339900
221155
6644
113344
663311
221155
6644
113344
2266
2222
Operating expenses
1133,,002266
22,,339922
11,,551199
66,,773322
556677
2244,,223355
of which: acceleration of expenses in relation to outstanding deferred compensation awards in
the third quarter of 2020 3
of which: expenses associated with terminated real estate leases
of which: impairment of internally generated software 4
of which: net restructuring expenses 5
4466
7722
33
55
2222
222299
66
2244
5588
7722
6677
00
335599
7722
6677
110077
OOppeerraattiinngg pprrooffiitt // ((lloossss)) bbeeffoorree ttaaxx
44,,001199
11,,225599
11,,445555
22,,448822
((11,,006600))
88,,115555
USD million
Operating income
of which: net foreign currency translation losses 6
of which: net losses from properties held for sale
Operating expenses
of which: impairment of goodwill
of which: net restructuring expenses 5
For the year ended 31.12.19
Global Wealth
Management
16,353
Personal &
Corporate
Banking
3,715
Asset
Manage-
ment
1,938
Investment
Bank
7,269
Group
Functions
(385)
12,955
2,274
1,406
68
17
33
6,485
110
168
Total
28,889
(35)
(29)
23,312
110
(35)
(29)
192
(2)
284
OOppeerraattiinngg pprrooffiitt // ((lloossss)) bbeeffoorree ttaaxx
33,,339977
11,,444411
553322
778844
((557777))
55,,557777
USD million
Operating income
of which: gains related to investments in associates
of which: gains on sale of real estate
of which: gains on sale of subsidiaries and businesses
of which: remeasurement loss related to UBS Securities China
Operating expenses
of which: gain related to changes to the Swiss pension plan
of which: net restructuring expenses 5
For the year ended 31.12.18
Global Wealth
Management
16,785
Personal &
Corporate
Banking
4,161
Asset
Manage-
ment
1,852
Investment
Bank
8,041
Group
Functions
(626)
101
359
31
25
Total
30,213
460
31
25
(270)
(270)
13,531
2,365
1,426
6,554
(66)
258
(38)
47
(10)
67
(5)
193
346
(122)
(4)
24,222
(241)
561
OOppeerraattiinngg pprrooffiitt // ((lloossss)) bbeeffoorree ttaaxx
33,,225544
11,,779966
442266
11,,448866
((997711))
55,,999911
11 The components of operating income and operating expenses disclosed in this table are items that are not recurring or necessarily representative of the underlying business performance for the reporting period
specified. 22 Reflects a valuation gain recognized in the fourth quarter of 2020 as a result of a recovery in underlying market conditions, following a change in valuation methodology. Refer to “Note 21 Fair value
measurement” in the “Consolidated financial statements” section of this report for more information. This gain was more than offset by valuation losses recognized earlier in the year. 33 Reflects the accelerated
expense recognized in the third quarter of 2020 when the conditions for continued vesting of certain outstanding deferred compensation awards were modified. This amount includes approximately USD 80 million
of accelerated expense that would otherwise have been recognized in the fourth quarter of 2020. Refer to “Note 1 Summary of significant accounting policies” in the “Consolidated financial statements” section of
this report for more information. The full year effect was an expense of approximately USD 280 million (Global Wealth Management: USD 30 million, Asset Management: USD 10 million, Investment Bank: USD 180
million, Group Functions: USD 60 million). 44 Relates to impairment of internally generated software resulting from a decision in the fourth quarter of 2020 to not proceed with an internal business transfer from
UBS Switzerland AG to UBS AG. 55 Reflects expenses for new restructuring initiatives. Prior-year comparative figures also include restructuring expenses related to legacy cost programs. 66 Related to the disposal
or closure of foreign operations.
70
71
71
Financial and operating performance Financial and operating performance | Group performance
2020 compared with 2019
Operating income
Results
In 2020, we recorded net profit attributable to shareholders of
USD 6,557 million, which included a net tax expense of
USD 1,583 million.
to
shareholders was USD 4,304 million, which included a net tax
expense of USD 1,267 million.
In 2019, net profit attributable
increase
Profit before tax increased by USD 2,578 million, or 46%, to
USD 8,155 million, reflecting higher operating income, partly
offset by an increase in operating expenses. Operating income
increased by USD 3,501 million, or 12%, to USD 32,390
in total
million, reflecting a USD 1,479 million
combined net interest income and other net income from
financial instruments measured at fair value through profit or
loss, a USD 1,773 million increase in net fee and commission
income, and USD 864 million higher other income. This was
partly offset by a USD 616 million increase in net credit loss
expenses. Operating expenses increased by USD 923 million, or
4%, to USD 24,235 million. This increase was mainly driven by
USD 1,140 million higher personnel expenses and USD 304
million higher depreciation and
impairment of property,
equipment and software. These effects were partly offset by a
USD 403 million decrease
in general and administrative
expenses and a USD 118 million decrease in amortization and
impairment of goodwill and intangible assets.
Net interest income and other net income from financial
instruments measured at fair value through profit or loss
Total combined net interest income and other net income from
financial instruments measured at fair value through profit or
loss increased by USD 1,479 million to USD 12,822 million. This
was mainly driven by higher net income in the Investment Bank
and Global Wealth Management, partly offset by lower net
income in Group Functions.
The Investment Bank increased by USD 1,454 million to
USD 5,643 million, largely driven by Global Markets. Income
increased in the Derivatives & Solutions business, reflecting
higher client activity levels across foreign exchange, rates and
credit products. In addition, increased income in the Financing
and Execution & Platform businesses was driven by higher levels
of Equity Financing revenues and client activity, respectively.
Global Wealth Management increased by USD 126 million to
USD 5,039 million, reflecting higher net interest income due to
growth in lending revenues, partly offset by lower deposit
revenues, as well as increased transaction-based income from
foreign exchange and other intermediary activity as a result of
higher levels of client activity.
hedge
including
asymmetries,
Group Functions decreased by USD 120 million to negative
USD 302 million. This was mainly due to lower net income from
accounting
accounting
ineffectiveness, and an increase in the total amount of negative
revenues related to centralized Group Treasury risk management
services, driven by additional liquidity costs in relation to COVID-
19 market stress in the first half of the year. In addition, Non-
core and Legacy Portfolio also recognized lower income, and
together these effects were partly offset by an increase in Group
Services, largely as a result of lower funding costs, mainly related
to deferred tax assets.
Net interest income and other net income from financial instruments measured at fair value through profit or loss
› Refer to “Note 3 Net interest income and other net income from
financial instruments measured at fair value through profit or
loss” in the “Consolidated financial statements” section of this
report for more information
For the year ended
31.12.19
3311..1122..2200
31.12.18
% change from
31.12.19
USD million
Net interest income from financial instruments measured at amortized cost and fair value through other
comprehensive income
Net interest income from financial instruments measured at fair value through profit or loss
Other net income from financial instruments measured at fair value through profit or loss
TToottaall
Global Wealth Management
of which: net interest income
of which: transaction-based income from foreign exchange and other intermediary activity 1
Personal & Corporate Banking
of which: net interest income
of which: transaction-based income from foreign exchange and other intermediary activity 1
Asset Management
Investment Bank2
Global Banking 3
Global Markets 3
44,,556633
11,,229999
66,,996600
1122,,882222
55,,003399
44,,002277
11,,001122
22,,445599
22,,004499
440099
((1166))
55,,664433
558855
55,,005577
((330022))
3,490
1,011
6,842
11,343
4,913
3,947
966
2,436
1,992
443
(13)
4,189
414
3,775
(182)
3,710
1,338
6,960
12,008
5,049
4,101
948
2,451
2,049
402
(35)
4,756
608
4,148
(214)
31
28
2
13
3
2
5
1
3
(8)
23
35
42
34
66
Group Functions
11 Mainly includes spread-related income in connection with client-driven transactions, foreign currency translation effects and income and expenses from precious metals, which are included in the income statement
line Other net income from financial instruments measured at fair value through profit or loss. The amounts reported on this line are one component of Transaction-based income in the management discussion and
analysis of Global Wealth Management and Personal & Corporate Banking in the “Global Wealth Management” and “Personal & Corporate Banking” sections of this report. 22 Investment Bank information is
provided at the business line level rather than by financial statement reporting line in order to reflect the underlying business activities, which is consistent with the structure of the management discussion and
analysis in the “Investment Bank” section of this report. 33 Effective as of 1 January 2020, the Investment Bank was realigned into two new business lines: Global Banking and Global Markets. The presentation of
prior-year information reflects the new structure, with no effect on the overall results of the Investment Bank.
72
72
Financial and operating performance | Group performance
2020 compared with 2019
Operating income
Results
In 2020, we recorded net profit attributable to shareholders of
USD 6,557 million, which included a net tax expense of
USD 1,583 million.
In 2019, net profit attributable
to
shareholders was USD 4,304 million, which included a net tax
expense of USD 1,267 million.
Profit before tax increased by USD 2,578 million, or 46%, to
USD 8,155 million, reflecting higher operating income, partly
offset by an increase in operating expenses. Operating income
increased by USD 3,501 million, or 12%, to USD 32,390
million, reflecting a USD 1,479 million
increase
in total
combined net interest income and other net income from
financial instruments measured at fair value through profit or
loss, a USD 1,773 million increase in net fee and commission
income, and USD 864 million higher other income. This was
partly offset by a USD 616 million increase in net credit loss
expenses. Operating expenses increased by USD 923 million, or
4%, to USD 24,235 million. This increase was mainly driven by
USD 1,140 million higher personnel expenses and USD 304
million higher depreciation and
impairment of property,
equipment and software. These effects were partly offset by a
USD 403 million decrease
in general and administrative
expenses and a USD 118 million decrease in amortization and
impairment of goodwill and intangible assets.
Net interest income and other net income from financial
instruments measured at fair value through profit or loss
Total combined net interest income and other net income from
financial instruments measured at fair value through profit or
loss increased by USD 1,479 million to USD 12,822 million. This
was mainly driven by higher net income in the Investment Bank
and Global Wealth Management, partly offset by lower net
income in Group Functions.
The Investment Bank increased by USD 1,454 million to
USD 5,643 million, largely driven by Global Markets. Income
increased in the Derivatives & Solutions business, reflecting
higher client activity levels across foreign exchange, rates and
credit products. In addition, increased income in the Financing
and Execution & Platform businesses was driven by higher levels
of Equity Financing revenues and client activity, respectively.
Global Wealth Management increased by USD 126 million to
USD 5,039 million, reflecting higher net interest income due to
growth in lending revenues, partly offset by lower deposit
revenues, as well as increased transaction-based income from
foreign exchange and other intermediary activity as a result of
higher levels of client activity.
Group Functions decreased by USD 120 million to negative
USD 302 million. This was mainly due to lower net income from
accounting
asymmetries,
including
hedge
accounting
ineffectiveness, and an increase in the total amount of negative
revenues related to centralized Group Treasury risk management
services, driven by additional liquidity costs in relation to COVID-
19 market stress in the first half of the year. In addition, Non-
core and Legacy Portfolio also recognized lower income, and
together these effects were partly offset by an increase in Group
Services, largely as a result of lower funding costs, mainly related
to deferred tax assets.
› Refer to “Note 3 Net interest income and other net income from
financial instruments measured at fair value through profit or
loss” in the “Consolidated financial statements” section of this
report for more information
44,,556633
11,,229999
66,,996600
1122,,882222
55,,003399
44,,002277
11,,001122
22,,445599
22,,004499
440099
((1166))
55,,664433
558855
55,,005577
((330022))
3,490
1,011
6,842
11,343
4,913
3,947
966
2,436
1,992
443
(13)
4,189
414
3,775
(182)
3,710
1,338
6,960
12,008
5,049
4,101
948
2,451
2,049
402
(35)
4,756
608
4,148
(214)
31
28
2
13
3
2
5
1
3
(8)
23
35
42
34
66
Net interest income and other net income from financial instruments measured at fair value through profit or loss
For the year ended
3311..1122..2200
31.12.19
31.12.18
% change from
31.12.19
Net interest income from financial instruments measured at amortized cost and fair value through other
Net interest income from financial instruments measured at fair value through profit or loss
Other net income from financial instruments measured at fair value through profit or loss
of which: transaction-based income from foreign exchange and other intermediary activity 1
of which: transaction-based income from foreign exchange and other intermediary activity 1
11 Mainly includes spread-related income in connection with client-driven transactions, foreign currency translation effects and income and expenses from precious metals, which are included in the income statement
line Other net income from financial instruments measured at fair value through profit or loss. The amounts reported on this line are one component of Transaction-based income in the management discussion and
analysis of Global Wealth Management and Personal & Corporate Banking in the “Global Wealth Management” and “Personal & Corporate Banking” sections of this report. 22 Investment Bank information is
provided at the business line level rather than by financial statement reporting line in order to reflect the underlying business activities, which is consistent with the structure of the management discussion and
analysis in the “Investment Bank” section of this report. 33 Effective as of 1 January 2020, the Investment Bank was realigned into two new business lines: Global Banking and Global Markets. The presentation of
prior-year information reflects the new structure, with no effect on the overall results of the Investment Bank.
USD million
comprehensive income
TToottaall
Global Wealth Management
of which: net interest income
Personal & Corporate Banking
of which: net interest income
Asset Management
Investment Bank2
Global Banking 3
Global Markets 3
Group Functions
72
Net fee and commission income
Net fee and commission income was USD 19,186 million,
compared with USD 17,413 million.
Net brokerage fees
increased by USD 920 million to
USD 3,858 million, reflecting a constructive market environment
and higher levels of client activity in Global Wealth Management
and the Investment Bank.
Investment fund fees increased by USD 431 million, driven by
Asset Management. This was largely due to higher performance-
based fee income, mainly relating to the Hedge Fund Businesses,
reflecting investment performance in a constructive market
environment. In addition, management fees increased, mainly
resulting from a higher average invested asset base, primarily
reflecting net new money generation and a constructive market
backdrop.
Fees for portfolio management and related services increased
by USD 353 million, driven by Global Wealth Management,
mostly reflecting the effect of higher average invested assets in a
constructive market environment.
Underwriting fees increased by USD 344 million to USD 1,085
million, mainly driven by the Investment Bank earning higher
equity underwriting revenues from public offerings.
› Refer to “Note 4 Net fee and commission income” in the
“Consolidated financial statements” section of this report for
more information
Other income
Other income increased by USD 864 million to USD 1,076
million, mainly driven by a gain of USD 631 million on the sale of
a majority stake in Fondcenter AG to Clearstream, Deutsche
Börse Group’s post-trade services provider, as well as a USD 215
million gain on the sale of intellectual property rights associated
with the Bloomberg Commodity Index family.
In addition, net gains from properties held for sale of
USD 76 million were recognized in the year, compared with a
USD 19 million net loss in 2019.
› Refer to “Note 5 Other income” in the “Consolidated financial
statements” section of this report for more information
› Refer to “Note 29 Changes in organization and acquisitions and
disposals of subsidiaries and businesses” in the “Consolidated
financial statements” section of this report for more information
about the sale of a majority stake in Fondcenter AG
Credit loss expense / release
Total net credit loss expenses were USD 694 million in 2020,
compared with USD 78 million, reflecting net credit
loss
expenses of USD 266 million related to stage 1 and 2 positions
and USD 429 million related to credit-impaired
(stage 3)
positions.
› Refer to “Note 9 Financial assets at amortized cost and other
positions in scope of expected credit loss measurement” and
“Note 20 Expected credit loss measurement” in the
“Consolidated financial statements” section of this report for
more information about credit loss expense / release
› Refer to the “Risk factors” section of this report for more
information
Credit loss (expense) / release
USD million
FFoorr tthhee yyeeaarr eennddeedd 3311..1122..2200
Stages 1 and 2
Stage 3
TToottaall ccrreeddiitt lloossss ((eexxppeennssee)) // rreelleeaassee
FFoorr tthhee yyeeaarr eennddeedd 3311..1122..1199
Stages 1 and 2
Stage 3
TToottaall ccrreeddiitt lloossss ((eexxppeennssee)) // rreelleeaassee
FFoorr tthhee yyeeaarr eennddeedd 3311..1122..1188
Stages 1 and 2
Stage 3
TToottaall ccrreeddiitt lloossss ((eexxppeennssee)) // rreelleeaassee
Global
Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group
Functions
((4488))
((4400))
((8888))
3
(23)
((2200))
0
(15)
((1155))
((112299))
((112288))
((225577))
23
(44)
((2211))
0
(56)
((5566))
00
((22))
((22))
0
0
00
0
0
00
((8888))
((221177))
((330055))
(4)
(26)
((3300))
(9)
(29)
((3388))
00
((4422))
((4422))
0
(7)
((77))
(1)
(8)
((88))
Total
((226666))
((442299))
((669944))
22
(100)
((7788))
(9)
(109)
((111188))
73
73
Financial and operating performance Financial and operating performance | Group performance
Operating expenses
Personnel expenses
Personnel expenses
to
USD 17,224 million, primarily reflecting higher expenses for
salaries, variable compensation and social security.
increased by USD 1,140 million
Salary costs increased by USD 505 million to USD 7,023
million, mainly driven by foreign currency translation effects and
a rebalancing from variable to fixed compensation for certain
employees, as well as the insourcing of certain activities from
third-party vendors to our Business Solutions Centers.
Expenses for total variable compensation
increased by
USD 428 million to USD 3,429 million, mainly driven by higher
expenses for current-year awards following improved business
performance, partly offset by the aforementioned rebalancing.
In addition, expenses for prior-year awards increased, primarily
following the modification of conditions for continued vesting of
certain outstanding deferred compensation awards in the third
quarter of 2020. These increases were partly offset by a
decrease in severance expenses.
Social security expenses increased by USD 100 million to
USD 899 million, broadly in line with the higher expenses for
salaries and variable compensation.
› Refer to the “Compensation” section of this report for more
information
› Refer to “Note 6 Personnel expenses,” “Note 26 Post-
employment benefit plans” and “Note 27 Employee benefits:
variable compensation” in the “Consolidated financial
statements” section of this report for more information
› Refer to “Note 1b Changes in accounting policies, comparability
and other adjustments” in the “Consolidated financial
statements” section of this report for more information about
the modification of deferred compensation awards
General and administrative expenses
General and administrative expenses decreased by USD 403
million to USD 4,885 million. This included USD 209 million
lower expenses related to travel and entertainment, reflecting
COVID-19-related restrictions, as well as USD 207 million lower
professional fees, largely in relation to consulting services. In
Operating expenses
USD million
Personnel expenses
of which: salaries
of which: variable compensation
of which: relating to current year 1
of which: relating to prior years 2
of which: financial advisor compensation 3
of which: other personnel expenses 4
General and administrative expenses
of which: net expenses for litigation, regulatory and similar matters
of which: other general and administrative expenses
addition, outsourcing costs decreased by USD 130 million,
mainly driven by the aforementioned insourcing of certain
activities from third-party vendors to our Business Solutions
Centers. These effects were partly offset by USD 95 million
higher costs arising from rent and maintenance of IT and other
equipment.
Net expenses for the UK and German bank levies were
USD 55 million in 2020 and included a USD 27 million credit
related to prior years. In 2019, net expenses for the UK and
German bank levies were USD 41 million and included a USD 31
million credit related to prior years.
We believe that the industry continues to operate in an
environment in which expenses associated with litigation,
regulatory and similar matters will remain elevated for the
foreseeable future, and we continue to be exposed to a number
of significant claims and regulatory matters. The outcome of
many of these matters, the timing of a resolution, and the
potential effects of resolutions on our future business, financial
results or financial condition are extremely difficult to predict.
› Refer to “Note 7 General and administrative expenses” and
“Note 18 Provisions and contingent liabilities” in the
“Consolidated financial statements” section of this report for
more information
Depreciation, amortization and impairment
Depreciation and impairment of property, equipment and
software increased by USD 304 million to USD 2,069 million,
mainly driven by internally generated software, including a
USD 67 million impairment as a result of a decision to not
proceed with an
from UBS
internal business
Switzerland AG to UBS AG. In addition, expenses related to real
estate
the effects of accelerated
depreciation resulting from the termination of property leases.
increased,
including
transfer
Amortization and impairment of goodwill and intangible
assets decreased by USD 118 million to USD 57 million, as the
prior year included a USD 110 million impairment of goodwill in
the Investment Bank.
› Refer to “Note 12 Property, equipment and software” and “Note
13 Goodwill and intangible assets” in the “Consolidated financial
statements” section of this report for more information
For the year ended
31.12.19
16,084
6,518
3,001
2,352
650
4,043
2,521
5,288
165
5,122
1,765
175
23,312
3311..1122..2200
1177,,222244
77,,002233
33,,442299
22,,663344
779955 55
44,,009911
22,,668800 55
44,,888855
119977
44,,668888
22,,006699
5577
2244,,223355
31.12.18
16,132
6,448
3,238
2,624
614
4,054
2,391
6,797
657
6,140
1,228
65
24,222
% change from
31.12.19
7
8
14
12
22
1
6
(8)
19
(8)
17
(67)
4
Depreciation and impairment of property, equipment and software
Amortization and impairment of goodwill and intangible assets
TToottaall ooppeerraattiinngg eexxppeennsseess
11 Includes expenses relating to performance awards and other variable compensation for the respective performance year. 22 Consists of amortization of prior years’ awards relating to performance awards and
other variable compensation. 33 Financial advisor compensation consists of grid-based compensation based directly on compensable revenues generated by financial advisors and supplemental compensation
calculated on the basis of financial advisor productivity, firm tenure, assets and other variables. It also includes expenses related to compensation commitments with financial advisors entered into at the time of
recruitment that are subject to vesting requirements. 44 Consists of expenses related to contractors, social security, post-employment benefit plans, and other personnel expenses. Refer to “Note 6 Personnel
expenses” in the “Consolidated financial statements” section of this report for more information. 55 During 2020, UBS modified the conditions for continued vesting of certain outstanding deferred compensation
awards for qualifying employees, resulting in an expense of approximately USD 280 million, of which USD 240 million is disclosed within Variable compensation – performance awards, USD 20 million within Social
security and USD 20 million within Other personnel expenses. Refer to “Note 1 Summary of significant accounting policies” in the “Consolidated financial statements” section of this report for more information.
74
74
Financial and operating performance | Group performance
Operating expenses
Personnel expenses
addition, outsourcing costs decreased by USD 130 million,
mainly driven by the aforementioned insourcing of certain
activities from third-party vendors to our Business Solutions
Personnel expenses
increased by USD 1,140 million
to
Centers. These effects were partly offset by USD 95 million
USD 17,224 million, primarily reflecting higher expenses for
higher costs arising from rent and maintenance of IT and other
salaries, variable compensation and social security.
equipment.
Salary costs increased by USD 505 million to USD 7,023
Net expenses for the UK and German bank levies were
million, mainly driven by foreign currency translation effects and
USD 55 million in 2020 and included a USD 27 million credit
a rebalancing from variable to fixed compensation for certain
related to prior years. In 2019, net expenses for the UK and
employees, as well as the insourcing of certain activities from
German bank levies were USD 41 million and included a USD 31
third-party vendors to our Business Solutions Centers.
million credit related to prior years.
Expenses for total variable compensation
increased by
We believe that the industry continues to operate in an
USD 428 million to USD 3,429 million, mainly driven by higher
environment in which expenses associated with litigation,
expenses for current-year awards following improved business
regulatory and similar matters will remain elevated for the
performance, partly offset by the aforementioned rebalancing.
foreseeable future, and we continue to be exposed to a number
In addition, expenses for prior-year awards increased, primarily
of significant claims and regulatory matters. The outcome of
following the modification of conditions for continued vesting of
many of these matters, the timing of a resolution, and the
certain outstanding deferred compensation awards in the third
potential effects of resolutions on our future business, financial
quarter of 2020. These increases were partly offset by a
results or financial condition are extremely difficult to predict.
decrease in severance expenses.
Social security expenses increased by USD 100 million to
USD 899 million, broadly in line with the higher expenses for
salaries and variable compensation.
› Refer to the “Compensation” section of this report for more
information
› Refer to “Note 6 Personnel expenses,” “Note 26 Post-
employment benefit plans” and “Note 27 Employee benefits:
variable compensation” in the “Consolidated financial
statements” section of this report for more information
› Refer to “Note 1b Changes in accounting policies, comparability
and other adjustments” in the “Consolidated financial
statements” section of this report for more information about
the modification of deferred compensation awards
General and administrative expenses
› Refer to “Note 7 General and administrative expenses” and
“Note 18 Provisions and contingent liabilities” in the
“Consolidated financial statements” section of this report for
more information
Depreciation, amortization and impairment
Depreciation and impairment of property, equipment and
software increased by USD 304 million to USD 2,069 million,
mainly driven by internally generated software, including a
USD 67 million impairment as a result of a decision to not
proceed with an
internal business
transfer
from UBS
Switzerland AG to UBS AG. In addition, expenses related to real
estate
increased,
including
the effects of accelerated
depreciation resulting from the termination of property leases.
Amortization and impairment of goodwill and intangible
assets decreased by USD 118 million to USD 57 million, as the
General and administrative expenses decreased by USD 403
prior year included a USD 110 million impairment of goodwill in
million to USD 4,885 million. This included USD 209 million
the Investment Bank.
lower expenses related to travel and entertainment, reflecting
COVID-19-related restrictions, as well as USD 207 million lower
professional fees, largely in relation to consulting services. In
› Refer to “Note 12 Property, equipment and software” and “Note
13 Goodwill and intangible assets” in the “Consolidated financial
statements” section of this report for more information
Operating expenses
USD million
Personnel expenses
of which: salaries
of which: variable compensation
of which: relating to current year 1
of which: relating to prior years 2
of which: financial advisor compensation 3
of which: other personnel expenses 4
General and administrative expenses
of which: net expenses for litigation, regulatory and similar matters
of which: other general and administrative expenses
Depreciation and impairment of property, equipment and software
Amortization and impairment of goodwill and intangible assets
TToottaall ooppeerraattiinngg eexxppeennsseess
For the year ended
31.12.19
16,084
31.12.18
16,132
% change from
31.12.19
3311..1122..2200
1177,,222244
77,,002233
33,,442299
22,,663344
779955 55
44,,009911
22,,668800 55
44,,888855
119977
44,,668888
22,,006699
5577
2244,,223355
6,518
3,001
2,352
650
4,043
2,521
5,288
165
5,122
1,765
175
23,312
6,448
3,238
2,624
614
4,054
2,391
6,797
657
6,140
1,228
65
24,222
7
8
14
12
22
1
6
(8)
19
(8)
17
(67)
4
11 Includes expenses relating to performance awards and other variable compensation for the respective performance year. 22 Consists of amortization of prior years’ awards relating to performance awards and
other variable compensation. 33 Financial advisor compensation consists of grid-based compensation based directly on compensable revenues generated by financial advisors and supplemental compensation
calculated on the basis of financial advisor productivity, firm tenure, assets and other variables. It also includes expenses related to compensation commitments with financial advisors entered into at the time of
recruitment that are subject to vesting requirements. 44 Consists of expenses related to contractors, social security, post-employment benefit plans, and other personnel expenses. Refer to “Note 6 Personnel
expenses” in the “Consolidated financial statements” section of this report for more information. 55 During 2020, UBS modified the conditions for continued vesting of certain outstanding deferred compensation
awards for qualifying employees, resulting in an expense of approximately USD 280 million, of which USD 240 million is disclosed within Variable compensation – performance awards, USD 20 million within Social
security and USD 20 million within Other personnel expenses. Refer to “Note 1 Summary of significant accounting policies” in the “Consolidated financial statements” section of this report for more information.
Tax
Income tax expenses of USD 1,583 million were recognized for
the Group in 2020, representing an effective tax rate of 19.4%,
compared with USD 1,267 million for 2019, which represented
an effective tax rate of 22.7%. The income tax expenses for
2020 included Swiss tax expenses of USD 598 million and non-
Swiss tax expenses of USD 985 million.
The Swiss tax expenses included current tax expenses of
USD 482 million related to taxable profits of UBS Switzerland AG
and other Swiss entities. They also included deferred tax
expenses of USD 116 million, which primarily reflect the
amortization of deferred tax assets (DTAs) previously recognized
in relation to deductible temporary differences.
The non-Swiss tax expenses included current tax expenses of
USD 749 million related to taxable profits earned by non-Swiss
subsidiaries and branches and net deferred tax expenses of
USD 236 million. Expenses of USD 444 million, primarily relating
to the amortization of DTAs previously recognized in relation to
tax losses carried forward and deductible temporary differences
of UBS Americas Inc., were partly offset by a net benefit of
USD 208 million in respect of the remeasurement of DTAs. This
net benefit included net upward remeasurements of DTAs of
USD 146 million for certain entities, primarily in connection with
our business planning process, and USD 62 million in respect of
additional DTA recognition that resulted from the contribution
of real estate assets by UBS AG to UBS Americas Inc. and UBS
Financial Services Inc. in 2020. This allowed the full recognition
of DTAs in respect of the associated historic real estate costs that
were previously capitalized for US tax purposes under the
elections made in the fourth quarter of 2018.
The effective tax rate for 2020 of 19.4% is lower than the
Group’s normal tax rate of around 25%, mainly as a result of
the aforementioned deferred tax benefit of USD 208 million and
also because no net tax expense was recognized in respect of
the pre-tax gain of USD 631 million in relation to the sale of a
majority stake in Fondcenter AG.
Excluding any potential effects from the remeasurement of
DTAs in connection with next year’s business planning process,
we expect a tax rate of around 25% for 2021. This also excludes
any impact from potential US corporate tax rate changes or
other jurisdictional statutory tax rate changes that could be
enacted during 2021.
› Refer to “Note 8 Income taxes” in the “Consolidated financial
statements” section of this report for more information
› Refer to the “Risk factors” section of this report for more
information
Total comprehensive income attributable to shareholders
In 2020, total comprehensive income attributable to shareholders
was USD 8,276 million, reflecting net profit of USD 6,557 million
and positive other comprehensive income (OCI), net of tax, of
USD 1,719 million.
Foreign currency translation OCI was positive USD 1,095
million in 2020. This was mainly due to the significant
strengthening of the Swiss franc (9%) and the euro (9%) against
the US dollar. In 2019, OCI related to foreign currency
translation was positive USD 104 million.
OCI related to cash flow hedges was positive USD 1,011
million, mainly reflecting an increase in net unrealized gains on
US dollar hedging derivatives resulting from decreases in the
relevant long-term US dollar interest rates, partly offset by the
reclassification of net gains on hedging instruments from OCI to
the income statement as the hedged forecast cash flows
affected profit or loss. In 2019, OCI related to cash flow hedges
was positive USD 1,143 million.
OCI associated with financial assets measured at fair value
through OCI was positive USD 136 million, compared with positive
USD 117 million, primarily reflecting net unrealized gains following
decreases in the relevant US dollar long-term interest rates in 2020.
OCI related to own credit on financial liabilities designated at fair
value was negative USD 293 million, compared with negative
USD 392 million, primarily due to a tightening of our credit spreads
in 2020.
Defined benefit plan OCI, net of tax, was negative USD 218
million, compared with negative USD 186 million. Total net pre-tax
OCI related to the Swiss pension plan was negative USD 276
million. This was mainly driven by an extraordinary employer
contribution of USD 235 million that increased the gross plan assets
but led to an OCI loss, as no net pension asset could be recognized
on the balance sheet as of 31 December 2020 due to the asset
ceiling. As announced in 2018, UBS agreed to mitigate the effects
from changes to the Swiss pension plan implemented in 2019 by
contributing up to CHF 720 million (USD 813 million at the closing
exchange rate as of 31 December 2020) in three installments in
2020, 2021 and 2022. The extraordinary contribution of USD 235
million in the first quarter of 2020 reflected the first installment
paid.
Total pre-tax OCI related to the UK pension plan was negative
USD 61 million, reflecting OCI losses of USD 449 million from the
remeasurement of the defined benefit obligation, mainly driven by a
loss of USD 504 million due to a decrease in the applicable discount
rate, partly offset by an experience gain of USD 42 million,
representing the effects of differences between the previous
actuarial assumptions and what actually occurred. This was partly
offset by OCI gains of USD 388 million due to a positive return on
plan assets.
› Refer to “Statement of comprehensive income” in the
“Consolidated financial statements” section of this report for
more information
› Refer to “Note 21 Fair value measurement” in the “Consolidated
financial statements” section of this report for more information
about own credit on financial liabilities designated at fair value
› Refer to “Note 25 Hedge accounting” in the “Consolidated
financial statements” section of this report for more information
about cash flow hedges of forecast transactions
› Refer to “Note 26 Post-employment benefit plans” in the
“Consolidated financial statements” section of this report for
more information about OCI related to defined benefit plans
74
75
75
Financial and operating performance Financial and operating performance | Group performance
Sensitivity to interest rate movements
As of 31 December 2020, we estimate that a parallel shift in
yield curves by +100 basis points could lead to a combined
increase in annual net interest income of approximately USD 1.6
billion in Global Wealth Management and Personal & Corporate
Banking. A parallel shift in yield curves by –100 basis points
could lead to a combined reduction in annual net interest
income of approximately USD 0.4 billion.
These estimates are based on a hypothetical scenario of an
immediate change in interest rates, equal across all currencies
and relative to implied forward rates as of 31 December 2020
applied to our banking book. These estimates further assume no
change to balance sheet size and structure, constant foreign
exchange rates, and no specific management action.
Seasonal characteristics
Our revenues may show seasonal patterns, notably in the
Investment Bank and Global Wealth Management. These
business divisions typically show the highest client activity levels
in the first quarter, with lower levels throughout the rest of the
year, especially during the summer months and end-of-year
holiday season.
Net new money can be affected by annual tax payments,
which are usually concentrated in the second quarter in the US,
but which for 2020 were concentrated in the third quarter, as a
result of US tax payment extensions granted due to COVID-19.
Key figures
Below we provide an overview of selected key figures of the
Group. For further information about key figures related to
capital management, refer to the “Capital, liquidity and funding,
and balance sheet” section of this report.
Cost / income ratio
The cost / income ratio was 73.3%, compared with 80.5%,
reflecting an increase in operating income, with a partly
offsetting effect driven by higher operating expenses. The cost /
income ratio is measured based on income before credit loss
expenses or releases.
Common equity tier 1 capital
Common equity tier 1 (CET1) capital increased by USD 4.4 billion
to USD 39.9 billion, mainly as a result of operating profit before
tax of USD 8.2 billion, foreign currency translation effects of
USD 1.2 billion and deferred tax assets on temporary differences
of USD 0.4 billion. The increase was partly offset by our capital
reserve for potential share repurchases of USD 2.0 billion,
accruals for dividends of USD 1.3 billion, current tax expenses of
USD 1.2 billion, share repurchases under our share repurchase
program of USD 0.4 billion, and defined benefit plans of
USD 0.3 billion.
Return on CET1 capital
Our return on CET1 capital (RoCET1) was 17.4%, compared
with 12.4%, reflecting a USD 2.3 billion increase in net profit
attributable to shareholders, with a partly offsetting effect driven
by USD 2.9 billion higher average CET1 capital.
Risk-weighted assets
Risk-weighted assets (RWA) increased by USD 29.9 billion to
USD 289.1 billion, driven by increases of USD 25.1 billion in
credit and counterparty credit risk RWA, including USD 7.7
billion from currency effects, USD 5.3 billion in market risk RWA,
and USD 1.3 billion in non-counterparty-related risk RWA, partly
offset by a reduction of USD 1.8 billion in operational risk RWA.
Common equity tier 1 capital ratio
Our CET1 capital ratio increased 0.1 percentage points to
13.8%, reflecting a USD 4.4 billion increase in CET1 capital that
was partly offset by the aforementioned increase in RWA.
Leverage ratio denominator (excluding temporary exemption
from FINMA)
The leverage ratio denominator (LRD) increased by USD 126
billion to USD 1,037 billion. The increase was driven by asset size
and other movements of USD 82 billion and currency effects of
USD 43 billion.
Common equity tier 1 leverage ratio (excluding temporary
exemption from FINMA)
Our CET1 leverage ratio decreased from 3.90% to 3.85% as of
31 December 2020, as the aforementioned increase in the LRD
more than offset the USD 4.4 billion increase in CET1 capital.
Going concern leverage ratio (excluding temporary exemption
from FINMA)
Our going concern leverage ratio decreased from 5.7% to
5.4%, as the USD 4.3 billion increase in our going concern
capital was more than offset by the aforementioned USD 126
billion increase in the LRD.
Personnel
We employed 71,551 personnel (full-time equivalents) as of
31 December 2020, a net increase of 2,950 compared with
31 December 2019, mostly reflecting the insourcing of certain
activities from third-party vendors to our Business Solutions
Centers.
76
76
Financial and operating performance | Group performance
Sensitivity to interest rate movements
accruals for dividends of USD 1.3 billion, current tax expenses of
USD 1.2 billion, share repurchases under our share repurchase
As of 31 December 2020, we estimate that a parallel shift in
program of USD 0.4 billion, and defined benefit plans of
yield curves by +100 basis points could lead to a combined
USD 0.3 billion.
increase in annual net interest income of approximately USD 1.6
billion in Global Wealth Management and Personal & Corporate
Return on CET1 capital
Return on equity
USD million, except where indicated
Net profit
Net profit / (loss) attributable to shareholders
Banking. A parallel shift in yield curves by –100 basis points
Our return on CET1 capital (RoCET1) was 17.4%, compared
could lead to a combined reduction in annual net interest
with 12.4%, reflecting a USD 2.3 billion increase in net profit
Equity
Equity attributable to shareholders
Less: goodwill and intangible assets
Tangible equity attributable to shareholders
Less: other CET1 deductions
Common equity tier 1 capital
Return on equity
Return on equity (%)
Return on tangible equity (%)
Return on common equity tier 1 capital (%)
As of or for the year ended
3311..1122..2200
31.12.19
31.12.18
66,,555577
4,304
4,516
5599,,444455
66,,448800
5522,,996655
1133,,007755
3399,,889900
1111..33
1122..88
1177..44
54,501
6,469
48,032
12,497
35,535
7.9
9.0
12.4
52,896
6,647
46,249
12,176
34,073
8.6
9.8
13.1
Net new money and invested assets
Management’s discussion and analysis on net new money and invested assets is provided in the “Global Wealth Management” and
“Asset Management” sections of this report.
Net new money1
USD billion
GGlloobbaall WWeeaalltthh MMaannaaggeemmeenntt
AAsssseett MMaannaaggeemmeenntt
of which: excluding money market flows
of which: money market flows
11 Net new money excludes interest and dividend income.
Invested assets
USD billion
GGlloobbaall WWeeaalltthh MMaannaaggeemmeenntt
AAsssseett MMaannaaggeemmeenntt
of which: excluding money market funds
of which: money market funds
For the year ended
3311..1122..2200
31.12.19
31.12.18
4433..33
8800..11
8877..55
((77..44))
31.6
17.8
12.6
5.2
24.7
32.2
24.7
7.5
3311..1122..2200
33,,001166
11,,009922
999955
9977
As of
31.12.19
2,635
903
801
102
31.12.18
2,260
781
686
95
% change from
31.12.19
14
21
24
(4)
income of approximately USD 0.4 billion.
attributable to shareholders, with a partly offsetting effect driven
These estimates are based on a hypothetical scenario of an
by USD 2.9 billion higher average CET1 capital.
immediate change in interest rates, equal across all currencies
and relative to implied forward rates as of 31 December 2020
Risk-weighted assets
applied to our banking book. These estimates further assume no
change to balance sheet size and structure, constant foreign
exchange rates, and no specific management action.
Seasonal characteristics
Risk-weighted assets (RWA) increased by USD 29.9 billion to
USD 289.1 billion, driven by increases of USD 25.1 billion in
credit and counterparty credit risk RWA, including USD 7.7
billion from currency effects, USD 5.3 billion in market risk RWA,
and USD 1.3 billion in non-counterparty-related risk RWA, partly
offset by a reduction of USD 1.8 billion in operational risk RWA.
Our revenues may show seasonal patterns, notably in the
Investment Bank and Global Wealth Management. These
Common equity tier 1 capital ratio
business divisions typically show the highest client activity levels
in the first quarter, with lower levels throughout the rest of the
year, especially during the summer months and end-of-year
Our CET1 capital ratio increased 0.1 percentage points to
13.8%, reflecting a USD 4.4 billion increase in CET1 capital that
was partly offset by the aforementioned increase in RWA.
holiday season.
Net new money can be affected by annual tax payments,
Leverage ratio denominator (excluding temporary exemption
which are usually concentrated in the second quarter in the US,
from FINMA)
but which for 2020 were concentrated in the third quarter, as a
result of US tax payment extensions granted due to COVID-19.
The leverage ratio denominator (LRD) increased by USD 126
billion to USD 1,037 billion. The increase was driven by asset size
and other movements of USD 82 billion and currency effects of
Key figures
USD 43 billion.
Below we provide an overview of selected key figures of the
Common equity tier 1 leverage ratio (excluding temporary
Group. For further information about key figures related to
exemption from FINMA)
capital management, refer to the “Capital, liquidity and funding,
and balance sheet” section of this report.
Our CET1 leverage ratio decreased from 3.90% to 3.85% as of
31 December 2020, as the aforementioned increase in the LRD
more than offset the USD 4.4 billion increase in CET1 capital.
Cost / income ratio
The cost / income ratio was 73.3%, compared with 80.5%,
Going concern leverage ratio (excluding temporary exemption
reflecting an increase in operating income, with a partly
from FINMA)
offsetting effect driven by higher operating expenses. The cost /
Our going concern leverage ratio decreased from 5.7% to
income ratio is measured based on income before credit loss
5.4%, as the USD 4.3 billion increase in our going concern
expenses or releases.
capital was more than offset by the aforementioned USD 126
Common equity tier 1 capital
Common equity tier 1 (CET1) capital increased by USD 4.4 billion
Personnel
billion increase in the LRD.
to USD 39.9 billion, mainly as a result of operating profit before
We employed 71,551 personnel (full-time equivalents) as of
tax of USD 8.2 billion, foreign currency translation effects of
31 December 2020, a net increase of 2,950 compared with
USD 1.2 billion and deferred tax assets on temporary differences
31 December 2019, mostly reflecting the insourcing of certain
of USD 0.4 billion. The increase was partly offset by our capital
activities from third-party vendors to our Business Solutions
reserve for potential share repurchases of USD 2.0 billion,
Centers.
76
77
77
Financial and operating performance
Financial and operating performance | Global Wealth Management
Global Wealth Management
Global Wealth Management1
USD million, except where indicated
Results
Net interest income
Recurring net fee income2
Transaction-based income3
Other income
Income
Credit loss (expense) / release
TToottaall ooppeerraattiinngg iinnccoommee
TToottaall ooppeerraattiinngg eexxppeennsseess
BBuussiinneessss ddiivviissiioonn ooppeerraattiinngg pprrooffiitt // ((lloossss)) bbeeffoorree ttaaxx
As of or for the year ended
3311..1122..2200
31.12.19
% change from
31.12.19
44,,002277
99,,337722
33,,557766
115599
1177,,113344
((8888))
1177,,004455
1133,,002266
44,,001199
3,947
9,258
3,059
110
16,373
(20)
16,353
12,955
3,397
2
1
17
45
5
337
4
1
18
3
1
3
(7)
Performance measures and other information
Recurring income4
Recurring income as a percentage of income (%)
Financial advisor variable compensation5,6
Compensation commitments with recruited financial advisors5,7
Pre-tax profit growth (%)
Cost / income ratio (%)
Average attributed equity (USD billion)8
Return on attributed equity (%)8
Risk-weighted assets (USD billion)8
Leverage ratio denominator (USD billion)8,9
Goodwill and intangible assets (USD billion)
Net new money (USD billion)
Invested assets (USD billion)
Net margin on invested assets (bps)10
Gross margin on invested assets (bps)
Client assets (USD billion)11
Loans, gross (USD billion)12
Customer deposits (USD billion)12
Recruitment loans to financial advisors5
Other loans to financial advisors5
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)13,14
(5)
Advisors (full-time equivalents)
11 Comparatives may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events
after the reporting period. 22 Recurring net fee income consists of fees for services provided on an ongoing basis, such as portfolio management fees, asset-based investment fund fees and custody fees, which are
generated on client assets, as well as credit card fees and administrative fees for accounts. 33 Transaction-based income consists of the non-recurring portion of net fee and commission income, mainly composed
of brokerage and transaction-based investment fund fees, as well as fees for payment and foreign exchange transactions, together with other net income from financial instruments measured at fair value through
profit or loss. 44 Recurring income consists of net interest income and recurring net fee income. 55 Relates to licensed professionals with the ability to provide investment advice to clients in the Americas.
66 Financial advisor variable compensation consists of formulaic compensation based directly on compensable revenues generated by financial advisors and supplemental compensation calculated on the basis of
financial advisor productivity, firm tenure, new assets and other variables. 77 Compensation commitments with recruited financial advisors represent expenses related to compensation commitments granted to
financial advisors at the time of recruitment that are subject to vesting requirements. 88 Refer to the “Capital, liquidity and funding, and balance sheet” section of this report for more information. 99 The leverage
ratio denominator as of 31 December 2020 does not reflect the effects of the temporary exemption that has been granted by FINMA in connection with COVID-19. Refer to the “Regulatory and legal
developments” section of this report for more information. 1100 Calculated as operating profit before tax (annualized as applicable) divided by average invested assets. 1111 Client assets are composed of invested
assets and other assets held purely for transactional purposes or custody only. 1122 Loans and Customer deposits in this table include customer brokerage receivables and payables, respectively, which are presented
in a separate reporting line on the balance sheet. 1133 Refer to the “Risk management and control” section of this report for more information about (credit-)impaired exposures. 1144 Excludes loans to financial
advisors.
13,205
80.6
3,501
542
4.4
79.1
16.6
20.5
78.1
312.7
5.1
31.6
2,635
14
66
2,909
179.3
296.1
2,053
824
0.3
10,077
1133,,339999
7788..22
33,,558899
550022
1188..33
7766..00
1177..11
2233..66
8877..22
337711..22
55..11
4433..33
33,,001166
1155
6655
33,,338822
221133..11
334488..00
11,,887722
669977
00..44
99,,557755
14
11
(2)
16
19
18
(9)
(15)
12
19
0
78
78
Financial and operating performance | Global Wealth Management
Global Wealth Management
2020 compared with 2019
Results
Profit before tax increased by USD 622 million, or 18%, to
USD 4,019 million, driven by higher operating income, which
was partly offset by higher operating expenses.
Operating income
Total operating income increased by USD 692 million, or 4%, to
USD 17,045 million, driven by increases across all income lines,
partly offset by higher credit loss expenses.
income
to
USD 4,027 million, mostly reflecting growth in lending revenues,
partly offset by lower deposit revenues, mainly due to lower US
dollar interest rates and despite higher deposit volumes.
increased by USD 80 million
interest
Net
professional fees, travel and marketing (as a result of COVID-19-
related impacts).
› Refer to the “Group performance” section and “Note 1b Changes
in accounting policies, comparability and other adjustments” in
the “Consolidated financial statements” section of this report for
more information about the modification of deferred
compensation awards
Pre-tax profit growth
Pre-tax profit growth in 2020 was 18.3%, compared with 4.4%
in 2019. Our target range is 10–15% over the cycle.
Cost / income ratio
The cost / income ratio decreased to 76.0% from 79.1%,
reflecting positive operating leverage.
Recurring net fee income increased by USD 114 million to
USD 9,372 million, primarily driven by higher average invested
assets, offset by lower margins, largely due to flows into lower-
margin funds and mandates.
Transaction-based income increased by USD 517 million to
USD 3,576 million, reflecting high levels of client activity in all
In 2019,
regions and constructive market opportunities.
transaction-based income included a USD 75 million fee received
from Personal & Corporate Banking for the shift of USD 6 billion
of business volume from Global Wealth Management to
Personal & Corporate Banking.
Other income increased by USD 49 million to USD 159
million, primarily driven by a gain of USD 60 million related to
the sale in 2020 of a majority stake in Fondcenter AG. 2019
included gains related to the repositioning of the liquidity
portfolio in the Americas and legacy security positions.
› Refer to “Note 29 Changes in organization and acquisitions and
disposals of subsidiaries and businesses” in the “Consolidated
Invested assets
Invested assets increased by USD 381 billion, or 14%, to
USD 3,016 billion, predominantly driven by positive market
performance of USD 291 billion, positive currency effects of
USD 48 billion and net new money inflows of USD 43 billion.
Net new money of USD 43 billion was mainly driven by
in Asia Pacific and EMEA. Mandate penetration
inflows
decreased to 34.0% from 34.3%.
Loans
Loans increased by USD 33.8 billion, or 19%, to USD 213.1
billion, primarily driven by net new loans of USD 26.3 billion,
USD 5.9 billion from foreign exchange translation and USD 1.6
billion from the transfer of the aircraft leasing business from
Personal & Corporate Banking in the first quarter of 2020. Net
new loans were largely driven by an increase in Lombard loans.
Loan penetration increased to 7.1% from 6.8% in 2019.
› Refer to the “Risk management and control” section of this
financial statements” section of this report for more information
report for more information
about the sale of a majority stake in Fondcenter AG
the
forward-looking
Net credit loss expenses were USD 88 million, compared with
net expenses of USD 20 million. Stage 1 and 2 credit loss
expenses were USD 48 million, largely resulting from an update
to
their associated
weightings, factoring in updated macroeconomic assumptions
to reflect the effects of the COVID-19 pandemic, in particular
updated GDP and unemployment assumptions, as well as model
updates. Stage 3 net credit loss expenses were USD 40 million,
mostly reflecting losses from a small number of collateralized
and securities-based lending positions.
scenarios and
Operating expenses
Total operating expenses increased by USD 71 million to
USD 13,026 million, mainly driven by higher personnel expenses,
related to financial advisor variable compensation and the
modification of certain outstanding deferred compensation
awards, and an increase in provisions for litigation, regulatory
and similar matters. This was mostly offset by lower costs for
Net new fee-generating assets
Starting from the first quarter of 2021, we will introduce a new
performance measure: net new fee-generating assets, which
captures the growth in clients’ invested assets from net flows
related to mandates, investment funds with recurring fees,
hedge funds and private markets investments, combined with
dividend and interest payments into mandates, less fees paid by
clients to UBS. The underlying assets and products generate
most of Global Wealth Management’s recurring fees and a
portion of its transaction-based income.
Compared with net new money, which we will continue to
disclose exclusively in our Annual Report going forward, net new
fee-generating assets will exclude flows related to assets that
generate revenues only when traded in the form of commissions
and transaction spreads. The new measure, unlike net new
money, will also exclude deposit flows that generate net interest
income. We believe that net new fee-generating assets, by
including only flows that are directly linked to recurring
revenues, is a better indicator of future profitability than net
new money. We will continue to disclose transaction-based
income performance in our quarterly and annual reporting,
given its importance to our business, as well as net new loans by
region as a key driver of net interest income.
79
79
As of or for the year ended
3311..1122..2200
31.12.19
% change from
31.12.19
44,,002277
99,,337722
33,,557766
115599
1177,,113344
((8888))
1177,,004455
1133,,002266
44,,001199
1133,,339999
7788..22
33,,558899
550022
1188..33
7766..00
1177..11
2233..66
8877..22
337711..22
55..11
4433..33
33,,001166
1155
6655
33,,338822
221133..11
334488..00
11,,887722
669977
00..44
99,,557755
3,947
9,258
3,059
110
16,373
(20)
16,353
12,955
3,397
13,205
80.6
3,501
542
4.4
79.1
16.6
20.5
78.1
312.7
5.1
31.6
2,635
14
66
2,909
179.3
296.1
2,053
824
0.3
10,077
2
1
17
45
5
4
1
18
337
1
3
(7)
3
12
19
0
14
11
(2)
16
19
18
(9)
(15)
(5)
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)13,14
Advisors (full-time equivalents)
11 Comparatives may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events
after the reporting period. 22 Recurring net fee income consists of fees for services provided on an ongoing basis, such as portfolio management fees, asset-based investment fund fees and custody fees, which are
generated on client assets, as well as credit card fees and administrative fees for accounts. 33 Transaction-based income consists of the non-recurring portion of net fee and commission income, mainly composed
of brokerage and transaction-based investment fund fees, as well as fees for payment and foreign exchange transactions, together with other net income from financial instruments measured at fair value through
profit or loss. 44 Recurring income consists of net interest income and recurring net fee income. 55 Relates to licensed professionals with the ability to provide investment advice to clients in the Americas.
66 Financial advisor variable compensation consists of formulaic compensation based directly on compensable revenues generated by financial advisors and supplemental compensation calculated on the basis of
financial advisor productivity, firm tenure, new assets and other variables. 77 Compensation commitments with recruited financial advisors represent expenses related to compensation commitments granted to
financial advisors at the time of recruitment that are subject to vesting requirements. 88 Refer to the “Capital, liquidity and funding, and balance sheet” section of this report for more information. 99 The leverage
ratio denominator as of 31 December 2020 does not reflect the effects of the temporary exemption that has been granted by FINMA in connection with COVID-19. Refer to the “Regulatory and legal
developments” section of this report for more information. 1100 Calculated as operating profit before tax (annualized as applicable) divided by average invested assets. 1111 Client assets are composed of invested
assets and other assets held purely for transactional purposes or custody only. 1122 Loans and Customer deposits in this table include customer brokerage receivables and payables, respectively, which are presented
in a separate reporting line on the balance sheet. 1133 Refer to the “Risk management and control” section of this report for more information about (credit-)impaired exposures. 1144 Excludes loans to financial
Global Wealth Management1
USD million, except where indicated
Results
Net interest income
Recurring net fee income2
Transaction-based income3
Other income
Income
Credit loss (expense) / release
TToottaall ooppeerraattiinngg iinnccoommee
TToottaall ooppeerraattiinngg eexxppeennsseess
BBuussiinneessss ddiivviissiioonn ooppeerraattiinngg pprrooffiitt // ((lloossss)) bbeeffoorree ttaaxx
Performance measures and other information
Recurring income4
Recurring income as a percentage of income (%)
Financial advisor variable compensation5,6
Compensation commitments with recruited financial advisors5,7
Pre-tax profit growth (%)
Cost / income ratio (%)
Average attributed equity (USD billion)8
Return on attributed equity (%)8
Risk-weighted assets (USD billion)8
Leverage ratio denominator (USD billion)8,9
Goodwill and intangible assets (USD billion)
Net new money (USD billion)
Invested assets (USD billion)
Net margin on invested assets (bps)10
Gross margin on invested assets (bps)
Client assets (USD billion)11
Loans, gross (USD billion)12
Customer deposits (USD billion)12
Recruitment loans to financial advisors5
Other loans to financial advisors5
advisors.
78
Financial and operating performance Financial and operating performance | Global Wealth Management
Regional breakdown of performance measures
As of or for the year ended 31.12.20
USD billion, except where indicated
Total operating income (USD million)
Total operating expenses (USD million)
Operating profit / (loss) before tax (USD million)
Cost / income ratio (%)
Loans, gross
Net new loans
Loan penetration (%)5
Mandate volume
Net new mandates
Mandate penetration (%)5
Invested assets
Net new money
Advisors (full-time equivalents)
Americas1
99,,002277
77,,666677
11,,336600
8844..44
7722..554
99..88
44..66
662200
1199..99
3399..55
11,,556688
((44..44))
66,,330055
Switzerland
11,,770000
11,,005588
664422
6611..77
4411..99
22..44
1155..33
9988
11..99
3355..77
227733
33..77
669955
EMEA2
33,,555566
22,,559999
995577
7722..77
4488..33
88..22
77..99
223366
55..22
3388..66
661122
1199..55
11,,557733
Asia Pacific
22,,773355
11,,667744
11,,006611
6611..22
4499..88
55..99
88..99
7722
55..88
1122..99
556600
2255..00
991111
Global Wealth
Management3
1177,,004455
1133,,002266
44,,001199
7766..00
221133..11
2266..33
77..11
11,,002266
3322..55
3344..00
33,,001166
4433..33
99,,557755
11 Including the following business units: United States and Canada; and Latin America. 22 Including the following business units: Europe; Central and Eastern Europe, Greece and Israel; and Middle East and Africa.
33 Including minor functions, which are not included in the four regions individually presented in this table, with USD 28 million of total operating income, USD 28 million of total operating expenses, USD 0 million of
operating profit before tax, USD 0.7 billion of loans, USD 0.0 billion of net new loan inflows, USD 0.3 billion of mandate volume, USD 0.3 billion of net new mandate outflows, USD 3 billion of invested assets,
USD 0.5 billion of net new money outflows and 92 advisors in 2020. 44 Loans include customer brokerage receivables, which are presented in a separate reporting line on the balance sheet. 55 Loans, gross, and
mandate volume, respectively, as a percentage of invested assets.
Regional comments: 2020 compared with 2019
Americas
Profit before tax increased by USD 86 million to USD 1,360
million, driven by lower operating expenses, which were partly
offset by lower operating income. Operating income decreased
by USD 31 million to USD 9,027 million, driven by lower net
interest income, which resulted primarily from US dollar interest
rate headwinds despite higher loan volumes, and higher credit
loss expenses. This was partly offset by an increase in recurring
net fee income as a result of higher average invested assets and
higher transaction-based income. The cost / income ratio
decreased from 85.7% to 84.4%. Loans increased 16% to
USD 72 billion, reflecting USD 9.8 billion of net new loans.
Mandate penetration increased from 39.2% to 39.5%.
Switzerland
Profit before tax increased by USD 64 million to USD 642 million.
Operating income increased by USD 117 million to USD 1,700
million, mainly driven by higher net interest income from
increased
lending revenues, and higher transaction-based
income. The cost / income ratio decreased from 63.7% to
increased 16% to USD 42 billion, mostly
61.7%. Loans
reflecting foreign currency effects and net new loans of USD 2.4
billion. Mandate penetration decreased from 37.5% to 35.7%.
EMEA
Profit before tax increased by USD 28 million to USD 957 million,
driven by higher operating income, which was partly offset by
higher operating expenses. Operating income increased by
USD 142 million
to higher
transaction-based income, net interest income and recurring net
fee income, reflecting higher average invested assets. The cost /
income ratio was stable at 72.7%. Loans increased 30% to
USD 48 billion, mainly reflecting USD 8.2 billion of net new
loans and foreign currency effects. Mandate penetration
increased from 37.7% to 38.6%.
to USD 3,556 million, due
Asia Pacific
Profit before tax increased by USD 501 million to USD 1,061
million. Operating income increased by USD 515 million to
USD 2,735 million, mostly driven by transaction-based income,
net interest income and recurring net fee income, as a result of
higher average
income ratio
invested assets. The cost
decreased from 74.8% to 61.2%. Loans increased 16% to
USD 50 billion, with USD 5.9 billion of net new loans. Mandate
penetration decreased from 13.4% to 12.9%.
/
80
80
Financial and operating performance | Global Wealth Management
Regional breakdown of performance measures
As of or for the year ended 31.12.20
USD billion, except where indicated
Total operating income (USD million)
Total operating expenses (USD million)
Operating profit / (loss) before tax (USD million)
Cost / income ratio (%)
Loans, gross
Net new loans
Loan penetration (%)5
Mandate volume
Net new mandates
Mandate penetration (%)5
Invested assets
Net new money
Advisors (full-time equivalents)
Americas1
Switzerland
Asia Pacific
99,,002277
77,,666677
11,,336600
8844..44
7722..554
99..88
44..66
662200
1199..99
3399..55
11,,556688
((44..44))
66,,330055
11,,770000
11,,005588
664422
6611..77
4411..99
22..44
1155..33
9988
11..99
3355..77
227733
33..77
669955
EMEA2
33,,555566
22,,559999
995577
7722..77
4488..33
88..22
77..99
223366
55..22
3388..66
661122
1199..55
11,,557733
Global Wealth
Management3
1177,,004455
1133,,002266
44,,001199
7766..00
221133..11
2266..33
77..11
11,,002266
3322..55
3344..00
33,,001166
4433..33
99,,557755
22,,773355
11,,667744
11,,006611
6611..22
4499..88
55..99
88..99
7722
55..88
1122..99
556600
2255..00
991111
11 Including the following business units: United States and Canada; and Latin America. 22 Including the following business units: Europe; Central and Eastern Europe, Greece and Israel; and Middle East and Africa.
33 Including minor functions, which are not included in the four regions individually presented in this table, with USD 28 million of total operating income, USD 28 million of total operating expenses, USD 0 million of
operating profit before tax, USD 0.7 billion of loans, USD 0.0 billion of net new loan inflows, USD 0.3 billion of mandate volume, USD 0.3 billion of net new mandate outflows, USD 3 billion of invested assets,
USD 0.5 billion of net new money outflows and 92 advisors in 2020. 44 Loans include customer brokerage receivables, which are presented in a separate reporting line on the balance sheet. 55 Loans, gross, and
mandate volume, respectively, as a percentage of invested assets.
Regional comments: 2020 compared with 2019
EMEA
Personal & Corporate Banking
Personal & Corporate Banking – in Swiss francs1
CHF million, except where indicated
Results
Net interest income
Recurring net fee income2
Transaction-based income3
Other income
Income
Credit loss (expense) / release
TToottaall ooppeerraattiinngg iinnccoommee
TToottaall ooppeerraattiinngg eexxppeennsseess
BBuussiinneessss ddiivviissiioonn ooppeerraattiinngg pprrooffiitt // ((lloossss)) bbeeffoorree ttaaxx
Performance measures and other information
Average attributed equity (CHF billion)4
Return on attributed equity (%)4
Americas
Profit before tax increased by USD 28 million to USD 957 million,
driven by higher operating income, which was partly offset by
Pre-tax profit growth (%)
Cost / income ratio (%)
Profit before tax increased by USD 86 million to USD 1,360
higher operating expenses. Operating income increased by
million, driven by lower operating expenses, which were partly
USD 142 million
to USD 3,556 million, due
to higher
offset by lower operating income. Operating income decreased
transaction-based income, net interest income and recurring net
by USD 31 million to USD 9,027 million, driven by lower net
fee income, reflecting higher average invested assets. The cost /
interest income, which resulted primarily from US dollar interest
income ratio was stable at 72.7%. Loans increased 30% to
rate headwinds despite higher loan volumes, and higher credit
USD 48 billion, mainly reflecting USD 8.2 billion of net new
loss expenses. This was partly offset by an increase in recurring
loans and foreign currency effects. Mandate penetration
net fee income as a result of higher average invested assets and
increased from 37.7% to 38.6%.
higher transaction-based income. The cost / income ratio
decreased from 85.7% to 84.4%. Loans increased 16% to
Asia Pacific
Net interest margin (bps)
Risk-weighted assets (CHF billion)4
Leverage ratio denominator (CHF billion)4,5
Business volume for Personal Banking (CHF billion)
Net new business volume for Personal Banking (CHF billion)
Net new business volume growth for Personal Banking (%)6
Active Digital Banking clients in Personal Banking (%)7
Active Digital Banking clients in Corporate & Institutional Clients (%)8
Mobile Banking log-in share in Personal Banking (%)9
Client assets (CHF billion)10
USD 72 billion, reflecting USD 9.8 billion of net new loans.
Profit before tax increased by USD 501 million to USD 1,061
Mandate penetration increased from 39.2% to 39.5%.
million. Operating income increased by USD 515 million to
Loans, gross (CHF billion)
Customer deposits (CHF billion)
As of or for the year ended
3311..1122..2200
31.12.19
% change from
31.12.19
11,,991166
667766
998855
7744
33,,665500
((224433))
33,,440077
22,,223333
11,,117755
88..33
1144..11
((1188..00))
6611..22
114422
6633..88
221199..99
117799
1111..66
66..99
6666..11
7777..99
6688..00
770022
113366..44
116611..11
1,980
634
1,041
60
3,714
(22)
3,692
2,259
1,433
8.4
17.1
(18.6)
60.8
150
65.0
217.1
168
7.3
4.7
62.1
76.4
61.9
685
132.2
150.5
(3)
7
(5)
23
(2)
(8)
(1)
(18)
(1)
(2)
1
6
2
3
7
Switzerland
USD 2,735 million, mostly driven by transaction-based income,
net interest income and recurring net fee income, as a result of
Profit before tax increased by USD 64 million to USD 642 million.
higher average
invested assets. The cost
/
income ratio
Operating income increased by USD 117 million to USD 1,700
decreased from 74.8% to 61.2%. Loans increased 16% to
million, mainly driven by higher net interest income from
USD 50 billion, with USD 5.9 billion of net new loans. Mandate
increased
lending revenues, and higher transaction-based
penetration decreased from 13.4% to 12.9%.
income. The cost / income ratio decreased from 63.7% to
61.7%. Loans
increased 16% to USD 42 billion, mostly
reflecting foreign currency effects and net new loans of USD 2.4
billion. Mandate penetration decreased from 37.5% to 35.7%.
9922..99
Secured loan portfolio as a percentage of total loan portfolio, gross (%)
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)11
11 Comparatives may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events
after the reporting period. 22 Recurring net fee income consists of fees for services provided on an ongoing basis, such as portfolio management fees, asset-based investment fund fees and custody fees, which are
generated on client assets, as well as administrative fees for accounts. 33 Transaction-based income consists of the non-recurring portion of net fee and commission income, mainly composed of brokerage and
transaction-based investment fund fees, and credit card fees, as well as fees for payment and foreign exchange transactions, together with other net income from financial instruments measured at fair value
through profit or loss. 44 Refer to the “Capital, liquidity and funding, and balance sheet” section of this report for more information. 55 The leverage ratio denominator as of 31 December 2020 does not reflect
the effects of the temporary exemption that has been granted by FINMA in connection with COVID-19. Refer to the “Regulatory and legal developments” section of this report for more information. 66 Calculated
as net new business volume for the period (annualized as applicable) divided by business volume at the beginning of the period. 77 “Clients” refers to the number of unique business relationships operated by
Personal Banking and “active” means at least one log-in within the past month (log-in time stamp is allocated to all business relationship numbers in a digital banking contract). Excluded are persons under the age
of 15, clients who do not have a private account, clients domiciled outside Switzerland, and clients who have defaulted on loans or credit facilities. In 2020, 83.3% of clients of Personal Banking were “activated
users” of Digital Banking (i.e., clients who had logged into Digital Banking at least once in the course of their relationship with UBS). 88 “Clients” refers to the number of unique business relationships or legal
entities operated by Corporate & Institutional Clients and “active” means at least one log-in within the past month (log-in time stamp is allocated to all business relationship numbers or per legal entity in a digital
banking contract). Excluded are clients that do not have an account, mono-product clients and clients that have defaulted on loans or credit facilities. 99 Mobile Banking app log-ins as a percentage of total log-ins
via E-Banking and Mobile Banking app in Personal Banking (if a digital banking contract is linked to multiple business relationships, the log-in is attributed to the business relationship with the most banking
products in use). 1100 Client assets are composed of invested assets and other assets held purely for transactional purposes or custody only. Net new money is not measured for Personal & Corporate Banking.
1111 Refer to the “Risk management and control” section of this report for more information about (credit-)impaired exposures.
92.6
1.1
11..11
80
81
81
Financial and operating performance
Financial and operating performance | Personal & Corporate Banking
Other income increased by CHF 14 million to CHF 74 million,
mostly from a valuation gain on our equity ownership of SIX
Group.
Net credit loss expenses were CHF 243 million, compared
with expenses of CHF 22 million. Stage 1 and 2 net expenses
were CHF 123 million, mainly reflecting expenses for selected
exposures to large Swiss corporate clients, small and medium-
sized entities, financial intermediaries, and, to a lesser extent,
real estate. These modeled expected losses were predominantly
driven by the update to the forward-looking scenarios and their
associated weightings, factoring in updated macroeconomic
assumptions to reflect the effects of the COVID-19 pandemic, in
particular Swiss GDP, unemployment and real estate prices, as
well as post-model adjustments. Stage 3 net expenses were
CHF 120 million, primarily reflecting expenses of CHF 54 million
related to a case of fraud at a commodity trade finance
counterparty, which affected a number of lenders, including
UBS. These stage 3 expenses also were driven by a number of
other defaults, mainly across our corporate portfolios, as well as
a further deterioration of corporate counterparties that were
credit-impaired as of 31 December 2019.
Operating expenses
Total operating expenses decreased by CHF 26 million, or 1%,
to CHF 2,233 million, mostly driven by
lower variable
compensation in line with lower profit.
Cost / income ratio
The cost / income ratio slightly increased to 61.2% from 60.8%,
reflecting lower income and lower operating expenses.
2020 compared with 2019
Results
Profit before tax decreased by CHF 258 million, or 18%, to
CHF 1,175 million, reflecting higher credit loss expenses and
lower income, partly offset by lower operating expenses.
Operating income
Total operating income decreased by CHF 285 million, or 8%, to
CHF 3,407 million, reflecting higher net credit loss expenses and
lower net interest and transaction-based income, partly offset by
record recurring net fees and higher other income.
Net
interest
income decreased by CHF 64 million to
CHF 1,916 million, mainly driven by lower deposit revenues,
reflecting a decrease in margins due to the ongoing low interest
rate environment.
Recurring net fee income increased by CHF 42 million to
CHF 676 million, primarily reflecting higher custody fees from
increased client assets, as well as higher income from bundled
products.
Transaction-based income decreased by CHF 56 million to
CHF 985 million, largely driven by lower revenues from credit
card fees and foreign exchange transactions, reflecting lower
spending on travel and leisure by clients due to the COVID-19
pandemic. In 2019, transaction-based income included a CHF 73
million fee paid to Global Wealth Management for the shift of
CHF 6 billion of business volume
from Global Wealth
Management to Personal & Corporate Banking, while 2020
included a gain of CHF 17 million in relation to the sale of an
equity investment measured at fair value through profit or loss.
82
82
Financial and operating performance | Personal & Corporate Banking
2020 compared with 2019
Other income increased by CHF 14 million to CHF 74 million,
mostly from a valuation gain on our equity ownership of SIX
Results
Group.
Net credit loss expenses were CHF 243 million, compared
Profit before tax decreased by CHF 258 million, or 18%, to
with expenses of CHF 22 million. Stage 1 and 2 net expenses
CHF 1,175 million, reflecting higher credit loss expenses and
were CHF 123 million, mainly reflecting expenses for selected
lower income, partly offset by lower operating expenses.
exposures to large Swiss corporate clients, small and medium-
Operating income
sized entities, financial intermediaries, and, to a lesser extent,
real estate. These modeled expected losses were predominantly
Total operating income decreased by CHF 285 million, or 8%, to
driven by the update to the forward-looking scenarios and their
CHF 3,407 million, reflecting higher net credit loss expenses and
associated weightings, factoring in updated macroeconomic
lower net interest and transaction-based income, partly offset by
assumptions to reflect the effects of the COVID-19 pandemic, in
record recurring net fees and higher other income.
particular Swiss GDP, unemployment and real estate prices, as
Net
interest
income decreased by CHF 64 million to
well as post-model adjustments. Stage 3 net expenses were
CHF 1,916 million, mainly driven by lower deposit revenues,
CHF 120 million, primarily reflecting expenses of CHF 54 million
reflecting a decrease in margins due to the ongoing low interest
related to a case of fraud at a commodity trade finance
rate environment.
counterparty, which affected a number of lenders, including
Recurring net fee income increased by CHF 42 million to
UBS. These stage 3 expenses also were driven by a number of
CHF 676 million, primarily reflecting higher custody fees from
other defaults, mainly across our corporate portfolios, as well as
increased client assets, as well as higher income from bundled
a further deterioration of corporate counterparties that were
products.
credit-impaired as of 31 December 2019.
Transaction-based income decreased by CHF 56 million to
CHF 985 million, largely driven by lower revenues from credit
Operating expenses
card fees and foreign exchange transactions, reflecting lower
Total operating expenses decreased by CHF 26 million, or 1%,
spending on travel and leisure by clients due to the COVID-19
to CHF 2,233 million, mostly driven by
lower variable
pandemic. In 2019, transaction-based income included a CHF 73
compensation in line with lower profit.
million fee paid to Global Wealth Management for the shift of
CHF 6 billion of business volume
from Global Wealth
Cost / income ratio
Management to Personal & Corporate Banking, while 2020
The cost / income ratio slightly increased to 61.2% from 60.8%,
included a gain of CHF 17 million in relation to the sale of an
reflecting lower income and lower operating expenses.
equity investment measured at fair value through profit or loss.
Personal & Corporate Banking – in US dollars1
USD million, except where indicated
Results
Net interest income
Recurring net fee income2
Transaction-based income3
Other income
Income
Credit loss (expense) / release
TToottaall ooppeerraattiinngg iinnccoommee
TToottaall ooppeerraattiinngg eexxppeennsseess
BBuussiinneessss ddiivviissiioonn ooppeerraattiinngg pprrooffiitt // ((lloossss)) bbeeffoorree ttaaxx
Performance measures and other information
Average attributed equity (USD billion)4
Return on attributed equity (%)4
Pre-tax profit growth (%)
Cost / income ratio (%)
Net interest margin (bps)
Risk-weighted assets (USD billion)4
Leverage ratio denominator (USD billion)4,5
Business volume for Personal Banking (USD billion)
Net new business volume for Personal Banking (USD billion)
Net new business volume growth for Personal Banking (%)6
Active Digital Banking clients in Personal Banking (%)7
Active Digital Banking clients in Corporate & Institutional Clients (%)8
Mobile Banking log-in share in Personal Banking (%)9
Client assets (USD billion)10
Loans, gross (USD billion)
Customer deposits (USD billion)
As of or for the year ended
3311..1122..2200
31.12.19
% change from
31.12.19
22,,004499
772255
11,,005544
7799
33,,990088
((225577))
33,,665511
22,,339922
11,,225599
88..99
1144..22
((1122..66))
6611..22
114433
7722..11
224488..33
220022
1122..33
77..11
6666..11
7777..99
6688..00
779933
115544..00
118811..99
1,992
638
1,045
60
3,736
(21)
3,715
2,274
1,441
8.4
17.1
(19.7)
60.9
149
67.1
224.2
174
7.3
4.6
62.1
76.4
61.9
708
136.6
155.5
3
14
1
32
5
(2)
5
(13)
5
7
11
16
12
13
17
9922..99
Secured loan portfolio as a percentage of total loan portfolio, gross (%)
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)11
11 Comparatives may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events
after the reporting period. 22 Recurring net fee income consists of fees for services provided on an ongoing basis, such as portfolio management fees, asset-based investment fund fees and custody fees, which are
generated on client assets, as well as administrative fees for accounts. 33 Transaction-based income consists of the non-recurring portion of net fee and commission income, mainly composed of brokerage and
transaction-based investment fund fees, and credit card fees, as well as fees for payment and foreign exchange transactions, together with other net income from financial instruments measured at fair value
through profit or loss. 44 Refer to the “Capital, liquidity and funding, and balance sheet” section of this report for more information. 55 The leverage ratio denominator as of 31 December 2020 does not reflect
the effects of the temporary exemption that has been granted by FINMA in connection with COVID-19. Refer to the “Regulatory and legal developments” section of this report for more information. 66 Calculated
as net new business volume for the period (annualized as applicable) divided by business volume at the beginning of the period. 77 “Clients” refers to the number of unique business relationships operated by
Personal Banking and “active” means at least one log-in within the past month (log-in time stamp is allocated to all business relationship numbers in a digital banking contract). Excluded are persons under the age
of 15, clients who do not have a private account, clients domiciled outside Switzerland, and clients who have defaulted on loans or credit facilities. In 2020, 83.3% of clients of Personal Banking were “activated
users” of Digital Banking (i.e., clients who had logged into Digital Banking at least once in the course of their relationship with UBS). 88 “Clients” refers to the number of unique business relationships or legal
entities operated by Corporate & Institutional Clients and “active” means at least one log-in within the past month (log-in time stamp is allocated to all business relationship numbers or per legal entity in a digital
banking contract). Excluded are clients that do not have an account, mono-product clients and clients that have defaulted on loans or credit facilities. 99 Mobile Banking app log-ins as a percentage of total log-ins
via E-Banking and Mobile Banking app in Personal Banking (if a digital banking contract is linked to multiple business relationships, the log-in is attributed to the business relationship with the most banking
products in use). 1100 Client assets are composed of invested assets and other assets held purely for transactional purposes or custody only. Net new money is not measured for Personal & Corporate Banking.
1111 Refer to the “Risk management and control” section of this report for more information about (credit-)impaired exposures.
92.6
11..11
1.1
82
83
83
Financial and operating performance
Financial and operating performance | Asset Management
Asset Management
Asset Management1
USD million, except where indicated
Results
Net management fees2
Performance fees
Net gain from disposal of subsidiary
Credit loss (expense) / release
TToottaall ooppeerraattiinngg iinnccoommee
TToottaall ooppeerraattiinngg eexxppeennsseess
BBuussiinneessss ddiivviissiioonn ooppeerraattiinngg pprrooffiitt // ((lloossss)) bbeeffoorree ttaaxx
Performance measures and other information
Average attributed equity (USD billion)3
Return on attributed equity (%)3
Pre-tax profit growth (%)
Cost / income ratio (%)
Risk-weighted assets (USD billion)3
Leverage ratio denominator (USD billion)3,4
Goodwill and intangible assets (USD billion)
Net margin on invested assets (bps)5
Gross margin on invested assets (bps)
Information by business line / asset class
NNeett nneeww mmoonneeyy ((UUSSDD bbiilllliioonn))
Equities6
Fixed Income
of which: money market
Multi-asset & Solutions6
Hedge Fund Businesses
Real Estate & Private Markets
TToottaall nneett nneeww mmoonneeyy
of which: net new money excluding money market
IInnvveesstteedd aasssseettss ((UUSSDD bbiilllliioonn))
Equities6
Fixed Income
of which: money market
Multi-asset & Solutions6
Hedge Fund Businesses
Real Estate & Private Markets
TToottaall iinnvveesstteedd aasssseettss
of which: passive strategies
Information by region
IInnvveesstteedd aasssseettss ((UUSSDD bbiilllliioonn))
Americas
Asia Pacific
Europe, Middle East and Africa (excluding Switzerland)
Switzerland
TToottaall iinnvveesstteedd aasssseettss
As of or for the year ended
3311..1122..2200
31.12.19
% change from
31.12.19
11,,995500
445555
557711
((22))
22,,997744
11,,551199
11,,445555
22..00
7744..22
117733..66
5511..00
66..99
55..88
11..22
1166
3322
6655..11
77..33
((77..44))
66..66
((11..11))
22..33
8800..11
8877..55
550066
227744
9977
117722
4488
9933
11,,009922
445577
225544
118811
229944
336633
11,,009922
1,778
160
0
1,938
1,406
532
1.8
29.7
24.9
72.6
4.6
5.0
1.4
6
23
30.9
(9.2)
5.2
(2.0)
(3.2)
1.3
17.8
12.6
374
253
102
148
42
86
903
374
206
155
236
306
903
10
185
53
8
174
9
51
17
(9)
146
38
35
8
(4)
16
14
8
21
22
24
16
25
19
21
Information by channel
IInnvveesstteedd aasssseettss ((UUSSDD bbiilllliioonn))
Third-party institutional
Third-party wholesale
UBS’s wealth management businesses
TToottaall iinnvveesstteedd aasssseettss
11 Comparatives may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events
after the reporting period. 22 Net management fees include transaction fees, fund administration revenues (including net interest and trading income from lending activities and foreign exchange hedging as part of
the fund services offering), gains or losses from seed money and co-investments, funding costs, and other items that are not Asset Management’s performance fees. 33 Refer to the “Capital, liquidity and funding,
and balance sheet” section of this report for more information. 44 The leverage ratio denominator as of 31 December 2020 does not reflect the effects of the temporary exemption that has been granted by FINMA
in connection with COVID-19. Refer to the “Regulatory and legal developments” section of this report for more information. 55 Calculated as operating profit before tax (annualized as applicable) divided by
average invested assets. 66 Comparative figures have been restated as a result of an adjustment in asset classification, effective as of 1 April 2020, in order to better reflect the underlying nature of certain assets,
following an internal asset reporting review in light of the evolution of our separately managed accounts initiative in the US with Global Wealth Management. The restatement had no effect on total net new money
and no effect on total invested assets. It resulted in an increase of USD 7 billion, or 2%, in invested assets in Equities and a decrease of USD 7 billion, or 5%, in invested assets in Multi-asset & Solutions for the year
ended 31 December 2019.
664488
112288
331166
11,,009922
552
98
253
903
17
31
25
21
84
84
Financial and operating performance | Asset Management
Asset Management
Asset Management1
USD million, except where indicated
Results
Net management fees2
Performance fees
Net gain from disposal of subsidiary
Credit loss (expense) / release
TToottaall ooppeerraattiinngg iinnccoommee
TToottaall ooppeerraattiinngg eexxppeennsseess
BBuussiinneessss ddiivviissiioonn ooppeerraattiinngg pprrooffiitt // ((lloossss)) bbeeffoorree ttaaxx
Performance measures and other information
Average attributed equity (USD billion)3
Return on attributed equity (%)3
Pre-tax profit growth (%)
Cost / income ratio (%)
Risk-weighted assets (USD billion)3
Leverage ratio denominator (USD billion)3,4
Goodwill and intangible assets (USD billion)
Net margin on invested assets (bps)5
Gross margin on invested assets (bps)
Information by business line / asset class
NNeett nneeww mmoonneeyy ((UUSSDD bbiilllliioonn))
of which: net new money excluding money market
Equities6
Fixed Income
of which: money market
Multi-asset & Solutions6
Hedge Fund Businesses
Real Estate & Private Markets
TToottaall nneett nneeww mmoonneeyy
IInnvveesstteedd aasssseettss ((UUSSDD bbiilllliioonn))
Equities6
Fixed Income
of which: money market
Multi-asset & Solutions6
Hedge Fund Businesses
Real Estate & Private Markets
TToottaall iinnvveesstteedd aasssseettss
of which: passive strategies
Information by region
IInnvveesstteedd aasssseettss ((UUSSDD bbiilllliioonn))
Americas
Asia Pacific
Switzerland
TToottaall iinnvveesstteedd aasssseettss
Information by channel
IInnvveesstteedd aasssseettss ((UUSSDD bbiilllliioonn))
Third-party institutional
Third-party wholesale
UBS’s wealth management businesses
TToottaall iinnvveesstteedd aasssseettss
Europe, Middle East and Africa (excluding Switzerland)
As of or for the year ended
3311..1122..2200
31.12.19
% change from
31.12.19
11,,995500
445555
557711
((22))
22,,997744
11,,551199
11,,445555
22..00
7744..22
117733..66
5511..00
66..99
55..88
11..22
1166
3322
6655..11
77..33
((77..44))
66..66
((11..11))
22..33
8800..11
8877..55
550066
227744
9977
117722
4488
9933
11,,009922
445577
225544
118811
229944
336633
11,,009922
664488
112288
331166
11,,009922
1,778
160
0
1,938
1,406
532
1.8
29.7
24.9
72.6
4.6
5.0
1.4
6
23
30.9
(9.2)
5.2
(2.0)
(3.2)
1.3
17.8
12.6
374
253
102
148
42
86
903
374
206
155
236
306
903
552
98
253
903
10
185
53
8
174
9
51
17
(9)
146
38
(4)
35
8
16
14
8
21
22
24
16
25
19
21
17
31
25
21
11 Comparatives may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events
after the reporting period. 22 Net management fees include transaction fees, fund administration revenues (including net interest and trading income from lending activities and foreign exchange hedging as part of
the fund services offering), gains or losses from seed money and co-investments, funding costs, and other items that are not Asset Management’s performance fees. 33 Refer to the “Capital, liquidity and funding,
and balance sheet” section of this report for more information. 44 The leverage ratio denominator as of 31 December 2020 does not reflect the effects of the temporary exemption that has been granted by FINMA
in connection with COVID-19. Refer to the “Regulatory and legal developments” section of this report for more information. 55 Calculated as operating profit before tax (annualized as applicable) divided by
average invested assets. 66 Comparative figures have been restated as a result of an adjustment in asset classification, effective as of 1 April 2020, in order to better reflect the underlying nature of certain assets,
following an internal asset reporting review in light of the evolution of our separately managed accounts initiative in the US with Global Wealth Management. The restatement had no effect on total net new money
and no effect on total invested assets. It resulted in an increase of USD 7 billion, or 2%, in invested assets in Equities and a decrease of USD 7 billion, or 5%, in invested assets in Multi-asset & Solutions for the year
ended 31 December 2019.
2020 compared with 2019
Results
Profit before tax increased by USD 923 million, or 174%, to
USD 1,455 million. The increase included a gain of USD 571
million related to the sale of a majority stake in Fondcenter AG,
our business-to-business (B2B) fund distribution platform, to
Clearstream. Excluding this gain, profit before tax increased by
USD 353 million, or 66%, to USD 884 million, reflecting strong
operating leverage.
› Refer to “Note 29 Changes in organization and acquisitions and
disposals of subsidiaries and businesses” in the “Consolidated
financial statements” section of this report for more information
about the sale of a majority stake in Fondcenter AG
Operating income
Total operating income increased by USD 1,036 million, or 53%,
to USD 2,974 million. Excluding the aforementioned gain of
USD 571 million, total operating income increased by USD 466
million, or 24%.
Net management fees increased by USD 172 million, or 10%,
to USD 1,950 million, mainly resulting from a higher average
invested asset base, driven by a combination of continued strong
net new money generation, a constructive market backdrop and
positive currency translation effects.
Performance fees increased by USD 295 million to USD 455
million, mostly from increases in our Hedge Fund Businesses,
reflecting strong investment performance in a constructive
market environment.
Operating expenses
Total operating expenses increased by USD 113 million, or 8%,
to USD 1,519 million, mainly driven by higher personnel
expenses, reflecting higher compensable revenues, partly offset
by lower general and administrative expenses.
Cost / income ratio
The cost
the
aforementioned gain of USD 571 million, the cost / income ratio
was 63.2%, compared with 72.6% in 2019.
ratio was 51.0%. Excluding
income
/
Invested assets
Invested assets increased to USD 1,092 billion from USD 903
billion, reflecting net new money inflows of USD 80 billion,
positive market performance of USD 69 billion and positive
foreign currency translation effects of USD 40 billion. Excluding
money market flows, net new money was USD 87.5 billion.
Investment performance
2020 was dominated by the COVID-19 pandemic. Economies
around the world were put into lockdown to slow the spread of
the virus, creating an unprecedented collapse in economic
activity. Risk assets experienced sharp drawdowns in challenging
markets early in the year, before concerted monetary and fiscal
policy measures led to a broad-based recovery in valuations
toward the end of the year.
Our active and passive strategies had to contend with highly
volatile markets and rapidly changing performance cycles. As of
year-end 2020, Morningstar assigned a four- or five-star rating
to 69% of our retail and institutional funds (both actively
managed and passive), on an assets under management (AuM)-
weighted basis. Furthermore, 74% of our actively managed
open-ended retail funds and actively managed institutional AuM
(which account in total for 44% of our relevant AuM) are
ranked, on an AuM-weighted basis over a three-year investment
period, above their respective peer median.
Investment performance as of 31 December 2020
In %
% of UBS AM fund assets rated as 4- or 5-star1,2
Total traditional
investments
69
Equities
74
Fixed income
69
Multi-asset
50
% of UBS AM above peer median over a 3-year investment period2,3
63
11 Percentage of AuM to which Morningstar has assigned a four- or five-star rating. AuM reflect the AuM of Asset Management’s retail and institutional funds (both actively managed and passive) across all
domiciles for which Asset Management owns the investment performance, i.e., Asset Management is either the sole portfolio manager or co-portfolio manager. Source: Morningstar (Morningstar® Essentials
Quantitative Star Rating & Rankings; © 2021 Morningstar). Universe is approximately 32% of all active and passive traditional fund assets of Asset Management (Equities, Fixed Income excluding money market,
and Multi-asset) as of 31 December 2020. 22 Morningstar® Essentials Quantitative Star Rating & Rankings; © 2021 Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to
Morningstar and / or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any
damages or losses arising from any use of this information. Past performance is no guarantee of future results. For more detailed information about the Morningstar Rating, including its methodology, please go to:
https://s21.q4cdn.com/198919461/files/doc_downloads/othe_disclosure_materials/MorningstarRatingforFunds.pdf. 33 Percentage of AuM above peer median over a three-year investment period. AuM reflect the
AuM of Asset Management’s actively managed open-ended retail funds across all domiciles and actively managed institutional AuM for which Asset Management owns the investment performance, i.e., Asset
Management is either the sole portfolio manager or co-portfolio manager. Source: Morningstar (Morningstar® Essentials Quantitative Star Rating & Rankings; © 2021 Morningstar), eVestment, KGAST. Universe is
approximately 44% of all actively managed traditional retail fund assets and actively managed traditional institutional AuM of Asset Management (Equities, Fixed Income excluding money market, and Multi-asset)
as of 31 December 2020.
74
80
69
84
85
85
Financial and operating performance
Financial and operating performance | Investment Bank
Investment Bank
Investment Bank1,2
USD million, except where indicated
Results
Advisory
Capital Markets
GGlloobbaall BBaannkkiinngg
Execution & Platform
Derivatives & Solutions
Financing
GGlloobbaall MMaarrkkeettss
of which: Equities
of which: Foreign Exchange, Rates and Credit
Income
Credit loss (expense) / release
TToottaall ooppeerraattiinngg iinnccoommee
TToottaall ooppeerraattiinngg eexxppeennsseess
BBuussiinneessss ddiivviissiioonn ooppeerraattiinngg pprrooffiitt // ((lloossss)) bbeeffoorree ttaaxx
As of or for the year ended
3311..1122..2200
31.12.19
% change from
31.12.19
663344
11,,774444
22,,337788
11,,885577
33,,660099
11,,667744
77,,114411
44,,550022
22,,663388
99,,551199
((330055))
99,,221144
66,,773322
22,,448822
707
1,230
1,937
1,430
2,374
1,557
5,362
3,799
1,563
7,299
(30)
7,269
6,485
784
(10)
42
23
30
52
7
33
19
69
30
923
27
4
217
Performance measures and other information
Pre-tax profit growth (%)
Average attributed equity (USD billion)3
Return on attributed equity (%)3
Cost / income ratio (%)
Risk-weighted assets (USD billion)3
Return on risk-weighted assets, gross (%)
Leverage ratio denominator (USD billion)3,4
Return on leverage ratio denominator, gross (%)5
Goodwill and intangible assets (USD billion)
Average VaR (1-day, 95% confidence, 5 years of historical data)
11 Comparative figures in this table have been restated to reflect the new structure of the Investment Bank, split into Global Banking and Global Markets. Global Banking has two product verticals: Capital Markets
and Advisory. Global Markets combines Equities and Foreign Exchange, Rates and Credit (FRC), with three product verticals: Execution & Platform, Derivatives & Solutions, and Financing. 22 Comparatives may
additionally differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events after the
reporting period. 33 Refer to the “Capital, liquidity and funding, and balance sheet” section of this report for more information. 44 The leverage ratio denominator as of 31 December 2020 does not reflect the
effects of the temporary exemption that has been granted by FINMA in connection with COVID-19. Refer to the “Regulatory and legal developments” section of this report for more information. 55 Leverage ratio
denominators used for the return calculation in 2020 do not reflect the effects of the temporary exemption referred to in footnote 4.
(47.3)
12.3
6.4
88.9
81.1
8.2
293.2
2.5
0.0
9
221166..66
1122..66
1199..77
7700..77
9944..33
1100..00
331155..55
33..11
00..22
1122
16
27
2
8
86
86
Financial and operating performance | Investment Bank
Investment Bank
Investment Bank1,2
USD million, except where indicated
Results
Advisory
Capital Markets
GGlloobbaall BBaannkkiinngg
Execution & Platform
Derivatives & Solutions
Financing
GGlloobbaall MMaarrkkeettss
of which: Equities
of which: Foreign Exchange, Rates and Credit
Income
Credit loss (expense) / release
TToottaall ooppeerraattiinngg iinnccoommee
TToottaall ooppeerraattiinngg eexxppeennsseess
BBuussiinneessss ddiivviissiioonn ooppeerraattiinngg pprrooffiitt // ((lloossss)) bbeeffoorree ttaaxx
Performance measures and other information
Pre-tax profit growth (%)
Average attributed equity (USD billion)3
Return on attributed equity (%)3
Cost / income ratio (%)
Risk-weighted assets (USD billion)3
Return on risk-weighted assets, gross (%)
Leverage ratio denominator (USD billion)3,4
Return on leverage ratio denominator, gross (%)5
Goodwill and intangible assets (USD billion)
Average VaR (1-day, 95% confidence, 5 years of historical data)
As of or for the year ended
3311..1122..2200
31.12.19
% change from
31.12.19
663344
11,,774444
22,,337788
11,,885577
33,,660099
11,,667744
77,,114411
44,,550022
22,,663388
99,,551199
((330055))
99,,221144
66,,773322
22,,448822
221166..66
1122..66
1199..77
7700..77
9944..33
1100..00
331155..55
33..11
00..22
1122
707
1,230
1,937
1,430
2,374
1,557
5,362
3,799
1,563
7,299
(30)
7,269
6,485
784
(47.3)
12.3
6.4
88.9
81.1
8.2
293.2
2.5
0.0
9
(10)
42
23
30
52
7
33
19
69
30
923
27
4
217
2
16
8
27
11 Comparative figures in this table have been restated to reflect the new structure of the Investment Bank, split into Global Banking and Global Markets. Global Banking has two product verticals: Capital Markets
and Advisory. Global Markets combines Equities and Foreign Exchange, Rates and Credit (FRC), with three product verticals: Execution & Platform, Derivatives & Solutions, and Financing. 22 Comparatives may
additionally differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events after the
reporting period. 33 Refer to the “Capital, liquidity and funding, and balance sheet” section of this report for more information. 44 The leverage ratio denominator as of 31 December 2020 does not reflect the
effects of the temporary exemption that has been granted by FINMA in connection with COVID-19. Refer to the “Regulatory and legal developments” section of this report for more information. 55 Leverage ratio
denominators used for the return calculation in 2020 do not reflect the effects of the temporary exemption referred to in footnote 4.
2020 compared with 2019
Results
intellectual property rights associated with the Bloomberg
Commodity Index family.
Profit before tax increased by USD 1,698 million, or 217%, to
USD 2,482 million, driven by higher operating income, partly
offset by higher operating expenses.
Of which: Foreign Exchange, Rates and Credit
Foreign Exchange, Rates and Credit revenues increased by
USD 1,075 million, or 69%, to USD 2,638 million, driven by
higher levels of client activity.
Operating income
Total operating income increased by USD 1,945 million, or 27%,
to USD 9,214 million, with higher revenues in both Global
Markets and Global Banking partly offset by higher credit loss
expenses.
Global Banking
Global Banking revenues increased by USD 441 million, or 23%,
to USD 2,378 million, reflecting higher revenues in Capital
Markets, partly offset by lower revenues in Advisory.
Advisory revenues decreased by USD 73 million, or 10%, to
USD 634 million, largely resulting from lower revenues from
mergers and acquisitions, in line with a global fee pool decline
of 11%.
Capital Markets revenues increased by USD 514 million, or
42%, to USD 1,744 million. This was primarily driven by increases
in Equity Capital Markets of USD 305 million, or 81%, compared
with an increase in the global fee pool of 90%, and increases in
Leveraged Capital Markets of USD 99 million, or 31%, compared
with a decrease in the global fee pool of 5%. Mark-to-market
losses of USD 66 million in leveraged capital markets, corporate
lending and real estate finance portfolios due to fluctuation in
credit spreads were mostly offset by gains of USD 64 million in a
portfolio of instruments used to hedge credit exposure in the
Investment Bank’s lending and leveraged loan portfolios.
Global Markets
Global Markets revenues increased by USD 1,779 million, or
33%, to USD 7,141 million, due to higher client activity levels
and more constructive market conditions, which were impacted
by the COVID-19 pandemic. The results included a USD 215
million gain on the sale of intellectual property rights associated
with the Bloomberg Commodity Index family.
Execution & Platform revenues increased by USD 427 million,
or 30%, to USD 1,857 million, mainly driven by higher client
activity levels in cash equities and also in fixed-income products
traded over electronic platforms.
Derivatives & Solutions revenues increased by USD 1,235
million, or 52%, to USD 3,609 million, benefiting from higher
client activity levels and more constructive market conditions
across rates, foreign exchange, credit and equity derivatives
products, as well as the aforementioned USD 215 million gain
on the sale of intellectual property rights associated with the
Bloomberg Commodity Index family.
Credit loss expense / release
Net credit loss expenses were USD 305 million, compared with
net expenses of USD 30 million. Stage 1 and 2 credit loss
expenses were USD 88 million, mainly due to expenses of
USD 86 million resulting from an update to the forward-looking
scenarios and their associated weightings, factoring in updated
macroeconomic assumptions to reflect the effects of the COVID-
19 pandemic, in particular updated GDP and unemployment
assumptions. Stage 3 net credit loss expenses were USD 217
million, including losses of USD 81 million related to a single
client in the travel sector and USD 58 million on energy-related
exposures.
Operating expenses
Total operating expenses increased by USD 247 million, or 4%, to
USD 6,732 million. The increase was mainly due to higher
personnel expenses, reflecting strong revenues in both Global
Markets and Global Banking, as well as USD 179 million related to
the modification of certain outstanding deferred compensation
awards. These effects were partly offset by lower restructuring
expenses. The prior year also included USD 110 million of goodwill
write-down.
› Refer to the “Group performance” section and “Note 1b Changes
in accounting policies, comparability and other adjustments” in
the “Consolidated financial statements” section of this report for
more information about the modification of deferred
compensation awards
Cost / income ratio
The cost / income ratio decreased to 70.7% from 88.9%,
reflecting positive operating leverage.
Risk-weighted assets
Risk-weighted assets (RWA) increased by USD 13 billion, or
16%, to USD 94 billion. Credit and counterparty credit risk RWA
increased by USD 8 billion, predominantly driven by an increase
in asset size (which was primarily due to higher loans and loan
commitments, as well as securities financing transactions) and
an increase from currency effects. Market risk RWA increased by
USD 4 billion, due to higher stressed and regulatory value-at-risk
(VaR) levels. Operational risk RWA increased by USD 1 billion,
due to allocation changes following the annual recalibration of
the advanced measurement approach (AMA) model.
› Refer to the “Capital, liquidity and funding, and balance sheet”
Financing revenues increased by USD 117 million, or 7%, to
section of this report for more information
USD 1,674 million, due to higher revenues in Equity Financing.
Of which: Equities
Equities revenues increased by USD 703 million, or 19%, to
USD 4,502 million, mostly due to increases in cash equities,
financing services and equity derivatives revenues, as well as
the aforementioned USD 215 million gain on the sale of
Leverage ratio denominator
The leverage ratio denominator increased by USD 22 billion, or
8%, to USD 316 billion, mainly reflecting both unfavorable
foreign exchange movements and increased secured financing
transaction and derivative exposures.
› Refer to the “Capital, liquidity and funding, and balance sheet”
section of this report for more information
86
87
87
Financial and operating performance
Financial and operating performance | Group Functions
Group Functions
Group Functions1
USD million, except where indicated
Results
TToottaall ooppeerraattiinngg iinnccoommee
TToottaall ooppeerraattiinngg eexxppeennsseess
OOppeerraattiinngg pprrooffiitt // ((lloossss)) bbeeffoorree ttaaxx
of which: Group Treasury
of which: Non-core and Legacy Portfolio
of which: Group Services
As of or for the year ended
3311..1122..2200
31.12.19
% change from
31.12.19
((449944))
556677
((11,,006600))
((334411))
((226699))
((445500))
(385)
192
(577)
(69)
(84)
(424)
28
195
84
393
222
6
Additional information
Risk-weighted assets (USD billion)2
Leverage ratio denominator (USD billion)2,3
11 Comparatives may differ as a result of adjustments following organizational changes, restatements due to the retrospective adoption of new accounting standards or changes in accounting policies, and events
after the reporting period. 22 Refer to the “Capital, liquidity and funding, and balance sheet” section of this report for more information. 33 The leverage ratio denominator as of 31 December 2020 does not
reflect the effects of the temporary exemption that has been granted by FINMA in connection with COVID-19. Refer to the “Regulatory and legal developments” section of this report for more information.
28.3
76.2
2288..77
9966..22
26
1
2020 compared with 2019
Results
Group Functions recorded a loss before tax of USD 1,060
million, compared with a loss of USD 577 million.
Group Treasury
The Group Treasury result was negative USD 341 million,
compared with negative USD 69 million.
Income from accounting asymmetries,
including hedge
accounting ineffectiveness, was net positive USD 6 million,
compared with net positive of USD 220 million.
related
Revenues
to centralized Group Treasury
risk
management services were negative USD 279 million, compared
with negative USD 168 million. This decrease was driven by
additional liquidity costs related to COVID-19 market stress in
the first half of 2020, with the business divisions having
assumed a part of these costs in the second half of the year.
2019 included net foreign currency translation losses of
USD 35 million in relation to the closing of subsidiaries.
88
88
Non-core and Legacy Portfolio
The Non-core and Legacy Portfolio result was negative USD 269
million, compared with negative USD 84 million. This result was
partly due to 2019 including a gain related to the settlement of
a litigation claim of USD 38 million, income related to a claim on
a defaulted counterparty position of USD 21 million and gains
from unwind activities of USD 20 million. In addition, 2020
included a credit loss expense of USD 42 million on an energy-
related exposure, as well as valuation losses of USD 143 million
in the first quarter of the year and valuation gains of USD 134
million in the fourth quarter, with such gains being the result of
a recovery in underlying market conditions, following a change
in valuation methodology. These factors resulted in a net
valuation loss of USD 9 million on our USD 1.5 billion portfolio
of auction rate securities (ARS), compared with valuation gains
of USD 11 million recognized in the prior year. Our remaining
exposures to ARS were all rated investment grade as of
31 December 2020.
Group Services
The Group Services result was negative USD 450 million,
compared with negative USD 424 million. This mainly resulted
from real estate costs of USD 72 million in relation to early lease
terminations and associated provisions, an
impairment of
internally generated software of USD 67 million, and expenses
of approximately USD 54 million related to the modification of
certain outstanding deferred compensation awards. These items
were partly offset by lower funding costs on deferred tax assets
and a net gain of USD 64 million from properties held for sale,
compared with a loss of USD 29 million in 2019.
› Refer to the “Group performance” section and “Note 1b Changes
in accounting policies, comparability and other adjustments” in
the “Consolidated financial statements” section of this report for
more information about the modification of deferred
compensation awards
Risk, capital,
liquidity and
funding, and
balance sheet
Management report
3
Audited information according to IFRS 7 and IAS 1
Risk and capital disclosures provided in line with the requirements of International Financial Reporting Standard 7 (IFRS 7), Financial
Instruments: Disclosures, and International Accounting Standard 1 (IAS 1), Presentation of Financial Statements, form part of the
financial statements included in the “Consolidated financial statements” section of this report and audited by the independent
registered public accounting firm Ernst & Young Ltd, Basel. This information is marked as “Audited” within this section of the report.
The risk profile of UBS AG consolidated does not differ materially from that of UBS Group AG consolidated. Audited information
provided in the “Risk management and control” and “Capital, liquidity and funding, and balance sheet” sections applies to both
UBS Group AG consolidated and UBS AG consolidated.
Signposts
The Audited | signpost that is displayed at the beginning of a section, table or chart indicates that those items have been audited. A triangle symbol – –
indicates the end of the audited section, table or chart.
Risk management
and control
Table of contents
91
93
94
95
97
Overview of risks arising from our business activities
Risk categories
Top and emerging risks
Risk governance
Risk appetite framework
Internal risk reporting
103
101
102 Model risk management
Risk measurement
Credit risk
106
124 Market risk
Country risk
Environmental, social and climate risk
Operational risk
139
137
133
Risk management
and control
Risk management and control
Overview of risks arising from our business activities
The scale of our activities depends on the capital available to
cover risks, the size of our on- and off-balance sheet assets via
their contribution to our capital, leverage and liquidity ratios,
and our risk appetite.
Group Functions. This shows how the activities in our business
divisions and Group Functions mentioned above the table are
captured in the risk measures, and shows their financial
performance in the context of such measures.
Overview of risks arising from our business activities
Table of contents
Risk categories
Top and emerging risks
Risk governance
Risk appetite framework
101
Internal risk reporting
102 Model risk management
Risk measurement
Credit risk
124 Market risk
Country risk
91
93
94
95
97
103
106
133
137
139
Environmental, social and climate risk
Operational risk
While our credit book grew over the course of 2020, our
overall credit risk profile was broadly unchanged and we
continued to manage market risks at generally low levels.
Operational resilience, conduct and prevention of financial
crime remain key focus topics.
risk-weighted assets
The “Risk measures and performance” table on the next page
shows
ratio
denominator (LRD) and risk-based capital (RBC), as well as
attributed tangible equity, credit loss expenses (CLE), total assets
and operating profit before tax for our business divisions and
leverage
(RWA),
the
› Refer to the “Capital, liquidity and funding, and balance sheet”
section of this report for more information about RWA, LRD and
our equity attribution framework
› Refer to “Statistical measures” in this section for more
information about RBC
› Refer to “Credit loss expense / release” in this section for more
information about CLE
› Refer to the “Performance of our business divisions and Group
Functions” table in the “Group performance” section of this
report for more information
91
91
Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Key risks by business division and Group Functions
Business divisions and Group Functions
Key risks arising from business activities
Global Wealth Management
Credit risk from lending against securities collateral and mortgages, derivatives trading activity and
aircraft financing for Global Wealth Management clients
Market risk from municipal securities and taxable fixed-income securities
Personal & Corporate Banking
Credit risk from retail business, mortgages, secured and unsecured corporate lending, and a small
amount of derivatives trading activity
Asset Management
Small amounts of credit and market risk
Minimal contribution to market risk
Investment Bank
Group Functions
Credit risk from lending (take and hold, as well as temporary loan underwriting activities), derivatives
trading and securities financing
Market risk from primary underwriting activities and secondary trading
Credit and market risk arising from management of the Group’s balance sheet, capital, profit or loss
and liquidity portfolios
Operational risk, which includes compliance and conduct risks, is an inevitable consequence of being in business, as losses can result from inadequate or
failed internal processes, people and systems, or from external events. It can arise as a result of our past and current business activities across all business
divisions and Group Functions.
Risk measures and performance
USD billion, as of or for the year ended
Risk-weighted assets1
of which: credit and counterparty credit risk
of which: market risk
of which: operational risk
Leverage ratio denominator1
Risk-based capital2
Average attributed tangible equity
Credit loss (expense) / release (USD million)
of which: stage 1 and 2 (USD million)
of which: stage 3 (USD million)
Total assets
Operating profit / (loss) before tax
USD billion, as of or for the year ended
Risk-weighted assets1
of which: credit and counterparty credit risk
of which: market risk
of which: operational risk
Leverage ratio denominator1
Risk-based capital2
Average attributed tangible equity
Credit loss (expense) / release (USD million)
of which: stage 1 and 2 (USD million)
of which: stage 3 (USD million)
GGlloobbaall WWeeaalltthh
MMaannaaggeemmeenntt
8877..22
4466..77
11..44
3322..88
337711..22
66..66
1122..00
((8888))
((4488))
((4400))
336677..77
44..00
Global Wealth
Management
78.1
35.0
0.8
35.9
312.7
6.6
11.5
(20)
3
(23)
PPeerrssoonnaall &&
CCoorrppoorraattee
BBaannkkiinngg
7722..11
6622..88
00..00
77..22
224488..33
55..77
88..99
((225577))
((112299))
((112288))
223311..77
11..33
Personal &
Corporate
Banking
67.1
57.3
0.0
7.7
224.2
4.9
8.4
(21)
23
(44)
3311..1122..2200
AAsssseett
MMaannaaggeemmeenntt
66..99
22..99
00..00
33..33
55..88
00..55
00..77
((22))
00
((22))
2288..66
11..55
31.12.19
Asset
Management
4.6
1.8
0.0
2.0
5.0
0.4
0.4
0
0
0
34.6
0.5
IInnvveessttmmeenntt
BBaannkk
9944..33
5588..55
99..00
2233..22
331155..55
77..11
1122..55
((330055))
((8888))
((221177))
336699..77
22..55
Investment
Bank
81.1
50.6
4.6
22.5
293.2
7.0
12.2
(30)
(4)
(26)
GGrroouupp
FFuunnccttiioonnss
2288..77
77..22
11..44
99..33
9966..22
1155..22
1177..44
((4422))
00
((4422))
112288..11
((11..11))
Group
Functions
28.3
8.3
1.1
9.4
76.2
16.1
15.1
(7)
0
(7)
TToottaall
228899..11
117788..11
1111..88
7755..88
11,,003377..11
3355..00
5511..44
((669944))
((226666))
((442299))
11,,112255..88
88..22
Total
259.2
153.0
6.6
77.5
911.3
35.0
47.6
(78)
22
(100)
972.2
5.6
Total assets
Operating profit / (loss) before tax
11 Refer to the “Capital, liquidity and funding, and balance sheet” section of this report for more information. 22 Refer to “Statistical measures” in this section for more information about risk-based capital.
102.6
(0.6)
209.4
1.4
315.9
0.8
309.8
3.4
92
92
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Key risks by business division and Group Functions
Business divisions and Group Functions
Key risks arising from business activities
Global Wealth Management
Credit risk from lending against securities collateral and mortgages, derivatives trading activity and
aircraft financing for Global Wealth Management clients
Market risk from municipal securities and taxable fixed-income securities
Personal & Corporate Banking
Credit risk from retail business, mortgages, secured and unsecured corporate lending, and a small
Asset Management
Small amounts of credit and market risk
amount of derivatives trading activity
Minimal contribution to market risk
Investment Bank
Credit risk from lending (take and hold, as well as temporary loan underwriting activities), derivatives
trading and securities financing
Market risk from primary underwriting activities and secondary trading
Group Functions
Credit and market risk arising from management of the Group’s balance sheet, capital, profit or loss
and liquidity portfolios
Operational risk, which includes compliance and conduct risks, is an inevitable consequence of being in business, as losses can result from inadequate or
failed internal processes, people and systems, or from external events. It can arise as a result of our past and current business activities across all business
divisions and Group Functions.
Risk measures and performance
USD billion, as of or for the year ended
Risk-weighted assets1
of which: credit and counterparty credit risk
of which: market risk
of which: operational risk
Leverage ratio denominator1
Risk-based capital2
Average attributed tangible equity
Credit loss (expense) / release (USD million)
of which: stage 1 and 2 (USD million)
of which: stage 3 (USD million)
Total assets
Operating profit / (loss) before tax
USD billion, as of or for the year ended
Risk-weighted assets1
of which: credit and counterparty credit risk
of which: market risk
of which: operational risk
Leverage ratio denominator1
Risk-based capital2
Average attributed tangible equity
Credit loss (expense) / release (USD million)
of which: stage 1 and 2 (USD million)
of which: stage 3 (USD million)
Total assets
Operating profit / (loss) before tax
GGlloobbaall WWeeaalltthh
MMaannaaggeemmeenntt
BBaannkkiinngg
MMaannaaggeemmeenntt
AAsssseett
IInnvveessttmmeenntt
GGrroouupp
FFuunnccttiioonnss
PPeerrssoonnaall &&
CCoorrppoorraattee
3311..1122..2200
8877..22
4466..77
11..44
3322..88
337711..22
66..66
1122..00
((8888))
((4488))
((4400))
336677..77
44..00
78.1
35.0
0.8
35.9
312.7
6.6
11.5
(20)
3
(23)
309.8
3.4
7722..11
6622..88
00..00
77..22
224488..33
55..77
88..99
((225577))
((112299))
((112288))
223311..77
11..33
67.1
57.3
0.0
7.7
224.2
4.9
8.4
(21)
23
(44)
209.4
1.4
66..99
22..99
00..00
33..33
55..88
00..55
00..77
((22))
00
((22))
2288..66
11..55
4.6
1.8
0.0
2.0
5.0
0.4
0.4
0
0
0
34.6
0.5
BBaannkk
9944..33
5588..55
99..00
2233..22
331155..55
77..11
1122..55
((330055))
((8888))
((221177))
336699..77
22..55
Bank
81.1
50.6
4.6
22.5
293.2
7.0
12.2
(30)
(4)
(26)
315.9
0.8
2288..77
77..22
11..44
99..33
9966..22
1155..22
1177..44
((4422))
00
((4422))
112288..11
((11..11))
28.3
8.3
1.1
9.4
76.2
16.1
15.1
(7)
0
(7)
102.6
(0.6)
TToottaall
228899..11
117788..11
1111..88
7755..88
11,,003377..11
3355..00
5511..44
((669944))
((226666))
((442299))
11,,112255..88
88..22
Total
259.2
153.0
6.6
77.5
911.3
35.0
47.6
(78)
22
(100)
972.2
5.6
Global Wealth
Management
Banking
Management
Asset
Investment
Group
Functions
Personal &
Corporate
31.12.19
11 Refer to the “Capital, liquidity and funding, and balance sheet” section of this report for more information. 22 Refer to “Statistical measures” in this section for more information about risk-based capital.
Risk categories
We categorize the risk exposures of our business divisions and Group Functions as outlined in the table below.
Risk
managed by
Independent
oversight by
Captured in
our risk appe-
tite framework
Financial risks
Audited | Credit risk: the risk of loss resulting from the failure of a client or counterparty to meet its contractual obligations toward UBS.
This includes settlement risk, loan underwriting risk and step-in risk.
Business
management
Risk Control
Settlement risk: the risk of loss resulting from transactions that involve exchange of value (e.g., security versus cash) where we must
deliver without first being able to determine with certainty that we will receive the countervalue.
Loan underwriting risk: the risk of loss arising during the holding period of financing transactions that are intended for further
distribution.
Step-in risk: the risk that UBS may decide to provide financial support to an unconsolidated entity that is facing stress in the absence
of, or in excess of, any contractual obligations to provide such support.
Audited | Market risk (traded and non-traded): the risk of loss resulting from adverse movements in market variables. Market variables
include observable variables, such as interest rates, foreign exchange rates, equity prices, credit spreads and commodity (including precious
metal) prices, as well as variables that may be unobservable or only indirectly observable, such as volatilities and correlations. Market risk
includes issuer risk and investment risk.
Business
management and
Group Treasury
Risk Control
Issuer risk: the risk of loss from changes in fair value resulting from credit-related events affecting an issuer to which we are exposed
through tradable securities or derivatives referencing the issuer.
Investment risk: issuer risk associated with positions held as financial investments.
Country risk: the risk of losses resulting from country-specific events. Includes transfer risk, whereby a country’s authorities prevent or
restrict the payment of an obligation, as well as systemic risk events arising from country-specific political or macroeconomic developments.
Business
management
Environmental and social risk: the risk that can arise when UBS supports clients and transactions, or sources products or services from
suppliers, that may cause or contribute to severe environmental damage, climate change, or human rights infringements. Physical and
transition risks from a changing climate contribute to a structural change across economies and therefore affect banks and the financial
sector as a whole. Environmental and social risks may manifest as increasing financial and reputational impacts for UBS.
Business
management
Risk Control
Risk Control
Treasury risk: the market risks that arise from structural exposures, including pension risks, and the risk of insufficient funding or liquidity.
Audited | Liquidity risk: the risk that the firm will not be able to efficiently meet both expected and unexpected current and forecast
cash flows and collateral needs without affecting either daily operations or the financial condition of the firm.
Audited | Funding risk: the risk that the firm will be unable, on an ongoing basis, to borrow funds in the market on an unsecured (or
even secured) basis at an acceptable price to fund actual or proposed commitments; i.e., the risk that UBS’s funding capacity is not
sufficient to support the firm’s current business and desired strategy.
Structural foreign exchange risk: the risk of decreases in our capital due to changes in foreign exchange rates with an adverse
translation effect on capital held in currencies other than the US dollar.
Pension risk: the risk of a negative impact on our capital as a result of deteriorating funded status from decreases in the fair value of
assets held in defined benefit pension funds and / or changes in the value of defined benefit pension obligations due to changes in
actuarial assumptions (e.g., discount rate, life expectancy, rate of pension increase, etc.) and / or changes to plan designs.
Group Treasury
Risk Control
Group Treasury
and Human
Resources
Risk Control
and Finance
Business risk: the potential negative impact on earnings from lower-than-expected business volumes and / or margins, to the extent they
are not offset by a decrease in expenses.
Business
management
Finance
Non-financial risks
Operational risk: the risk resulting from inadequate or failed internal processes, people or systems, or from external causes (deliberate,
accidental or natural), that have an impact (either financial or non-financial) on UBS, its clients or the markets in which it operates. Events
may be direct financial losses or indirect, in the form of revenue forgone as a result of business suspension. They may also result in damage
to our reputation and to our franchise that has longer-term financial consequences.
Business
management
Legal risk: the financial or reputational implications resulting from the risk of: (i) being held liable for a breach of applicable laws, rules or
regulations; (ii) being held liable for a breach of contractual or other legal obligations; (iii) an inability or failure to enforce or protect
contractual rights or non-contractual rights sufficiently to protect UBS’s interests, including the risk of being party to a claim in respect of
any of the above (and the risk of loss of attorney-client privilege in the context of any such claim); (iv) a failure to adequately develop,
supervise and resource legal teams or adequately supervise external legal counsel advising on business legal risk and other matters; and
(v) a failure to adequately manage any potential, threatened and commenced litigation and legal proceedings, including civil, criminal,
arbitration and regulatory proceedings, and / or litigation risk or any dispute or investigation that may lead to litigation or threat of any
litigation.
Conduct risk: the risk that the conduct of the firm or its individuals unfairly impacts clients or counterparties, undermines the integrity
of the financial system or impairs effective competition to the detriment of consumers.
Employment risk: the risk incurred by the firm by not adhering to the applicable employment law, regulatory requirements and
human resources practices, as well as our own internal standards. Such risk is managed by business management, with independent
overview by HR.
Compliance risk: the risk incurred by the firm by not adhering to the applicable laws, rules and regulations, and our own internal
standards.
Financial crime risk: the risk that UBS fails to detect criminal activities, including internal and external theft and fraud, money
laundering, bribery and corruption, fails to comply with sanctions and embargoes, or fails to report or respond to requests from relevant
authorities related to these matters.
Cybersecurity and information security risk: the risk of a material impact from an external or internal attack on our information
systems with the purpose of data theft, fraud or denial of service. Cyberattacks are manifestations of a cyber threat into an act of
aggression or criminal activity causing financial, regulatory or reputational harm or loss.
Business manage-
ment and Group
Technology
Group Compli-
ance, Regula-
tory & Gover-
nance (GCRG)
Legal
GCRG
GCOO
GCRG
GCRG
GCRG
Model risk: the risk of adverse consequences via financial loss or non-financial impact (e.g., poor business and / or strategic decision
making, or damage to the firm’s reputation) resulting from decisions based on incorrect or misused model outputs and reports. Model risk
may result from a number of sources: inputs, methodology, implementation or use.
Model owner
Risk Control
Reputational risk: the risk of damage to our reputation from the point of view of our stakeholders, such as clients, shareholders,
staff and the general public.
All businesses
and functions
All control
functions
92
93
93
Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Risk management and control
overnight. In some cases, contracts may contain provisions
intended to provide a fallback interest rate in the event of a
brief unavailability of the relevant LIBOR. These provisions
may not be effective or may produce arbitrary results in the
event of a permanent cessation of the relevant LIBOR. In
addition, numerous of our internal systems, limits and
processes make use of LIBOR as reference rates. Transition to
replacement reference rates will require significant investment
and effort.
– As a global financial services firm, we are subject to many
different legal, tax and regulatory regimes and extensive
regulatory oversight. We are exposed to significant liability
risk and we are subject to various claims, disputes, legal
proceedings and government investigations, as noted in
“Regulatory and legal risks” in the “Risk factors” section of
this report. Information about litigation, regulatory and
in
similar matters we consider significant
the
“Note 18 Provisions and contingent
“Consolidated financial statements” section of this report.
– One of the most critical risks facing the broader industry is
the inability to keep pace with evolving cyber threats, such as
data theft and data leakage, disruption of service and cyber
fraud, all of which have the potential to significantly affect
our business. Additionally, as a result of the operational
complexity of all our businesses, we are continually exposed
to operational resilience scenarios such as process error, failed
execution, system failures and fraud.
is disclosed
liabilities”
in
– Conduct risks are inherent in our businesses. Achieving fair
outcomes for our clients, upholding market integrity and
cultivating the highest standards of employee conduct are of
critical importance to UBS. Management of conduct risks is
an integral part of our operational risk framework.
– Financial crime,
laundering,
including money
terrorist
financing, sanctions violation, fraud, bribery and corruption,
presents significant risk. Heightened regulatory expectations
and attention require investment in people and systems,
while emerging technologies and changing geopolitical risks
further increase the complexity of identifying and preventing
financial crime. Refer to “Operational risk” in this section and
“Strategy, management and operational risks” in the “Risk
factors” section of this report for more information.
Top and emerging risks
The top and emerging risks disclosed below reflect those that
we currently think have the potential to materialize within one
year and which could significantly affect the Group. Investors
should also carefully review all information set out in the “Risk
factors” section of this report, where we discuss these and other
material risks that we consider could have an effect on our
ability to execute our strategy and may affect our business
activities, financial condition, results of operations and business
prospects.
– The continued widespread COVID-19 pandemic and the
governmental measures taken to contain it have significantly
affected, and will likely continue to adversely affect, global
economic conditions. If the pandemic is prolonged or the
actions of governments and central banks are unsuccessful,
this detrimental impact on the global economy will deepen,
and UBS’s results of operations and financial condition in
future quarters may be
impacted. These effects may
materialize through adverse market performance, increased
credit risk or negative effects on operational resilience.
– We are exposed to a number of macroeconomic issues, as
well as general market conditions. As noted in “Market,
credit and macroeconomic risks” in the “Risk factors” section
of this report, these external pressures may have a significant
adverse effect on our business activities and related financial
results, primarily through reduced margins and revenues,
asset
valuation adjustments.
Accordingly, these macroeconomic factors are considered in
the development of stress testing scenarios for our ongoing
risk management activities.
impairments and other
– We are exposed to substantial changes in the regulation of
our businesses that could have a material adverse effect on
our business, as discussed in the “Regulatory and legal
developments” section of this report and in “Regulatory and
legal risks” in the “Risk factors” section of this report.
– We have a substantial number of contracts linked to LIBOR
rates. In November 2020, the administrator for LIBOR
announced a consultation on its intention to cease many
LIBOR rates (including all non-USD LIBOR rates) at the end of
2021. Users are urged to plan the transition to alternative
reference rates (ARRs), but these do not currently provide a
term structure, which will require a change in the contractual
terms of products currently indexed on terms other than
94
94
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Top and emerging risks
Risk governance
Our risk governance framework operates along three lines of
defense.
protecting against non-compliance with applicable laws and
regulations.
Our first line of defense, business management, owns its risk
exposures and is accountable for maintaining effective processes
and systems to manage its risks in compliance with applicable
laws, external regulations and internal requirements, including
identifying control weaknesses and inadequate processes.
Our second line of defense is formed by the control functions,
separate from the business and reporting directly to the Group
independent oversight,
CEO. Control
challenge financial and non-financial risks arising from the firm’s
business activities, and establish independent frameworks for
risk assessment, measurement, aggregation and reporting,
functions provide
Our third line of defense, Group Internal Audit, reports to the
Chairman and to the Audit Committee. This function assesses
the design and operating effectiveness and sustainability of
processes to define risk appetite, governance, risk management,
internal controls, remediation activities and processes to comply
with legal and regulatory requirements and internal governance
requirements.
The key roles and responsibilities for risk management and
control are shown in the chart below and described on the
following pages.
and UBS’s results of operations and financial condition in
this report. Information about litigation, regulatory and
Audited | Risk governance
Risk
Committee
Audit
Committee
Corporate Culture and
Responsibility Committee
Governance and
Nominating Committee
Compensation
Committee
Board of Directors
Group Internal Audit (third line of defense)
Group Executive Board (acting as risk council)
Group Chief Executive Officer
s
e
e
t
t
i
m
m
o
c
y
t
i
l
i
b
a
i
l
d
n
a
t
e
s
s
a
d
n
a
k
s
i
R
First line of defense
(business and
Group Functions
management)
Divisional, regional,
legal entity Presidents
Group function heads
Second line of defense (Group Functions – control functions)
Group Risk
Control
Group Compliance,
Regulatory &
Governance (GCRG)
Group
Finance
Group
General Counsel
Group
Human Resources
Group Chief
Risk Officer
Group Chief
Compliance and
Governance Officer
Group Chief
Financial Officer
Group
General Counsel
Group Chief
Operating Officer
Group Functions
Market and
Treasury CRO
Group Treasury* /
Non-core and
Legacy Portfolio
Central Risk
functions
Central GCRG
functions
Central Finance
functions
Central Legal
functions
HR functions
Divisional
Presidents
Divisional CROs
Divisional heads Com-
pliance & Operational
Risk Control (C&ORC)
Divisional CFOs
Divisional General
Counsels
HR Business Partners
(by business division)
Regional / legal entity
Presidents
Regional / legal entity
CROs
Regional / legal entity
heads C&ORC
Regional / legal entity
CFOs
Regional / legal entity
General Counsels
HR regions
* Part of Group Finance
▲
95
95
The top and emerging risks disclosed below reflect those that
overnight. In some cases, contracts may contain provisions
we currently think have the potential to materialize within one
intended to provide a fallback interest rate in the event of a
year and which could significantly affect the Group. Investors
brief unavailability of the relevant LIBOR. These provisions
should also carefully review all information set out in the “Risk
may not be effective or may produce arbitrary results in the
factors” section of this report, where we discuss these and other
event of a permanent cessation of the relevant LIBOR. In
material risks that we consider could have an effect on our
addition, numerous of our internal systems, limits and
ability to execute our strategy and may affect our business
processes make use of LIBOR as reference rates. Transition to
activities, financial condition, results of operations and business
replacement reference rates will require significant investment
prospects.
and effort.
– The continued widespread COVID-19 pandemic and the
– As a global financial services firm, we are subject to many
governmental measures taken to contain it have significantly
different legal, tax and regulatory regimes and extensive
affected, and will likely continue to adversely affect, global
regulatory oversight. We are exposed to significant liability
economic conditions. If the pandemic is prolonged or the
risk and we are subject to various claims, disputes, legal
actions of governments and central banks are unsuccessful,
proceedings and government investigations, as noted in
this detrimental impact on the global economy will deepen,
“Regulatory and legal risks” in the “Risk factors” section of
future quarters may be
impacted. These effects may
similar matters we consider significant
is disclosed
in
materialize through adverse market performance, increased
“Note 18 Provisions and contingent
liabilities”
in
the
credit risk or negative effects on operational resilience.
“Consolidated financial statements” section of this report.
– We are exposed to a number of macroeconomic issues, as
– One of the most critical risks facing the broader industry is
well as general market conditions. As noted in “Market,
the inability to keep pace with evolving cyber threats, such as
credit and macroeconomic risks” in the “Risk factors” section
data theft and data leakage, disruption of service and cyber
of this report, these external pressures may have a significant
fraud, all of which have the potential to significantly affect
adverse effect on our business activities and related financial
our business. Additionally, as a result of the operational
results, primarily through reduced margins and revenues,
complexity of all our businesses, we are continually exposed
asset
impairments and other
valuation adjustments.
to operational resilience scenarios such as process error, failed
Accordingly, these macroeconomic factors are considered in
execution, system failures and fraud.
the development of stress testing scenarios for our ongoing
– Conduct risks are inherent in our businesses. Achieving fair
risk management activities.
outcomes for our clients, upholding market integrity and
– We are exposed to substantial changes in the regulation of
cultivating the highest standards of employee conduct are of
our businesses that could have a material adverse effect on
critical importance to UBS. Management of conduct risks is
our business, as discussed in the “Regulatory and legal
an integral part of our operational risk framework.
developments” section of this report and in “Regulatory and
– Financial crime,
including money
laundering,
terrorist
legal risks” in the “Risk factors” section of this report.
financing, sanctions violation, fraud, bribery and corruption,
– We have a substantial number of contracts linked to LIBOR
presents significant risk. Heightened regulatory expectations
rates. In November 2020, the administrator for LIBOR
and attention require investment in people and systems,
announced a consultation on its intention to cease many
while emerging technologies and changing geopolitical risks
LIBOR rates (including all non-USD LIBOR rates) at the end of
further increase the complexity of identifying and preventing
2021. Users are urged to plan the transition to alternative
financial crime. Refer to “Operational risk” in this section and
reference rates (ARRs), but these do not currently provide a
“Strategy, management and operational risks” in the “Risk
term structure, which will require a change in the contractual
factors” section of this report for more information.
terms of products currently indexed on terms other than
94
Risk, capital, liquidity and funding, and balance sheet
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
The business division CROs are
the
implementation and enforcement of the risk management and
control framework in the respective business division. The
regional CROs provide independent oversight of risks in the
respective region.
responsible
for
sets
for developing
the Group’s operational
requirements
The Group Chief Compliance and Governance Officer is
risk
responsible
framework, which
for
identification, management, assessment and mitigation of
operational risk, and for ensuring that all non-financial risks are
identified, owned and managed according to the operational
risk appetite objectives, supported by an effective control
framework.
the general
is
responsible
The Group Chief Financial Officer
for
transparency in assessing the financial performance of the
Group and the business divisions, and for managing the Group’s
financial accounting, controlling, forecasting, planning and
reporting. Additional responsibilities include managing UBS’s tax
affairs, as well as treasury and capital management, including
funding and liquidity risk and UBS’s regulatory capital ratios.
The Group General Counsel is responsible for managing the
Group’s legal affairs (including litigation involving UBS) and ensuring
effective and timely assessment of legal matters impacting the
Group or its businesses, and for the management and reporting of
all litigation matters.
The Group Chief Operating Officer
is
responsible
for
independent oversight and challenge of employment-related risks.
(GIA)
Group
independently
Internal Audit
assesses
effectiveness of processes to define strategy and risk appetite
and overall adherence to the approved strategy. It also assesses
the effectiveness of governance processes and risk management,
including compliance with legal and regulatory requirements
and internal governance documents. The Head GIA reports to
the Chairman of the BoD. GIA also has a functional reporting
line to the BoD Audit Committee.
Some of these roles and responsibilities are replicated for
certain significant legal entities of the Group. The legal entity
risk officers are responsible for independent oversight and
control of financial and non-financial risks for certain significant
legal entities of the Group as part of the legal entity control
framework, which complements the Group’s risk management
and control framework.
Audited | The Board of Directors (the BoD) approves the risk
management and control framework of the Group, including
the Group and business division overall risk appetite. The BoD is
supported by its Risk Committee, which monitors and oversees
the Group’s risk profile and the implementation of the risk
framework approved by the BoD, and approves the Group’s risk
appetite methodology. The Corporate Culture and Responsibility
Committee helps the BoD meet its duty to safeguard and
advance UBS’s reputation for responsible and sustainable
conduct, reviewing stakeholder concerns and expectations
pertaining to UBS’s societal contribution and corporate culture.
The Audit Committee aids the BoD with its oversight duty
relating to financial reporting and internal controls over financial
reporting, and the effectiveness of whistleblowing procedures
and the external and internal audit functions.
The Group Executive Board (the GEB) has overall responsibility
for establishing and implementing a risk management and
control framework in the Group, managing the risk profile of
the Group as a whole.
The Group Chief Executive Officer has responsibility and
accountability for the management and performance of the
Group, has risk authority over transactions, positions and
exposures, and allocates business divisions and Group Functions
risk limits approved by the BoD.
The business division Presidents and Group function heads
are responsible for the operation and management of their
business divisions, including controlling the dedicated financial
resources and risk appetite of the business division.
The regional Presidents are responsible for cross-divisional
collaboration in their region, and are mandated to inform the
GEB of any activities / issues that may give rise to actual or
potentially material regulatory or reputational concerns.
The Group Chief Risk Officer (the Group CRO) is responsible
for developing the Group’s risk management and control
framework (including risk principles and risk appetite) for credit,
market, country, treasury, model, and environmental and social
risks. This includes risk measurement and aggregation, portfolio
controls and risk reporting. The Group CRO sets risk limits and
approves credit and market risk transactions and exposures. Risk
Control is also the central function for model risk management
and control for all models used in UBS. A framework of policies
and authorities support the risk control process.
96
96
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Audited | The Board of Directors (the BoD) approves the risk
The business division CROs are
responsible
for
the
management and control framework of the Group, including
implementation and enforcement of the risk management and
the Group and business division overall risk appetite. The BoD is
control framework in the respective business division. The
supported by its Risk Committee, which monitors and oversees
regional CROs provide independent oversight of risks in the
the Group’s risk profile and the implementation of the risk
respective region.
framework approved by the BoD, and approves the Group’s risk
The Group Chief Compliance and Governance Officer is
appetite methodology. The Corporate Culture and Responsibility
responsible
for developing
the Group’s operational
Committee helps the BoD meet its duty to safeguard and
framework, which
sets
the general
requirements
risk
for
advance UBS’s reputation for responsible and sustainable
identification, management, assessment and mitigation of
conduct, reviewing stakeholder concerns and expectations
operational risk, and for ensuring that all non-financial risks are
pertaining to UBS’s societal contribution and corporate culture.
identified, owned and managed according to the operational
The Audit Committee aids the BoD with its oversight duty
risk appetite objectives, supported by an effective control
relating to financial reporting and internal controls over financial
framework.
reporting, and the effectiveness of whistleblowing procedures
The Group Chief Financial Officer
is
responsible
for
and the external and internal audit functions.
transparency in assessing the financial performance of the
The Group Executive Board (the GEB) has overall responsibility
Group and the business divisions, and for managing the Group’s
for establishing and implementing a risk management and
financial accounting, controlling, forecasting, planning and
control framework in the Group, managing the risk profile of
reporting. Additional responsibilities include managing UBS’s tax
the Group as a whole.
affairs, as well as treasury and capital management, including
The Group Chief Executive Officer has responsibility and
funding and liquidity risk and UBS’s regulatory capital ratios.
accountability for the management and performance of the
The Group General Counsel is responsible for managing the
Group, has risk authority over transactions, positions and
Group’s legal affairs (including litigation involving UBS) and ensuring
exposures, and allocates business divisions and Group Functions
effective and timely assessment of legal matters impacting the
risk limits approved by the BoD.
Group or its businesses, and for the management and reporting of
The business division Presidents and Group function heads
all litigation matters.
are responsible for the operation and management of their
The Group Chief Operating Officer
is
responsible
for
business divisions, including controlling the dedicated financial
independent oversight and challenge of employment-related risks.
resources and risk appetite of the business division.
Group
Internal Audit
(GIA)
independently
assesses
The regional Presidents are responsible for cross-divisional
effectiveness of processes to define strategy and risk appetite
collaboration in their region, and are mandated to inform the
and overall adherence to the approved strategy. It also assesses
GEB of any activities / issues that may give rise to actual or
the effectiveness of governance processes and risk management,
potentially material regulatory or reputational concerns.
including compliance with legal and regulatory requirements
The Group Chief Risk Officer (the Group CRO) is responsible
and internal governance documents. The Head GIA reports to
for developing the Group’s risk management and control
the Chairman of the BoD. GIA also has a functional reporting
framework (including risk principles and risk appetite) for credit,
line to the BoD Audit Committee.
market, country, treasury, model, and environmental and social
Some of these roles and responsibilities are replicated for
risks. This includes risk measurement and aggregation, portfolio
certain significant legal entities of the Group. The legal entity
controls and risk reporting. The Group CRO sets risk limits and
risk officers are responsible for independent oversight and
approves credit and market risk transactions and exposures. Risk
control of financial and non-financial risks for certain significant
Control is also the central function for model risk management
legal entities of the Group as part of the legal entity control
and control for all models used in UBS. A framework of policies
framework, which complements the Group’s risk management
and authorities support the risk control process.
and control framework.
Risk appetite framework
We have a defined Group level risk appetite, covering all financial and non-financial risk types, via a complementary set of qualitative
and quantitative risk appetite statements. This is reviewed and recalibrated annually and presented to the BoD for approval.
level and
Our risk appetite is defined at the aggregate Group level and
reflects the types of risk that we are willing to accept or avoid. It
is set via complementary qualitative and quantitative risk
appetite statements defined at a firm-wide
is
embedded throughout our business divisions and legal entities
by Group, business division and legal entity policies, limits and
authorities. UBS is the largest truly global wealth manager and a
leading bank in Switzerland. We are subject to consolidated
supervision by the Swiss Financial Market Supervisory Authority
(FINMA) and related ordinances, which impose, among other
requirements, minimum standards for capital, liquidity, risk
concentration and internal organization. Our risk appetite is
reviewed and recalibrated annually, with an aim of ensuring that
risk-taking at every level of the organization is in line with our
strategic priorities, our capital and liquidity plans, our pillars,
principles and behaviors, and minimum regulatory requirements.
The risk appetite statements are critical for maintaining a robust
risk culture throughout UBS. The “Risk appetite framework”
chart below shows the key elements of the framework, which
are described in detail in this section.
Qualitative statements aim to ensure we maintain the desired
risk culture. Quantitative risk appetite objectives are designed to
(cid:52)(cid:75)(cid:85)(cid:77)(cid:2)(cid:67)(cid:82)(cid:82)(cid:71)(cid:86)(cid:75)(cid:86)(cid:71)(cid:2)(cid:72)(cid:84)(cid:67)(cid:79)(cid:71)(cid:89)(cid:81)(cid:84)(cid:77)
enhance UBS’s resilience against the effect of potential severe
adverse economic or geopolitical events. These risk appetite
objectives cover UBS’s minimum capital and leverage ratios,
solvency, earnings, liquidity, and funding, and are subject to
periodic review, including the annual business planning process.
theft,
including market conduct,
These objectives are complemented by operational risk
appetite objectives, which are set for each of our operational risk
categories,
fraud, data
confidentiality and technology risks. A standardized financial
firm-wide operational risk appetite has been established at
Group level and is embedded throughout our business divisions.
Operational risk events exceeding predetermined risk tolerances,
expressed as percentages of UBS’s operating income, must be
escalated as per the firm-wide escalation framework to the
respective business division President or higher, as appropriate.
The quantitative risk appetite objectives are supported by a
comprehensive suite of risk limits set at a portfolio level. These
may apply across the Group, within a business division or
business, at legal entity level, or to an asset class. These
additional quantitative controls are designed to monitor specific
portfolios and to control potential risk concentrations.
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Risk reports listing aggregated measures of risk across products
and businesses provide insight into the amounts, types, and
sensitivities of our portfolios’ various risks and aim to ensure
adherence to defined limits. Risk officers, senior management and
the BoD use this information to understand our risk profile and
portfolio performance.
The status of risk appetite objectives is evaluated each month
and reported to the BoD and the GEB. As our risk appetite may
change over time, portfolio limits and associated approval
authorities are subject to periodic reviews and changes,
particularly in the context of our annual business planning process.
is governed by a single
overarching policy and conforms to the Financial Stability Board’s
Principles for an Effective Risk Appetite Framework.
Our risk appetite framework
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Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Risk principles and risk culture
Maintaining a strong risk culture is a prerequisite for success in
today’s highly complex operating environment and a source of
sustainable competitive advantage. Placing prudent and
disciplined risk-taking at the center of every decision aims to
achieve three goals: delivering unrivaled client satisfaction;
creating long-term value for stakeholders; and making UBS one
of the world’s most attractive companies to work for.
Our risk appetite framework combines all the important
elements of our risk culture, expressed in our Pillars, Principles
and Behaviors, our risk management and control principles, our
Code of Conduct and Ethics, and our Total Reward Principles.
Together, these aim to align our decisions with the Group’s
strategy, principles and risk appetite. They help create a solid
foundation for promoting risk awareness, leading to appropriate
Risk management and control principles
risk-taking and the establishing of robust risk management and
control processes. These principles are supported by a range of
initiatives covering employees at all levels, for example the UBS
House View on Leadership, which is a set of explicit expectations
for leaders that establishes consistent leadership standards
across UBS. Another example
is our Principles of Good
Supervision, which establish clear expectations of managers and
employees regarding supervisory responsibilities, specifically: to
take responsibility; to know and organize their business; to
know their employees and what they do; to create a good risk
culture; and to respond to and resolve issues.
› Refer to the foldout pages of this report for more information
about our Pillars, Principles and Behaviors
› Refer to the Code of Conduct and Ethics of UBS at ubs.com/code
for more information
Protection of financial strength
Protection of reputation
Business management accountability
Independent controls
Risk disclosure
Protecting UBS’s financial strength by controlling our risk exposure and avoiding potential risk
concentrations at individual exposure levels, at specific portfolio levels and at an aggregate firm-wide
level across all risk types
Protecting our reputation through a sound risk culture characterized by a holistic and integrated view of
risk, performance and reward, and through full compliance with our standards and principles, particularly
our Code of Conduct and Ethics
Maintaining management accountability, whereby business management owns all risks assumed
throughout the Group and is responsible for the continuous and active management of all risk exposures
to provide for balanced risk and return
Independent control functions that monitor the effectiveness of the businesses’ risk management and
oversee risk-taking activities
Disclosure of risks to senior management, the BoD, investors, regulators, credit rating agencies and other
stakeholders with an appropriate level of comprehensiveness and transparency
Whistleblowing policies and procedures exist to support an
environment where staff are comfortable raising concerns. There
are multiple channels via which individuals may, either openly or
anonymously, escalate suspected breaches of laws, regulations,
rules and other legal requirements, our Code of Conduct and
Ethics, policies, or relevant professional standards. Our program
is designed to ensure that whistleblowing concerns are
investigated and that appropriate and consistent action is taken.
We are committed to ensuring appropriate training for and
communication to staff and legal entity representatives are
available on an ongoing basis, including with regard to new
regulatory requirements.
Mandatory training programs cover various compliance and
risk-related topics, including anti-money laundering (AML) and
operational risk. Additional specialized training is provided
depending on employees’ specific roles and responsibilities, e.g.,
credit risk and market risk training for those working in trading
areas. Failure to complete mandatory training sessions within an
appropriate timeframe can lead to consequences, including
disciplinary action. Our operational risk and conduct risk
frameworks aim to identify and manage financial, regulatory
and reputational risks, as well as risks to clients and markets.
We want to be the financial provider of choice for clients
investments supporting the
wishing to direct capital to
Sustainable Development Goals and the transition to a low-
carbon economy. Our environmental and social risk framework
governs all client and supplier relationships, applies firm-wide to
all activities, and is integrated in management practices and
control principles. We seek to protect our assets from climate
change risks by limiting our risk appetite for carbon-related
assets.
Quantitative risk appetite objectives
Our quantitative risk appetite objectives aim to ensure that our
aggregate risk exposure remains within desired risk capacity,
based on capital and business plans. The specific definition of
risk capacity for each objective is aimed at ensuring we have
sufficient capital, earnings, funding and liquidity to protect our
businesses and exceed minimum regulatory requirements under
a severe stress event. The risk appetite objectives are evaluated
during the annual business planning process and approved by
the BoD. The comparison of risk exposure with risk capacity is a
key consideration in decisions on potential adjustments to the
business strategy and risk profile of UBS and capital returns to
shareholders.
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98
creating long-term value for stakeholders; and making UBS one
employees regarding supervisory responsibilities, specifically: to
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The annual business planning process reviews UBS’s business
strategy, assesses the risk profile our operations and activities
result in, and stress-tests that risk profile. We use both scenario-
based stress tests and statistical risk measurement techniques to
assess effects of severe stress events at a firm-wide level. These
complementary frameworks capture exposures to all material
risks across our business divisions and Group Functions.
› Refer to “Risk measurement” in this section for more
information about our stress testing and statistical stress
frameworks
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Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Risk principles and risk culture
risk-taking and the establishing of robust risk management and
control processes. These principles are supported by a range of
Maintaining a strong risk culture is a prerequisite for success in
initiatives covering employees at all levels, for example the UBS
today’s highly complex operating environment and a source of
House View on Leadership, which is a set of explicit expectations
sustainable competitive advantage. Placing prudent and
for leaders that establishes consistent leadership standards
disciplined risk-taking at the center of every decision aims to
across UBS. Another example
is our Principles of Good
achieve three goals: delivering unrivaled client satisfaction;
Supervision, which establish clear expectations of managers and
of the world’s most attractive companies to work for.
take responsibility; to know and organize their business; to
Our risk appetite framework combines all the important
know their employees and what they do; to create a good risk
elements of our risk culture, expressed in our Pillars, Principles
culture; and to respond to and resolve issues.
and Behaviors, our risk management and control principles, our
Code of Conduct and Ethics, and our Total Reward Principles.
Together, these aim to align our decisions with the Group’s
› Refer to the foldout pages of this report for more information
about our Pillars, Principles and Behaviors
› Refer to the Code of Conduct and Ethics of UBS at ubs.com/code
strategy, principles and risk appetite. They help create a solid
for more information
foundation for promoting risk awareness, leading to appropriate
Risk management and control principles
Protection of financial strength
Protecting UBS’s financial strength by controlling our risk exposure and avoiding potential risk
concentrations at individual exposure levels, at specific portfolio levels and at an aggregate firm-wide
Protection of reputation
Protecting our reputation through a sound risk culture characterized by a holistic and integrated view of
risk, performance and reward, and through full compliance with our standards and principles, particularly
level across all risk types
our Code of Conduct and Ethics
Business management accountability
Maintaining management accountability, whereby business management owns all risks assumed
throughout the Group and is responsible for the continuous and active management of all risk exposures
to provide for balanced risk and return
Independent controls
Independent control functions that monitor the effectiveness of the businesses’ risk management and
oversee risk-taking activities
Risk disclosure
Disclosure of risks to senior management, the BoD, investors, regulators, credit rating agencies and other
stakeholders with an appropriate level of comprehensiveness and transparency
Whistleblowing policies and procedures exist to support an
We want to be the financial provider of choice for clients
environment where staff are comfortable raising concerns. There
wishing to direct capital to
investments supporting the
are multiple channels via which individuals may, either openly or
Sustainable Development Goals and the transition to a low-
anonymously, escalate suspected breaches of laws, regulations,
carbon economy. Our environmental and social risk framework
rules and other legal requirements, our Code of Conduct and
governs all client and supplier relationships, applies firm-wide to
Ethics, policies, or relevant professional standards. Our program
all activities, and is integrated in management practices and
is designed to ensure that whistleblowing concerns are
control principles. We seek to protect our assets from climate
investigated and that appropriate and consistent action is taken.
change risks by limiting our risk appetite for carbon-related
We are committed to ensuring appropriate training for and
assets.
communication to staff and legal entity representatives are
available on an ongoing basis, including with regard to new
Quantitative risk appetite objectives
regulatory requirements.
Mandatory training programs cover various compliance and
Our quantitative risk appetite objectives aim to ensure that our
risk-related topics, including anti-money laundering (AML) and
aggregate risk exposure remains within desired risk capacity,
operational risk. Additional specialized training is provided
based on capital and business plans. The specific definition of
depending on employees’ specific roles and responsibilities, e.g.,
risk capacity for each objective is aimed at ensuring we have
credit risk and market risk training for those working in trading
sufficient capital, earnings, funding and liquidity to protect our
areas. Failure to complete mandatory training sessions within an
businesses and exceed minimum regulatory requirements under
appropriate timeframe can lead to consequences, including
a severe stress event. The risk appetite objectives are evaluated
disciplinary action. Our operational risk and conduct risk
during the annual business planning process and approved by
frameworks aim to identify and manage financial, regulatory
the BoD. The comparison of risk exposure with risk capacity is a
and reputational risks, as well as risks to clients and markets.
key consideration in decisions on potential adjustments to the
business strategy and risk profile of UBS and capital returns to
shareholders.
98
99
99
Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Our risk capacity is underpinned by performance targets and
capital guidance as per our business plan. When determining
our risk capacity in case of a severe stress event, we estimate
projected earnings under stress, factoring in lower expected
income and also lower expenses, including lower variable
compensation and financial advisor compensation. We also
consider capital impacts under stress from deferred tax assets,
pension plan assets and liabilities, and accruals for capital returns
to shareholders.
Risk appetite objectives define the aggregate risk exposure
acceptable at the firm-wide level, given our risk capacity. The
maximum acceptable risk exposure is supported by a full set of
risk limits, triggers and targets, which are cascaded to businesses
and portfolios. These limits, triggers and targets aim to ensure
that our total risks remain in line with risk appetite.
Risk appetite statements at the business division level are
derived from the firm-wide risk appetite. They may also include
division-specific strategic goals related to that division’s activities
and risks. Risk appetite statements are also set for certain legal
entities, which must be consistent with the firm-wide risk
appetite framework and approved in accordance with Group
and legal entity regulations. Differences may exist that reflect
the specific nature, size, complexity and regulations applicable to
the relevant legal entity.
100
100
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Our risk capacity is underpinned by performance targets and
Risk appetite objectives define the aggregate risk exposure
capital guidance as per our business plan. When determining
acceptable at the firm-wide level, given our risk capacity. The
our risk capacity in case of a severe stress event, we estimate
maximum acceptable risk exposure is supported by a full set of
projected earnings under stress, factoring in lower expected
risk limits, triggers and targets, which are cascaded to businesses
income and also lower expenses, including lower variable
and portfolios. These limits, triggers and targets aim to ensure
compensation and financial advisor compensation. We also
that our total risks remain in line with risk appetite.
consider capital impacts under stress from deferred tax assets,
Risk appetite statements at the business division level are
pension plan assets and liabilities, and accruals for capital returns
derived from the firm-wide risk appetite. They may also include
to shareholders.
division-specific strategic goals related to that division’s activities
and risks. Risk appetite statements are also set for certain legal
entities, which must be consistent with the firm-wide risk
appetite framework and approved in accordance with Group
and legal entity regulations. Differences may exist that reflect
the specific nature, size, complexity and regulations applicable to
the relevant legal entity.
Internal risk reporting
risk governance
Comprehensive and transparent reporting of risks is central to
our
framework’s control and oversight
responsibilities and required by our risk management and
control principles. Accordingly, risks are reported at a frequency
and level of detail commensurate with the extent and variability
of the risk and the needs of the various governance bodies,
regulators and risk authority holders.
The Group Risk Report provides a detailed qualitative and
quantitative monthly overview of developments in financial and
non-financial risks at the firm-wide level, along with breakdowns
of risks at the divisional level, including the status of our risk
appetite objectives and the results of firm-wide stress testing.
The Group Risk Report is distributed internally to the BoD and
the GEB, and senior members of Risk Control, GIA, Finance, and
Legal. Risk reports are also produced for significant Group
entities (entities subject to enhanced standards of corporate
governance) and significant branches.
Granular divisional risk reports are provided to the respective
business division CROs and business division Presidents. That
monthly reporting is supplemented with daily or weekly reports,
at various levels of granularity, covering market and credit risks
for the business divisions to enable risk officers and senior
management to monitor and control the Group’s risk profile.
Our internal risk reporting covers financial and non-financial
risks and is supported by risk data and measurement systems that
are also used for external disclosure and regulatory reporting.
Dedicated units within Risk Control assume responsibility for
measurement, analysis and reporting of risk and for overseeing
the quality and integrity of risk-related data. Our risk data and
measurement systems are subject to periodic review by GIA,
following a risk-based audit approach.
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Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Our model
risk governance
follows our
overarching risk governance framework, with the three lines of
defense (LoD) assigned as follows:
– First LoD: model sponsors, model owners and model
framework
developers
– Second LoD: Chief Model Risk Officer, Model Risk
Management & Control
– Third LoD: Group Internal Audit
An important difference as compared to how LoD are usually
defined in financial and non-financial risk is that models can also
be owned by the second LoD.
Model risk appetite framework and statement
The model risk appetite framework sets out the model risk
appetite statement, defines the relevant metrics and lays out
how appropriate adherence is assessed.
Model oversight
Model oversight boards and committees ensure that model risk
is overseen at different levels of the organization, appropriate
model risk management and control actions are taken and,
where necessary, escalated to the next level.
The Group Model Governance Board is our most senior
oversight and escalation body for all models in scope of our
model governance framework. It is chaired by the Group CRO
and the Group CFO and is responsible for: (i) reviewing and
approving changes to the framework; (ii) approving the model
risk appetite statement; (iii) overseeing adherence to the UBS
model risk governance framework; and (iv) monitoring model
risk at a firm-wide level.
Model risk management
Introduction
We rely on models to derive risk management and control
decisions, to measure risks or exposures, value instruments or
positions, conduct stress testing, assess adequacy of capital, and
manage clients’ assets and our own assets. Models may also be
used to measure and monitor compliance with rules and
regulations, for surveillance activities, or to meet financial or
regulatory reporting requirements. Promoted by industry-wide
advances in technology and data, the depth and breadth of
model use across UBS continues to increase.
Model risk is defined as the risk of adverse consequences
(e.g., financial losses or reputational damage) resulting from
incorrect models.
Model governance framework
Our model governance framework establishes requirements for
identifying, measuring, monitoring, reporting, controlling and
mitigating model risks. All models that we use are subject to
governance and controls throughout their life cycle. This ensures
that risks arising from model use are understood, managed,
monitored, controlled and reported on both a model-specific
and an aggregated level. Before they can be granted approval
for use
the model sponsor, all our models are
independently validated along four model risk dimensions: (i)
model input; (ii) model methodology; (iii) model implementation;
and (iv) model use.
from
Once validated and approved for use, a model is subject to
ongoing model performance monitoring and annual model
confirmation, ensuring that the model is only used if it remains
fit for purpose. All models are subject to periodic model re-
validation, with rigor, depth and frequency determined by the
model’s materiality and complexity.
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Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Model risk management
Risk measurement
Introduction
Our model
risk governance
framework
follows our
overarching risk governance framework, with the three lines of
We rely on models to derive risk management and control
defense (LoD) assigned as follows:
decisions, to measure risks or exposures, value instruments or
– First LoD: model sponsors, model owners and model
positions, conduct stress testing, assess adequacy of capital, and
developers
manage clients’ assets and our own assets. Models may also be
– Second LoD: Chief Model Risk Officer, Model Risk
used to measure and monitor compliance with rules and
Management & Control
regulations, for surveillance activities, or to meet financial or
– Third LoD: Group Internal Audit
regulatory reporting requirements. Promoted by industry-wide
advances in technology and data, the depth and breadth of
An important difference as compared to how LoD are usually
model use across UBS continues to increase.
defined in financial and non-financial risk is that models can also
Model risk is defined as the risk of adverse consequences
be owned by the second LoD.
(e.g., financial losses or reputational damage) resulting from
incorrect models.
Model risk appetite framework and statement
Model governance framework
The model risk appetite framework sets out the model risk
appetite statement, defines the relevant metrics and lays out
Our model governance framework establishes requirements for
how appropriate adherence is assessed.
identifying, measuring, monitoring, reporting, controlling and
mitigating model risks. All models that we use are subject to
Model oversight
governance and controls throughout their life cycle. This ensures
that risks arising from model use are understood, managed,
Model oversight boards and committees ensure that model risk
monitored, controlled and reported on both a model-specific
is overseen at different levels of the organization, appropriate
and an aggregated level. Before they can be granted approval
model risk management and control actions are taken and,
for use
from
the model sponsor, all our models are
where necessary, escalated to the next level.
independently validated along four model risk dimensions: (i)
The Group Model Governance Board is our most senior
model input; (ii) model methodology; (iii) model implementation;
oversight and escalation body for all models in scope of our
and (iv) model use.
model governance framework. It is chaired by the Group CRO
Once validated and approved for use, a model is subject to
and the Group CFO and is responsible for: (i) reviewing and
ongoing model performance monitoring and annual model
approving changes to the framework; (ii) approving the model
confirmation, ensuring that the model is only used if it remains
risk appetite statement; (iii) overseeing adherence to the UBS
fit for purpose. All models are subject to periodic model re-
model risk governance framework; and (iv) monitoring model
validation, with rigor, depth and frequency determined by the
risk at a firm-wide level.
model’s materiality and complexity.
Audited | We apply a variety of methodologies and measurements
to quantify the risks of our portfolios and potential risk
concentrations. Risks that are not fully reflected within standard
measures are subject to additional controls, which may include
preapproval of specific transactions and the application of
specific restrictions. Models to quantify risk are generally
developed by dedicated units within control functions and are
subject to independent validation.
› Refer to “Credit risk,” “Market risk” and “Operational risk” in
this section for more information about model confirmation
procedures
Stress testing
We perform stress testing to estimate losses that could result
from extreme yet plausible macroeconomic and geopolitical
stress events so as to identify, better understand and manage
our potential vulnerabilities and risk concentrations. Stress
testing has a key role in our limits framework at the firm-wide,
business division, legal entity and portfolio levels. Stress test
results are regularly reported to the BoD and the GEB. As
described in “Risk appetite framework,” stress testing, along
with statistical loss measures, has a central role in our risk
appetite and business planning processes.
Our stress testing framework has three pillars: (i) combined
stress tests; (ii) an extensive set of portfolio- and risk type-
specific stress tests; and (iii) reverse stress testing.
Our combined stress test (CST) framework is scenario-based
and aims to quantify overall firm-wide losses that could result
from various potential global systemic events. The framework
captures all material risks, as covered in “Risk categories” above.
Scenarios are forward-looking and encompass macroeconomic
and geopolitical stress events calibrated to different levels of
severity. We implement each scenario through the expected
evolution of market indicators and economic variables under
that scenario and then estimate the overall loss and capital
implications were the scenario to occur. At least once a year, the
Risk Committee approves the most relevant scenario, known as
the binding scenario, for use as the main scenario for regular
CST reporting and for monitoring risk exposure against our
minimum capital, earnings and leverage ratio objectives in our
risk appetite framework.
We provide detailed stress loss analyses to FINMA and
regulators of our legal entities in accordance with their
requirements. For example, in addition to CST, we perform a
FINMA, a
Loss Potential Analysis
required by
(LPA)
for
(CCAR)
Comprehensive Capital Analysis and Review
Americas Holding LLC required by the US Federal Reserve Board,
and regular stress tests for UBS Europe SE required by the
European Central Bank.
Our Enterprise-wide Stress Committee (the ESC) aims to
ensure the consistency and adequacy of the assumptions and
scenarios used for firm-wide stress measures. As part of its
responsibilities, the ESC seeks to ensure that the set of stress
scenarios adequately reflects current and potential developments
in the macroeconomic and geopolitical environment, current
and planned business activities, and actual or potential risk
concentrations and vulnerabilities in our portfolios. The ESC
meets at least quarterly and is composed of Group, business
division and legal entity representatives of Risk Control. In
executing its responsibilities, the ESC considers input from the
Think Tank, a panel of senior representatives from the business
divisions, Risk Control and economic research that meets
quarterly to review the current and possible future market
environment so as to identify potential stress scenarios that
could materially affect the Group’s profitability. This results in a
range of internal stress scenarios developing and evolving over
time.
in
changes
assumed
Each scenario captures a wide range of macroeconomic
variables, including GDP, equity prices, interest rates, foreign
rates, commodity prices, property prices and
exchange
unemployment. We use
these
macroeconomic and market variables in each scenario to stress
the key risk drivers of our portfolios. For example, lower GDP
growth and rising interest rates may reduce the income of
clients we have lent money to, which changes the credit risk
parameters for probability of default, loss given default and
exposure at default, and results in higher predicted credit losses
within the stress scenario. We also capture the business risk
resulting from lower fee, interest and trading income net of
lower expenses. These effects are measured for all businesses
and material risk types to calculate the aggregate estimated
effect of the scenario on profit or loss, other comprehensive
income, RWA, LRD and, ultimately, capital and leverage ratios.
The assumed changes in macroeconomic variables are updated
periodically to account for changes in the current and possible
future market environment.
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Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Risk management and control
We have updated the binding stress scenario in our CST
framework for 2021. The updated Global Crisis scenario reflects
the weaker fiscal conditions resulting from the COVID-19
pandemic and still focuses on the ensuing Eurozone crisis,
China’s hard landing and increasing global protectionism.
Portfolio-specific stress tests are measures tailored to the risks
of specific portfolios. Our portfolio stress loss measures are
derived from data on past events, but also include forward-
looking elements; e.g., we derive the expected market
movements in our liquidity-adjusted stress metric using a
combination of historical market behavior, based on an analysis
of historical events, and forward-looking analysis, including
consideration of defined scenarios that are not modeled on any
historical events. Results of portfolio-specific stress tests may be
subject to limits to explicitly control risk-taking, or may be
monitored without limits to identify vulnerabilities.
Reverse stress testing starts from a defined stress outcome
(e.g., a specified loss amount, reputational damage, a liquidity
shortfall or a breach of regulatory capital ratios) and works
backward to identify economic or financial scenarios that could
result in such an outcome. As such, reverse stress testing is
intended to complement scenario-based stress tests by assuming
“what if” outcomes that could extend beyond the range
normally considered, and
thereby potentially challenge
assumptions regarding severity and plausibility.
We also routinely analyze the effect of increases or decreases
in interest rates and changes in the structure of yield curves.
Within Group Treasury, we also perform stress testing to
determine the optimum asset and liability structure allowing us
to maintain an appropriately balanced liquidity and funding
position under various scenarios. These scenarios differ from
those outlined above, because they focus on specific situations
that could generate liquidity and funding stress, as opposed to
the scenarios used in the CST framework, which focus on the
effect on profit or loss and capital.
› Refer to “Credit risk” and “Market risk” in this section for more
information about stress loss measures
› Refer to the “Capital, liquidity and funding, and balance sheet”
section of this report for more information about stress testing
Statistical measures
As well as our scenario-based CST measures, we use a statistical
stress framework to calculate and aggregate risks using
statistical
to derive stress events at chosen
confidence levels.
techniques
This framework is used to derive a distribution of potential
earnings based on historically observed market changes in
combination with the firm’s actual risk exposures, considering
effects on both income and expenses. From that, we determine
earnings-at-risk (EaR), measuring the potential shortfall in
earnings (i.e., the deviation from forecast earnings) at a 95%
confidence level and evaluated over a one-year horizon. EaR is
used for the assessment of the earnings objectives in our risk
appetite framework.
In 2020, the binding scenario for CST was the internal Global
Crisis scenario, which is characterized by a combined crisis in the
Eurozone, US and China and was updated over the course of
2020 to incorporate risks related to COVID-19. In Europe, a lack
of confidence in the trajectory of several peripheral European
economies leads to a sudden spike in their bond yields, which
eventually results in them losing market access, followed by
bailouts and debt restructurings; Greece leaves the Eurozone.
Protectionist measures and geopolitical tensions contribute to a
hard landing in China. This, coupled with a contraction in global
trade, weighs on the economic recovery. Attempting to restore
confidence and stimulate growth, central banks in the Eurozone,
Switzerland and Japan push policy rates further into negative
territory; however, that fails to avert a severe global recession.
The incorporation of pandemic-related risks led to severe
scenario assumptions, in particular macroeconomic assumptions,
such as deteriorating GDP and rising unemployment. Stress
testing models are reviewed regularly with subject matter
experts and relevant governance bodies. Notwithstanding the
market turbulence and economic disruptions caused by the
outbreak of COVID-19, the CST risk exposure was broadly stable
over 2020, with most of the month-on-month variability arising
loan
in volumes of
primarily
underwriting exposure in the Investment Bank.
from changes
temporary
As part of the CST framework, we routinely monitored four
additional stress scenarios throughout 2020:
– The Failure of a Major Financial Institution scenario represents
renewed financial market turmoil reflecting the failure of a
major global financial institution, leading to prolonged
financial deleveraging and plunging activity around the globe.
– The US Monetary Crisis scenario represents a loss of
confidence in the US, which leads to international portfolio
repositioning out of US dollar-denominated assets, sparking
an abrupt and substantial US dollar sell-off. The US is pushed
back into recession, other industrialized countries replicate
this pattern and inflationary concerns lead to an overall
higher interest rate level.
– The Global Depression scenario represents a severe and
prolonged Eurozone crisis
in which several peripheral
countries default and exit the Eurozone, and advanced
economies are pulled into a prolonged period of economic
stagnation. So as to better monitor the risks related to
COVID-19, in mid-2020 the Global Depression scenario was
put on hold and the Extreme Coronavirus scenario was
introduced. The Extreme Coronavirus scenario represents a
return to stringent containment measures at a global level,
resulting in a deep and prolonged contraction in economic
activity beyond that envisaged in the Global Depression
scenario. The scenario was selected from a range of new
COVID-19 scenarios.
– The Global Interest Rate Steepening scenario represents a
sudden shift in market sentiment, causing a disorderly sell-off
in long-dated bonds and a rapid steepening of the yield
curve, exacerbated by a lack of liquidity in financial markets.
This in turn triggers a sovereign crisis in Japan and a global
recession.
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104
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
In 2020, the binding scenario for CST was the internal Global
We have updated the binding stress scenario in our CST
Crisis scenario, which is characterized by a combined crisis in the
framework for 2021. The updated Global Crisis scenario reflects
Eurozone, US and China and was updated over the course of
the weaker fiscal conditions resulting from the COVID-19
2020 to incorporate risks related to COVID-19. In Europe, a lack
pandemic and still focuses on the ensuing Eurozone crisis,
of confidence in the trajectory of several peripheral European
China’s hard landing and increasing global protectionism.
economies leads to a sudden spike in their bond yields, which
Portfolio-specific stress tests are measures tailored to the risks
eventually results in them losing market access, followed by
of specific portfolios. Our portfolio stress loss measures are
bailouts and debt restructurings; Greece leaves the Eurozone.
derived from data on past events, but also include forward-
Protectionist measures and geopolitical tensions contribute to a
looking elements; e.g., we derive the expected market
hard landing in China. This, coupled with a contraction in global
movements in our liquidity-adjusted stress metric using a
trade, weighs on the economic recovery. Attempting to restore
combination of historical market behavior, based on an analysis
confidence and stimulate growth, central banks in the Eurozone,
of historical events, and forward-looking analysis, including
Switzerland and Japan push policy rates further into negative
consideration of defined scenarios that are not modeled on any
territory; however, that fails to avert a severe global recession.
historical events. Results of portfolio-specific stress tests may be
The incorporation of pandemic-related risks led to severe
subject to limits to explicitly control risk-taking, or may be
We extend the EaR measure, incorporating the effects of
gains and losses recognized through other comprehensive
income, to derive a distribution of potential effects of stress
events on CET1 capital. From this distribution, we derive our
capital-at-risk (CaR) buffer measure at a 95% confidence level to
assess our capital and leverage ratio risk appetite objectives, and
derive our CaR solvency measure at a 99.9% confidence level to
assess our solvency risk appetite objective.
We use the CaR solvency measure as a basis for deriving the
contributions of business divisions to risk-based capital (RBC),
which is a component of our equity attribution framework. RBC
measures the potential capital impairment from an extreme
stress event at a 99.9% confidence level.
› Refer to the “Capital, liquidity and funding, and balance sheet”
section of this report for more information about the equity
scenario assumptions, in particular macroeconomic assumptions,
monitored without limits to identify vulnerabilities.
attribution framework
such as deteriorating GDP and rising unemployment. Stress
Reverse stress testing starts from a defined stress outcome
testing models are reviewed regularly with subject matter
(e.g., a specified loss amount, reputational damage, a liquidity
Portfolio and position limits
UBS maintains a comprehensive set of risk limits across its major
risk portfolios. These portfolio limits are set based on our risk
appetite and periodically reviewed and adjusted as part of the
business planning process.
Firm-wide stress and statistical metrics are complemented by
more granular portfolio and position limits, triggers and targets.
Combining these measures provides a comprehensive control
framework to apply to our business divisions, as well as the
significant legal entities, as relevant to the key risks arising from
their businesses.
We apply limits to a variety of exposures at portfolio level,
using statistical and stress-based measures, such as value-at-risk,
liquidity-adjusted stress, loan underwriting limits, economic
value sensitivity and portfolio default simulations for loan books.
These are complemented with a set of controls for net interest
income sensitivity, mark-to-market losses on available-for-sale
portfolios, and the effect of foreign exchange movements on
capital and capital ratios.
Portfolio measures are supplemented with position-level
controls. Risk measures for position controls are based on
market risk sensitivities and counterparty-level credit risk
exposures. Market risk sensitivities
include sensitivities to
changes in general market risk factors (e.g., equity indices,
foreign exchange rates and interest rates) and sensitivities to
issuer-specific factors (e.g., changes in an issuer’s credit spread
or default risk). We monitor numerous market risk controls for
the Investment Bank and Group Functions on a daily basis.
Counterparty measures capture the current and potential future
exposure to an individual counterparty, taking into account
collateral and legally enforceable netting agreements.
› Refer to “Credit risk” in this section for more information about
– The Global Interest Rate Steepening scenario represents a
earnings-at-risk (EaR), measuring the potential shortfall in
counterparty limits
› Refer to “Risk appetite framework” in this section for more
information about the risk appetite framework
experts and relevant governance bodies. Notwithstanding the
shortfall or a breach of regulatory capital ratios) and works
market turbulence and economic disruptions caused by the
backward to identify economic or financial scenarios that could
outbreak of COVID-19, the CST risk exposure was broadly stable
result in such an outcome. As such, reverse stress testing is
over 2020, with most of the month-on-month variability arising
intended to complement scenario-based stress tests by assuming
primarily
from changes
in volumes of
temporary
loan
“what if” outcomes that could extend beyond the range
underwriting exposure in the Investment Bank.
normally considered, and
thereby potentially challenge
As part of the CST framework, we routinely monitored four
assumptions regarding severity and plausibility.
additional stress scenarios throughout 2020:
We also routinely analyze the effect of increases or decreases
– The Failure of a Major Financial Institution scenario represents
in interest rates and changes in the structure of yield curves.
renewed financial market turmoil reflecting the failure of a
Within Group Treasury, we also perform stress testing to
major global financial institution, leading to prolonged
determine the optimum asset and liability structure allowing us
financial deleveraging and plunging activity around the globe.
to maintain an appropriately balanced liquidity and funding
– The US Monetary Crisis scenario represents a loss of
position under various scenarios. These scenarios differ from
confidence in the US, which leads to international portfolio
those outlined above, because they focus on specific situations
repositioning out of US dollar-denominated assets, sparking
that could generate liquidity and funding stress, as opposed to
an abrupt and substantial US dollar sell-off. The US is pushed
the scenarios used in the CST framework, which focus on the
back into recession, other industrialized countries replicate
effect on profit or loss and capital.
this pattern and inflationary concerns lead to an overall
› Refer to “Credit risk” and “Market risk” in this section for more
higher interest rate level.
information about stress loss measures
– The Global Depression scenario represents a severe and
› Refer to the “Capital, liquidity and funding, and balance sheet”
prolonged Eurozone crisis
in which several peripheral
section of this report for more information about stress testing
countries default and exit the Eurozone, and advanced
economies are pulled into a prolonged period of economic
Statistical measures
stagnation. So as to better monitor the risks related to
COVID-19, in mid-2020 the Global Depression scenario was
As well as our scenario-based CST measures, we use a statistical
put on hold and the Extreme Coronavirus scenario was
stress framework to calculate and aggregate risks using
introduced. The Extreme Coronavirus scenario represents a
statistical
techniques
to derive stress events at chosen
return to stringent containment measures at a global level,
confidence levels.
resulting in a deep and prolonged contraction in economic
This framework is used to derive a distribution of potential
activity beyond that envisaged in the Global Depression
earnings based on historically observed market changes in
scenario. The scenario was selected from a range of new
combination with the firm’s actual risk exposures, considering
COVID-19 scenarios.
effects on both income and expenses. From that, we determine
sudden shift in market sentiment, causing a disorderly sell-off
earnings (i.e., the deviation from forecast earnings) at a 95%
in long-dated bonds and a rapid steepening of the yield
confidence level and evaluated over a one-year horizon. EaR is
curve, exacerbated by a lack of liquidity in financial markets.
used for the assessment of the earnings objectives in our risk
This in turn triggers a sovereign crisis in Japan and a global
appetite framework.
recession.
104
Risk concentrations
Audited | A risk concentration exists where (i) a position is affected
by changes in a group of correlated factors, or a group of
positions are affected by changes in the same risk factor or a
group of correlated factors; and (ii) the exposure could, in the
event of large but plausible adverse developments, result in
significant losses. The categories where risk concentrations may
occur include counterparties, industries, legal entities, countries
or geographical regions, products, and businesses.
Identification of risk concentrations requires judgment, as
potential future developments cannot be accurately predicted
and may vary from period to period. In determining if a risk
concentration exists, we consider a number of elements, both
individually and collectively. These elements include the shared
characteristics of the positions and counterparties, the size of
the position or group of positions, the sensitivity of the position
or group of positions to changes in risk factors and the volatility,
and the correlations of those factors. Also important in our
assessment is the liquidity of the markets where the positions
are traded, as well as the availability and effectiveness of hedges
or other potential risk-mitigating factors. The value of a hedging
instrument may not always move in line with the position being
hedged; this mismatch is referred to as basis risk. In addition,
operational risk concentrations may result from a single issue
that is large on its own (i.e., has the potential to produce a
single high-impact loss or a number of losses that together are
high-impact) or related issues that may link together to create a
high impact.
Risk concentrations are subject to increased oversight by
Group Risk Control and Group Compliance, Regulatory &
Governance and assessed to determine whether they should be
reduced or mitigated, depending on available means to do so. It
is possible that material losses could occur on asset classes,
positions and hedges, particularly if the correlations that emerge
in a stressed environment differ markedly from those envisaged
by risk models.
› Refer to “Credit risk” and “Market risk” in this section for more
information about the composition of our portfolios
› Refer to the “Risk factors” section of this report for more
information
Asset Management fund liquidity risk
Asset management is a fiduciary for its clients’ assets and is
exposed to fund liquidity risk which can lead to reputational
risks. Fund liquidity risk is defined as the risk that a fund could
be unable meet redemption requests, while also fulfilling
ongoing obligations to its remaining shareholders, including that
fund’s duty to pursue its stated investment objective, strategies,
and policies. Liquidity of funds is monitored using a variety of
tools, including third-party liquidity assessment models, covering
both the assets (fund holdings) and liabilities (shareholder
redemptions), and
including a range of market scenario
assumptions. Furthermore, reverse stress tests are applied to
determine
liquidity
considerations. Liquidity events can also be managed via the
enactment of liquidity tools available to the funds. Overall, our
funds fared well during the heightened market volatility in
March 2020.
the deterioration
required
trigger
to
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105
Risk, capital, liquidity and funding, and balance sheet
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Credit risk
Key developments
In Global Wealth Management, the Lombard and mortgage
books showed significant growth over the course of 2020 while
keeping a stable risk profile with regard to concentrations and
collateral liquidity, and with no material incurred losses after
undergoing a real-life stress test in the first quarter of 2020.
facilities guaranteed by
Our Swiss corporate banking products exposure increased over
the course of 2020, mainly due to the appreciation of the Swiss
the Swiss
franc and COVID-19
government, as well as several large single positions. Due to our
strong footprint in our home market, we are exposed to the
development of the Swiss economy and the effects of the
ongoing and highly uncertain COVID-19 pandemic. Within our
Swiss corporate book, risks related to certain industries, including
the tourism; watches; and culture, sports and education sectors,
where we have modest exposure, have increased.
Our Swiss real estate portfolio increased over the course of
2020, mainly due to the appreciation of the Swiss franc. It is of
high quality but carefully monitored, due to its materiality. We are
paying particularly close attention to the level of risk in our Swiss
commercial retail and office real estate portfolio and its resilience
to the economic impact of COVID-19.
Our loans to customers in the Investment Bank are modest
compared with our Personal & Corporate Banking and Global
Wealth Management loan books. Over the course of 2020, we
have seen defaults in industries impacted by COVID-19, such as
energy, real estate and travel, and we are watchful of further
impairments.
Credit loss expense / release
Total net credit loss expenses were USD 694 million in 2020,
compared with USD 78 million in the prior year, reflecting net
Credit loss (expense) / release
expenses of USD 266 million related to stage 1 and 2 positions
and net expenses of USD 429 million related to credit-impaired
(stage 3) positions. The most notable contributors to stage 3
credit loss expenses were: USD 81 million in the Investment Bank
related to an exposure to a client in the travel sector; USD 59
million in Personal & Corporate Banking related to a case of
fraud at a commodity trade finance counterparty, which
affected a number of lenders, including UBS; and USD 42 million
in Group Functions from an energy-related exposure in Non-core
and Legacy Portfolio.
› Refer to “Note 1 Summary of significant accounting policies,”
“Note 9 Financial assets at amortized cost and other positions in
scope of expected credit loss measurement” and “Note 20
Expected credit loss measurement” in the “Consolidated financial
statements” section of this report for more information about
IFRS 9 and expected credit losses
Audited | Main sources of credit risk
– Global Wealth Management predominantly
conducts
securities-based (Lombard) lending and mortgage lending.
– A substantial portion of lending exposure arises from Personal
& Corporate Banking, which offers mortgage loans, secured
mainly by residential properties and income-producing real
estate, as well as corporate loans, and therefore depends on
the performance of the Swiss economy.
– The Investment Bank’s credit exposure arises mainly from
lending, derivatives
financing.
trading and
Derivatives trading and securities financing are mainly
investment grade. Loan underwriting activity can be lower
rated and give rise to temporary concentrated exposure.
securities
– Credit risk within Non-core and Legacy Portfolio relates to
derivative transactions, predominantly carried out on a cash-
collateralized basis, and securitized positions.
Global
Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group
Functions
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(1)
(8)
((88))
Total
((226666))
((442299))
((669944))
22
(100)
((7788))
(9)
(109)
((111188))
USD million
FFoorr tthhee yyeeaarr eennddeedd 3311..1122..2200
Stages 1 and 2
Stage 3
TToottaall ccrreeddiitt lloossss ((eexxppeennssee)) // rreelleeaassee
FFoorr tthhee yyeeaarr eennddeedd 3311..1122..1199
Stages 1 and 2
Stage 3
TToottaall ccrreeddiitt lloossss ((eexxppeennssee)) // rreelleeaassee
FFoorr tthhee yyeeaarr eennddeedd 3311..1122..1188
Stages 1 and 2
Stage 3
TToottaall ccrreeddiitt lloossss ((eexxppeennssee)) // rreelleeaassee
106
106
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Credit risk
Key developments
expenses of USD 266 million related to stage 1 and 2 positions
and net expenses of USD 429 million related to credit-impaired
In Global Wealth Management, the Lombard and mortgage
(stage 3) positions. The most notable contributors to stage 3
books showed significant growth over the course of 2020 while
credit loss expenses were: USD 81 million in the Investment Bank
keeping a stable risk profile with regard to concentrations and
related to an exposure to a client in the travel sector; USD 59
collateral liquidity, and with no material incurred losses after
million in Personal & Corporate Banking related to a case of
undergoing a real-life stress test in the first quarter of 2020.
fraud at a commodity trade finance counterparty, which
Our Swiss corporate banking products exposure increased over
affected a number of lenders, including UBS; and USD 42 million
the course of 2020, mainly due to the appreciation of the Swiss
in Group Functions from an energy-related exposure in Non-core
franc and COVID-19
facilities guaranteed by
the Swiss
and Legacy Portfolio.
government, as well as several large single positions. Due to our
strong footprint in our home market, we are exposed to the
development of the Swiss economy and the effects of the
ongoing and highly uncertain COVID-19 pandemic. Within our
Swiss corporate book, risks related to certain industries, including
the tourism; watches; and culture, sports and education sectors,
where we have modest exposure, have increased.
› Refer to “Note 1 Summary of significant accounting policies,”
“Note 9 Financial assets at amortized cost and other positions in
scope of expected credit loss measurement” and “Note 20
Expected credit loss measurement” in the “Consolidated financial
statements” section of this report for more information about
IFRS 9 and expected credit losses
Our Swiss real estate portfolio increased over the course of
Audited | Main sources of credit risk
2020, mainly due to the appreciation of the Swiss franc. It is of
high quality but carefully monitored, due to its materiality. We are
– Global Wealth Management predominantly
conducts
paying particularly close attention to the level of risk in our Swiss
securities-based (Lombard) lending and mortgage lending.
commercial retail and office real estate portfolio and its resilience
– A substantial portion of lending exposure arises from Personal
to the economic impact of COVID-19.
& Corporate Banking, which offers mortgage loans, secured
Our loans to customers in the Investment Bank are modest
mainly by residential properties and income-producing real
compared with our Personal & Corporate Banking and Global
estate, as well as corporate loans, and therefore depends on
Wealth Management loan books. Over the course of 2020, we
the performance of the Swiss economy.
have seen defaults in industries impacted by COVID-19, such as
– The Investment Bank’s credit exposure arises mainly from
energy, real estate and travel, and we are watchful of further
lending, derivatives
trading and
securities
financing.
Total net credit loss expenses were USD 694 million in 2020,
derivative transactions, predominantly carried out on a cash-
compared with USD 78 million in the prior year, reflecting net
collateralized basis, and securitized positions.
Derivatives trading and securities financing are mainly
investment grade. Loan underwriting activity can be lower
rated and give rise to temporary concentrated exposure.
– Credit risk within Non-core and Legacy Portfolio relates to
impairments.
Credit loss expense / release
Credit loss (expense) / release
USD million
FFoorr tthhee yyeeaarr eennddeedd 3311..1122..2200
Stages 1 and 2
Stage 3
TToottaall ccrreeddiitt lloossss ((eexxppeennssee)) // rreelleeaassee
FFoorr tthhee yyeeaarr eennddeedd 3311..1122..1199
Stages 1 and 2
Stage 3
TToottaall ccrreeddiitt lloossss ((eexxppeennssee)) // rreelleeaassee
FFoorr tthhee yyeeaarr eennddeedd 3311..1122..1188
Stages 1 and 2
Stage 3
TToottaall ccrreeddiitt lloossss ((eexxppeennssee)) // rreelleeaassee
Global
Wealth
Management
Personal &
Corporate
Banking
Asset
Investment
Management
Bank
Group
Functions
((4488))
((4400))
((8888))
3
(23)
((2200))
0
(15)
((1155))
((112299))
((112288))
((225577))
23
(44)
((2211))
0
(56)
((5566))
00
((22))
((22))
0
0
00
0
0
00
((8888))
((221177))
((330055))
(4)
(26)
((3300))
(9)
(29)
((3388))
00
((4422))
((4422))
0
(7)
((77))
(1)
(8)
((88))
Total
((226666))
((442299))
((669944))
22
(100)
((7788))
(9)
(109)
((111188))
Audited | Overview of measurement, monitoring and
management techniques
Banking products
– Credit risk from transactions with individual counterparties is
based on our estimates of probability of default (PD), exposure
at default (EAD) and loss given default (LGD). Limits are
established for individual counterparties and groups of related
counterparties covering banking and traded products, and for
settlement amounts. Risk authorities are approved by the BoD,
and are delegated to the Group CEO, the Group CRO and
divisional CROs, based on risk exposure amounts, internal
credit rating and potential loss.
– Limits apply not only to the current outstanding amount, but
also to contingent commitments and the potential future
exposure of traded products.
– The Investment Bank monitoring, measurement and limit
framework distinguishes between exposures intended to be
held to maturity (take-and-hold exposures) and those intended
for distribution or risk transfer (temporary exposures).
– We use models to derive portfolio credit risk measures of
expected loss, statistical loss and stress loss at Group-wide and
business division levels, and to establish portfolio limits.
– Credit risk concentrations can arise if clients are engaged in
similar activities, located in the same geographical region or
have comparable economic characteristics, e.g., if their ability
to meet contractual obligations would be similarly affected by
changes in economic, political or other conditions. To avoid
credit risk concentrations, we establish limits / operational
controls that constrain risk concentrations at portfolio and sub-
portfolio levels with regard to sector exposure, country risk and
specific product exposures.
Credit risk profile of the Group
The exposures detailed
this section are based on
management’s view of credit risk, which differs in certain
respects from the expected credit loss (ECL) measurement
requirements of IFRS.
in
Breakdowns of banking products exposures in the “Banking and
traded products exposure in our business divisions and Group
Functions” table on the next page are gross before allowances
and provisions for ECLs and credit hedges. Guarantees and loan
commitments are shown on a notional basis, without applying
credit conversion factors.
The table reflects the total exposures (stages 1–3) in scope
of ECL requirements, allowances and provisions by ECL stages
and separately credit-impaired exposures, gross (stage 3). Total
gross banking products exposure was USD 639 billion as of 31
December 2020, compared with USD 515 billion at the end of
the prior year.
The gross exposure for banking products as shown in the
table corresponds to an ECL gross exposure of USD 802 billion.
The gross exposure shown in the table includes other financial
assets measured at amortized cost, but excludes cash,
receivables from securities financing transactions, cash collateral
receivables on derivative instruments, financial assets at fair
value through other comprehensive income (FVOCI), irrevocable
committed prolongation of existing
loans, unconditionally
revocable committed credit lines, and forward starting reverse
repurchase and securities borrowing agreements
› Refer to “Note 1 Summary of significant accounting policies” in
the “Consolidated financial statements” section of this report for
more information about our accounting policy for allowances
and provisions for ECLs
› Refer to “Note 9 Financial assets at amortized cost and other
positions in scope of expected credit loss measurement” and
“Note 20 Expected credit loss measurement” in the
“Consolidated financial statements” section of this report for
more information about ECL measurement requirements under
IFRS
› Refer to “Note 14a Other financial assets measured at amortized
cost” in the “Consolidated financial statements” section of this
report for more details
include drawn
loans, guarantees and
Internally, we put credit risk exposures into two broad
categories: banking products and traded products. Banking
products
loan
commitments, amounts due from banks, balances at central
banks, and other financial assets at amortized cost. Traded
products include over-the-counter derivatives, exchange-traded
derivatives and securities financing transactions, consisting of
securities borrowing and lending, and repurchase and reverse
repurchase agreements.
106
107
107
Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Banking and traded products exposure in our business divisions and Group Functions
USD million
BBaannkkiinngg pprroodduuccttss11,,22
Gross exposure
of which: loans and advances to customers (on-balance sheet)
of which: guarantees and loan commitments (off-balance sheet)
TTrraaddeedd pprroodduuccttss22,,33
Gross exposure
of which: over-the-counter derivatives
of which: securities financing transactions
of which: exchange-traded derivatives
OOtthheerr ccrreeddiitt lliinneess,, ggrroossss44
Total credit-impaired exposure, gross (stage 3)1
Total allowances and provisions for expected credit losses (stages 1 to 3)
of which: stage 1
of which: stage 2
of which: stage 3 (allowances and provisions for credit-impaired exposures)
USD million
BBaannkkiinngg pprroodduuccttss11,,22
Gross exposure
of which: loans and advances to customers (on-balance sheet)
of which: guarantees and loan commitments (off-balance sheet)
TTrraaddeedd pprroodduuccttss22,,33
Gross exposure
of which: over-the-counter derivatives
of which: securities financing transactions
of which: exchange-traded derivatives
OOtthheerr ccrreeddiitt lliinneess,, ggrroossss44
GGlloobbaall WWeeaalltthh
MMaannaaggeemmeenntt
PPeerrssoonnaall &&
CCoorrppoorraattee
BBaannkkiinngg
AAsssseett
MMaannaaggeemmeenntt
IInnvveessttmmeenntt
BBaannkk
GGrroouupp
FFuunnccttiioonnss
3311..1122..2200
330000,,336688
220088,,332244
1100,,115533
222277,,113399
115533,,997755
2288,,881144
33,,337744
11
00
5566,,223377
1133,,996644
1155,,993366
5522,,119999
44,,332244
33,,555500
99,,991199
66,,994466
00
22,,997733
1122,,220011
11,,332244
331188
110033
5544
116600
11,,220011
11,,118822
00
1199
2244,,995500
11,,999977
884422
113300
221166
449977
00
00
00
00
00
00
11
00
00
11
4400,,221155
1111,,223366
2211,,775533
77,,222277
22,,995522
445500
229988
7700
6633
116655
3311
77
1100
33
00
66
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group
Functions
31.12.19
239,032
174,510
5,578
8,830
6,571
0
2,259
10,735
194,395
136,572
23,142
841
804
0
36
20,986
2,914
1
0
48,170
10,585
16,009
30,570
5,882
960
0
0
0
0
0
38,233
9,832
20,821
7,580
3,227
144
TToottaall
663399,,331177
338800,,558899
5588,,445533
5511,,333355
1199,,336644
2211,,775533
1100,,221188
4400,,113344
33,,777788
11,,446688
330066
333333
882299
Total
515,081
327,550
45,689
47,904
17,207
20,821
9,876
35,092
Total credit-impaired exposure, gross (stage 3)1
Total allowances and provisions for expected credit losses (stages 1 to 3)
of which: stage 1
of which: stage 2
of which: stage 3 (allowances and provisions for credit-impaired exposures)
3,113
1,029
181
160
688
11 ECL gross exposure including other financial assets at amortized cost, but excluding cash, receivables from securities financing transactions, cash collateral receivables on derivative instruments, financial assets at
FVOCI, irrevocable committed prolongation of existing loans and unconditionally revocable committed credit lines and forward starting reverse repurchase and securities borrowing agreements. 22 Internal
management view of credit risk, which differs in certain respects from IFRS. 33 As counterparty risk for traded products is managed at counterparty level, no further split between exposures in the Investment Bank
and Group Functions is provided. 44 Unconditionally revocable committed credit lines.
1,694
696
81
122
493
902
209
59
34
116
427
37
3
0
34
91
87
38
3
46
0
0
0
0
0
(Lombard
Global Wealth Management
Gross banking products exposure within Global Wealth
Management increased to USD 300 billion from USD 239 billion.
Our Global Wealth Management loan portfolio is mainly
secured by securities
loans) and by residential
property. Most of the Lombard loans were of high quality, with
92% rated as investment grade based on our internal ratings,
and they are typically short term in nature. Moreover, Lombard
loans can be canceled immediately, if the collateral quality
deteriorates or margin calls are not met. In 2020, the Lombard
book increased by 20%, while keeping a stable risk profile with
regard to concentrations and collateral liquidity and with no
material losses. The increase was mainly driven by higher
volumes of loans in Switzerland, the US, and Asia Pacific.
The mortgage book increased by 13%, equally driven by the
effects of the US dollar depreciating against the Swiss franc on a
mostly Swiss-franc denominated portfolio and a higher volume
of mortgage loans in Switzerland and the US, distributed across
various clients.
During 2020, aircraft leasing was gradually transitioned to
Global Wealth Management from Personal & Corporate
Banking, shifting loans of USD 1.8 billion.
Due to negative market movements during the COVID-19
global outbreak, the number of margin calls in Global Wealth
Management for Lombard and securities-based loans materially
spiked in mid-March. Since mid-April, both the number of
margin calls and their volumes were within normal ranges, with
no material credit losses.
108
108
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
of which: loans and advances to customers (on-balance sheet)
of which: guarantees and loan commitments (off-balance sheet)
of which: over-the-counter derivatives
of which: securities financing transactions
of which: exchange-traded derivatives
OOtthheerr ccrreeddiitt lliinneess,, ggrroossss44
Total credit-impaired exposure, gross (stage 3)1
11,,332244
11,,999977
Total allowances and provisions for expected credit losses (stages 1 to 3)
of which: stage 3 (allowances and provisions for credit-impaired exposures)
USD million
BBaannkkiinngg pprroodduuccttss11,,22
Gross exposure
TTrraaddeedd pprroodduuccttss22,,33
Gross exposure
of which: stage 1
of which: stage 2
USD million
BBaannkkiinngg pprroodduuccttss11,,22
Gross exposure
TTrraaddeedd pprroodduuccttss22,,33
Gross exposure
of which: loans and advances to customers (on-balance sheet)
of which: guarantees and loan commitments (off-balance sheet)
of which: over-the-counter derivatives
of which: securities financing transactions
of which: exchange-traded derivatives
OOtthheerr ccrreeddiitt lliinneess,, ggrroossss44
Total credit-impaired exposure, gross (stage 3)1
Total allowances and provisions for expected credit losses (stages 1 to 3)
of which: stage 1
of which: stage 2
of which: stage 3 (allowances and provisions for credit-impaired exposures)
GGlloobbaall WWeeaalltthh
MMaannaaggeemmeenntt
BBaannkkiinngg
MMaannaaggeemmeenntt
BBaannkk
AAsssseett
IInnvveessttmmeenntt
GGrroouupp
FFuunnccttiioonnss
PPeerrssoonnaall &&
CCoorrppoorraattee
3311..1122..2200
33,,337744
5566,,223377
1133,,996644
1155,,993366
5522,,119999
44,,332244
33,,555500
330000,,336688
220088,,332244
1100,,115533
99,,991199
66,,994466
00
22,,997733
1122,,220011
331188
110033
5544
116600
239,032
174,510
5,578
8,830
6,571
0
2,259
10,735
902
209
59
34
116
222277,,113399
115533,,997755
2288,,881144
11,,220011
11,,118822
00
1199
2244,,995500
884422
113300
221166
449977
194,395
136,572
23,142
841
804
0
36
20,986
1,694
696
81
122
493
TToottaall
663399,,331177
338800,,558899
5588,,445533
5511,,333355
1199,,336644
2211,,775533
1100,,221188
4400,,113344
33,,777788
11,,446688
330066
333333
882299
Total
515,081
327,550
45,689
47,904
17,207
20,821
9,876
35,092
3,113
1,029
181
160
688
4400,,221155
1111,,223366
2211,,775533
77,,222277
22,,995522
445500
229988
7700
6633
116655
38,233
9,832
20,821
7,580
3,227
91
87
38
3
46
3311
77
1100
33
00
66
144
427
37
3
0
34
11
00
00
00
00
00
00
00
11
00
00
11
1
0
0
0
0
0
0
0
0
0
0
0
Global Wealth
Management
Banking
Management
Bank
Asset
Investment
Group
Functions
Personal &
Corporate
31.12.19
2,914
48,170
10,585
16,009
30,570
5,882
960
11 ECL gross exposure including other financial assets at amortized cost, but excluding cash, receivables from securities financing transactions, cash collateral receivables on derivative instruments, financial assets at
FVOCI, irrevocable committed prolongation of existing loans and unconditionally revocable committed credit lines and forward starting reverse repurchase and securities borrowing agreements. 22 Internal
management view of credit risk, which differs in certain respects from IFRS. 33 As counterparty risk for traded products is managed at counterparty level, no further split between exposures in the Investment Bank
and Group Functions is provided. 44 Unconditionally revocable committed credit lines.
Global Wealth Management
The mortgage book increased by 13%, equally driven by the
Gross banking products exposure within Global Wealth
effects of the US dollar depreciating against the Swiss franc on a
Management increased to USD 300 billion from USD 239 billion.
mostly Swiss-franc denominated portfolio and a higher volume
Our Global Wealth Management loan portfolio is mainly
of mortgage loans in Switzerland and the US, distributed across
secured by securities
(Lombard
loans) and by residential
various clients.
property. Most of the Lombard loans were of high quality, with
During 2020, aircraft leasing was gradually transitioned to
92% rated as investment grade based on our internal ratings,
Global Wealth Management from Personal & Corporate
and they are typically short term in nature. Moreover, Lombard
Banking, shifting loans of USD 1.8 billion.
loans can be canceled immediately, if the collateral quality
Due to negative market movements during the COVID-19
deteriorates or margin calls are not met. In 2020, the Lombard
global outbreak, the number of margin calls in Global Wealth
book increased by 20%, while keeping a stable risk profile with
Management for Lombard and securities-based loans materially
regard to concentrations and collateral liquidity and with no
spiked in mid-March. Since mid-April, both the number of
material losses. The increase was mainly driven by higher
margin calls and their volumes were within normal ranges, with
volumes of loans in Switzerland, the US, and Asia Pacific.
no material credit losses.
Banking and traded products exposure in our business divisions and Group Functions
Global Wealth Management and Personal & Corporate Banking loans and advances to customers, gross
USD million
Secured by residential property
Secured by commercial / industrial property1
Secured by cash
Secured by securities
Secured by guarantees and other collateral
Unsecured loans and advances to customers
TToottaall llooaannss aanndd aaddvvaanncceess ttoo ccuussttoommeerrss,, ggrroossss
AAlllloowwaanncceess
TToottaall llooaannss aanndd aaddvvaanncceess ttoo ccuussttoommeerrss,, nneett ooff aalllloowwaanncceess
11 Includes exposures with mixed collateral as security, where the primary purpose of the loan is not to finance a specific property.
Global Wealth Management
Personal & Corporate Banking
3311..1122..2200
6600,,002211
33,,227733
2222,,772222
110044,,665522
1155,,660055
22,,005511
220088,,332244
((119900))
220088,,113344
31.12.19
54,383
2,619
16,852
88,684
10,591
1,381
174,510
(93)
174,417
3311..1122..2200
111111,,555544
1199,,662233
22,,886600
22,,000033
66,,994422
1100,,999944
115533,,997755
((667766))
115533,,229999
31.12.19
100,645
17,131
1,569
1,766
5,351
10,111
136,572
(595)
135,978
Personal & Corporate Banking
Gross banking products exposure (excluding exposure re-
allocated from Group Treasury) within Personal & Corporate
Banking increased to USD 187 billion (CHF 165 billion) from
USD 163 billion (CHF 158 billion), predominantly driven by the
appreciation of the Swiss franc. Net banking products exposure
was USD 186 billion (CHF 165 billion), compared with USD 162
billion (CHF 157 billion), of which approximately 65% was
classified as investment grade, compared with 63% in 2019.
Around 50% of the exposure is categorized in the lowest LGD
bucket of 0–25%, similar to 2019. The size of Personal &
Corporate Banking’s gross loan portfolio increased to USD 154
billion (CHF 136 billion) from USD 137 billion (CHF 132 billion).
This portfolio is predominantly denominated in Swiss francs
and thus the increase is largely due to the US dollar
depreciating. As of 31 December 2020, 93% of this portfolio
was secured by collateral, mainly residential and commercial
property. Of the total unsecured amount, 81% related to cash
flow-based
lending to corporate counterparties and 4%
related to lending to public authorities. Based on our internal
ratings, 45% of the unsecured loan portfolio was rated as
investment grade, compared with 46% in 2019.
loss expenses
Although credit
for banking products
increased significantly in 2020 compared with 2019, they
remained within our expectations, considering the COVID-19
pandemic. This was achieved due to our careful risk
management, as well as external measures, such as the Swiss
federal and cantonal credit programs and Kurzarbeit (short-
time work benefit), supporting the Swiss economy. Given the
credit quality of our portfolio and prudent risk management
approach, alongside improved macroeconomic forecasts, we
currently do not expect credit loss expense to increase in 2021
from 2020. Our Swiss corporate banking products portfolio,
which was USD 35 billion (CHF 31 billion) compared with
USD 26 billion (CHF 26 billion) in 2019, consists of loans,
guarantees and
loan commitments to multi-national and
domestic counterparties. The increase compared with 2019 is
mainly due to the COVID-19 facilities guaranteed by the Swiss
government of CHF 3 billion (USD 3 billion) and several large
single positions. The small and medium-sized entity (SME)
portfolio, in particular, is well diversified across industries.
However, such companies are reliant on the domestic economy
and the economies to which they export, in particular the EU
and the US. In addition, the change in the EUR / CHF exchange
rate is an important risk factor for Swiss corporate clients.
The delinquency ratio was 0.4% for the corporate portfolio,
compared with 0.5% at the end of 2019.
› Refer to “Credit risk models” in this section for more information
about loss given default, rating grades and rating agency
mappings
(CHF 136 billion) of
Swiss mortgage loan portfolio
Our Swiss mortgage loan portfolio secured by residential and
commercial real estate in Switzerland continues to be our largest
loan portfolio. These mortgage loans, totaling USD 170 billion
(CHF 150 billion), mainly originate from Personal & Corporate
Banking, but also from Global Wealth Management Region
those
Switzerland. USD 153 billion
mortgage loans related to residential properties that the
borrower was either occupying or renting out, with full recourse
to the borrower. Of this USD 153 billion (CHF 136 billion),
USD 111 billion (CHF 98 billion) is related to properties occupied
by the borrower, with an average loan-to-value (LTV) ratio of
54%, unchanged compared with 31 December 2019. The
average LTV for newly originated loans for this portfolio was
67%, compared with 65% in 2019. The remaining USD 43
billion (CHF 38 billion) of the Swiss residential mortgage loan
portfolio relates to properties rented out by the borrower and
the average LTV of that portfolio was 53%, compared with 54%
as of 31 December 2019. The average LTV for newly originated
Swiss residential mortgage loans for properties rented out by the
borrower was 56%, compared with 58% in 2019.
As illustrated in the “Swiss mortgages: distribution of net
exposure at default (EAD) across exposure segments and loan-
to-value (LTV) buckets” table on the next page, more than 99%
of the aggregate amount of Swiss residential mortgage loans
would continue to be covered by the real estate collateral even if
the value assigned to that collateral were to decrease by 20%,
and 98% would remain covered by the real estate collateral
even if the value assigned to that collateral were to decrease by
30%. In this table, the amount of each mortgage loan is
allocated across the LTV buckets to indicate the portion at risk at
the various value levels shown; for example, a loan of 75 with an
LTV ratio of 75% (i.e., a collateral value of 100) would result in
allocations of 30 in the less-than-30% LTV bucket, 20 in the 31–
50% bucket, 10 in the 51–60% bucket, 10 in the 61–70%
bucket and 5 in the 71–80% bucket.
108
109
109
Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Personal & Corporate Banking: distribution of banking products exposure across internal UBS ratings and loss given
default (LGD) buckets1
USD million, except where indicated
31.12.19
Internal UBS rating2
Investment grade
Sub-investment grade
of which: 6−9
of which: 10−13
Defaulted / Credit-impaired
EExxppoossuurree
112211,,338866
6633,,226666
5588,,114411
55,,112255
11,,999977
00––2255%%
7722,,552222
2255,,772200
2233,,771144
22,,000066
5533
3311..1122..2200
LLGGDD bbuucckkeettss
2266––5500%% 5511––7755%%
99,,552222
3377,,772244
7766––110000%%
11,,661177
2233,,664444
1111,,889911
2211,,885500
1100,,779944
11,,779944
11,,770022
11,,009988
224411
22,,001111
11,,778833
222288
00
33,,662288
WWeeiigghhtteedd
aavveerraaggee
LLGGDD ((%%))
2266
3333
3333
3355
4411
2299
Weighted
average
LGD (%)
27
34
34
32
40
29
Exposure
102,491
58,597
53,811
4,786
1,694
162,782
Total exposure before deduction of allowances and provisions
118866,,664488
9988,,229966
6633,,007700
2211,,665544
Less: allowances and provisions
NNeett bbaannkkiinngg pprroodduuccttss eexxppoossuurree11
11 Excluding balances at central banks and Group Treasury reallocations. 22 The ratings of the major credit rating agencies, and their mapping to our internal rating scale, are shown in the “Internal UBS rating scale
and mapping of external ratings” table in this section.
162,121
118855,,885533
((779955))
(660)
Personal & Corporate Banking: unsecured loans by industry sector
Construction
Financial institutions
Hotels and restaurants
Manufacturing
Private households
Public authorities
Real estate and rentals
Retail and wholesale
Services
Other
EExxppoossuurree,, ggrroossss
3311..1122..2200
UUSSDD mmiilllliioonn
115577
22,,555533
113333
11,,557722
11,,664488
447722
449988
11,,775566
11,,889966
330099
%%
11..44
2233..22
11..22
1144..33
1155..00
44..33
44..55
1166..00
1177..33
22..88
31.12.19
USD million
135
1,873
81
1,536
1,609
497
236
1,981
1,850
313
%
1.3
18.5
0.8
15.2
15.9
4.9
2.3
19.6
18.3
3.1
1100,,999944
110000..00
10,111
100.0
Swiss mortgages: distribution of net exposure at default (EAD) across exposure segments and loan-to-value (LTV)
buckets
USD billion, except where indicated
Exposure segment
Residential mortgages
Income-producing real estate
Corporates
Other segments
MMoorrttggaaggee--ccoovveerreedd eexxppoossuurree
Mortgage-covered exposure 31.12.19
3311..1122..2200
LLTTVV bbuucckkeettss
31.12.19
≤≤3300%%
3311––5500%%
5511––6600%%
6611––7700%%
7711––8800%% 8811––110000%% >>110000%%
TToottaall
Total
Net EAD
as a % of row total
Net EAD
as a % of row total
Net EAD
as a % of row total
Net EAD
as a % of row total
Net EAD
as a % of total
Net EAD
as a % of total
8866..66
6600
1144..77
6655
66..99
6644
00..66
6688
110088..88
6611
94.6
60
3388..88
1100..99
2277
55..88
2255
22..66
2244
00..22
2211
4477..33
2277
41.7
27
88
11..44
66
00..77
66
00..00
55
1133..00
77
11.8
8
55..44
44
00..66
33
00..33
33
00..00
33
66..44
44
6.1
4
11..77
11
00..22
11
00..11
11
00..00
11
22..00
11
2.1
1
00..44
00
00..11
00
00..11
11
00..00
11
00..55
00
0.4
0
00..22
00
00..00
00
00..00
00
00..00
00
00..22
00
0.1
0
114433..99
127.7
18.7
9.6
0.7
156.7
110000
2222..88
110000
1100..88
110000
00..88
110000
117788..33
110000
156.7
100
Asset Management
Gross banking products exposure within Asset Management was
USD 3.4 billion as of 31 December 2020, compared with
USD 2.9 billion as of 31 December 2019. Banking products
relate primarily to balances at central banks and to a lesser
extent to cash at banks held by individual Asset Management
legal entities, liquid assets and receivables.
Investment Bank
The Investment Bank’s lending activities are largely associated
with corporate and non-bank financial institutions. The business
is broadly diversified across industry sectors, but concentrated in
North America.
110
110
3311..1122..2200
LLGGDD bbuucckkeettss
Investment Bank: distribution of banking products exposure across internal UBS ratings and loss given default (LGD)
buckets1
USD million, except where indicated
31.12.19
Internal UBS rating2
Investment grade
Sub-investment grade
of which: 6−9
of which: 10−13
Defaulted / Credit-impaired
EExxppoossuurree
1199,,330033
00––2255%%
66,,885588
2266––5500%%
88,,447788
5511––7755%%
33,,668800
7766––110000%%
228888
1166,,778855
1122,,003300
44,,775566
445500
44,,559988
33,,001144
11,,558844
9922
55,,111111
22,,006600
33,,005511
111133
66,,995577
66,,883366
112211
223333
112200
112200
00
1122
The gross banking products exposure including balances at
central banks and Group Treasury reallocations was USD 56
billion as of 31 December 2020, compared with USD 48 billion
as of 31 December 2019. Gross banking products exposure
excluding balances at central banks and Group Treasury
reallocations increased to USD 37 billion from USD 32 billion,
mostly driven by increases in loans and advances to customers.
Based on our internal ratings, 53% of this gross banking
products exposure was classified as investment grade. The vast
majority of the gross banking products exposure had an
estimated LGD below 50%.
remained
Our loan underwriting business’s overall ability to distribute
risk
loan
sound. Total mandated
underwriting exposure ended 2020 at USD 4.9 billion, compared
with USD 4.4 billion at the end of the prior year. Loan
underwriting exposures are classified as held for trading, with
fair values reflecting market conditions at the end of 2020.
temporary
› Refer to “Credit risk models” in this section for more information
about LGD, rating grades and rating agency mappings
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Personal & Corporate Banking: distribution of banking products exposure across internal UBS ratings and loss given
2266––5500%% 5511––7755%%
7766––110000%%
3311..1122..2200
LLGGDD bbuucckkeettss
3377,,772244
2233,,664444
99,,552222
1111,,889911
2211,,885500
1100,,779944
11,,779944
11,,770022
11,,009988
224411
00––2255%%
7722,,552222
2255,,772200
2233,,771144
22,,000066
5533
EExxppoossuurree
112211,,338866
6633,,226666
5588,,114411
55,,112255
11,,999977
((779955))
118855,,885533
31.12.19
Weighted
average
LGD (%)
WWeeiigghhtteedd
aavveerraaggee
LLGGDD ((%%))
2266
3333
3333
3355
4411
2299
Exposure
102,491
58,597
53,811
4,786
1,694
162,782
(660)
162,121
Total exposure before deduction of allowances and provisions
118866,,664488
9988,,229966
6633,,007700
2211,,665544
11 Excluding balances at central banks and Group Treasury reallocations. 22 The ratings of the major credit rating agencies, and their mapping to our internal rating scale, are shown in the “Internal UBS rating scale
and mapping of external ratings” table in this section.
Personal & Corporate Banking: unsecured loans by industry sector
3311..1122..2200
UUSSDD mmiilllliioonn
31.12.19
USD million
11,,661177
22,,001111
11,,778833
222288
00
33,,662288
%%
11..44
2233..22
11..22
1144..33
1155..00
44..33
44..55
1166..00
1177..33
22..88
115577
22,,555533
113333
11,,557722
11,,664488
447722
449988
11,,775566
11,,889966
330099
135
1,873
81
1,536
1,609
497
236
1,981
1,850
313
Swiss mortgages: distribution of net exposure at default (EAD) across exposure segments and loan-to-value (LTV)
1100,,999944
110000..00
10,111
100.0
3311..1122..2200
LLTTVV bbuucckkeettss
31.12.19
≤≤3300%%
3311––5500%%
5511––6600%%
6611––7700%%
7711––8800%% 8811––110000%% >>110000%%
TToottaall
Total
3388..88
1100..99
00..22
114433..99
127.7
as a % of row total
as a % of row total
Net EAD
Net EAD
Net EAD
Net EAD
as a % of row total
as a % of row total
Net EAD
as a % of total
Net EAD
as a % of total
8866..66
6600
1144..77
6655
66..99
6644
00..66
6688
110088..88
6611
94.6
60
2277
55..88
2255
22..66
2244
00..22
2211
4477..33
2277
41.7
27
11..44
00..77
00..00
88
66
66
55
77
8
1133..00
11.8
55..44
00..66
00..33
00..00
44
33
33
33
44
4
66..44
6.1
11..77
00..22
00..11
00..00
11
11
11
11
11
1
22..00
2.1
00..44
00..11
00..11
00..00
00
00
11
11
00
0
00..55
0.4
00..00
00..00
00..00
00
00
00
00
00
0
110000
2222..88
110000
1100..88
110000
00..88
110000
110000
100
00..22
117788..33
156.7
0.1
156.7
default (LGD) buckets1
USD million, except where indicated
Internal UBS rating2
Investment grade
Sub-investment grade
of which: 6−9
of which: 10−13
Defaulted / Credit-impaired
Less: allowances and provisions
NNeett bbaannkkiinngg pprroodduuccttss eexxppoossuurree11
Construction
Financial institutions
Hotels and restaurants
Manufacturing
Private households
Public authorities
Real estate and rentals
Retail and wholesale
Services
Other
EExxppoossuurree,, ggrroossss
buckets
USD billion, except where indicated
Exposure segment
Residential mortgages
Income-producing real estate
Corporates
Other segments
MMoorrttggaaggee--ccoovveerreedd eexxppoossuurree
Mortgage-covered exposure 31.12.19
27
34
34
32
40
29
%
1.3
18.5
0.8
15.2
15.9
4.9
2.3
19.6
18.3
3.1
18.7
9.6
0.7
Asset Management
Investment Bank
Gross banking products exposure within Asset Management was
The Investment Bank’s lending activities are largely associated
USD 3.4 billion as of 31 December 2020, compared with
with corporate and non-bank financial institutions. The business
USD 2.9 billion as of 31 December 2019. Banking products
is broadly diversified across industry sectors, but concentrated in
relate primarily to balances at central banks and to a lesser
North America.
extent to cash at banks held by individual Asset Management
legal entities, liquid assets and receivables.
BBaannkkiinngg pprroodduuccttss eexxppoossuurree11
30
1111,,554477
11 Excluding balances at central banks and Group Treasury reallocations. 22 The ratings of the major credit rating agencies, and their mapping to our internal rating scale, are shown in the “Internal UBS rating scale
and mapping of external ratings” table in this section.
32,229
3366,,553388
1100,,887700
1133,,770011
442200
2277
Investment Bank: banking products exposure by geographical region1
Asia Pacific
Latin America
Middle East and Africa
North America
Switzerland
Rest of Europe
EExxppoossuurree11
11 Excluding balances at central banks and Group Treasury reallocations.
Investment Bank: banking products exposure by industry sector1
Banks
Chemicals
Electricity, gas, water supply
Financial institutions, excluding banks
Manufacturing
Mining
Public authorities
Real estate and construction
Retail and wholesale
Technology and communications
Transport and storage
Other
3311..1122..2200
UUSSDD mmiilllliioonn
77,,221166
11,,558844
442288
1155,,446622
772200
1111,,112299
3366,,553388
3311..1122..2200
UUSSDD mmiilllliioonn
77,,228866
887766
444488
1133,,113300
11,,668811
11,,555588
11,,227733
11,,442211
22,,004411
33,,444433
444455
22,,993377
%%
1199..77
44..33
11..22
4422..33
22..00
3300..55
110000..00
%%
1199..99
22..44
11..22
3355..99
44..66
44..33
33..55
33..99
55..66
99..44
11..22
88..00
31.12.19
USD million
5,080
844
467
16,553
779
8,505
32,229
31.12.19
USD million
5,375
766
534
12,944
1,705
1,699
872
1,291
1,842
2,302
458
2,441
%
15.8
2.6
1.5
51.4
2.4
26.4
100.0
%
16.7
2.4
1.7
40.2
5.3
5.3
2.7
4.0
5.7
7.1
1.4
7.6
EExxppoossuurree11
11 Excluding balances at central banks and Group Treasury reallocations.
3366,,553388
110000..00
32,229
100.0
110
111
111
WWeeiigghhtteedd
aavveerraaggee
LLGGDD ((%%))
3366
1177
1111
3300
5533
Weighted
average
LGD (%)
40
18
14
30
40
Exposure
17,541
14,598
10,746
3,852
91
Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Group Functions
Gross banking products exposure within Group Functions, which
arises primarily in connection with treasury activities, increased
by USD 22 billion to USD 52 billion. Of this increase, USD 18
billion came from balances at central banks, as the Group
increased its liquidity reserves in a volatile market environment.
› Refer to “Balance sheet assets” in the “Capital, liquidity and
funding, and balance sheet” section of this report for more
information
› Refer to the “Group Functions” section of this report for more
information
Traded products
Audited | Counterparty credit risk arising from traded products,
which include over-the-counter (OTC) derivatives, exchange-
traded derivatives (ETD) exposures and securities financing
transactions (SFTs), originating in the Investment Bank, Non-core
and Legacy Portfolio, and Group Treasury is generally managed
on a close-out basis. This takes into account possible effects of
market movements on the exposure and any associated
collateral over the time it would take to close out our positions.
In the Investment Bank, limits are applied to the potential future
exposure per counterparty, with the size of the limit dependent
on the creditworthiness (as determined by Risk Control) of the
counterparty. Limit frameworks are also applied to control
overall exposure to specific classes or categories of collateral on
a portfolio level. Such portfolio limits are monitored and
reported to senior management.
Trading in OTC derivatives is conducted through central
counterparties (CCPs) where practicable. Where CCPs are not
used, we have clearly defined policies and processes for trading on
a bilateral basis. Trading is typically conducted under bilateral
International Swaps and Derivatives Association (ISDA) or similar
master netting agreements, which generally allow for close-out
and netting of transactions in case of default, subject to applicable
law. For most major market participant counterparties, we use
two-way collateral agreements under which either party can be
required to provide collateral in the form of cash or marketable
securities when the exposure exceeds specified levels. This
collateral typically consists of well-rated government debt or other
regulations. For certain
collateral permitted by applicable
counterparties, an initial margin is taken to cover some or all of
the calculated close-out exposure. This is in addition to the
variation margin taken to settle changes in market value of
transactions. Regulations on margining uncleared OTC derivatives
continue to evolve. These generally expand the scope of bilateral
derivatives activity subject to margining. They will also result in
greater amounts of initial margin received from, and posted to,
certain bilateral trading counterparties than had been required in
the past. These changes should result in lower close-out risk over
time.
› Refer to “Note 10 Derivative instruments” in the “Consolidated
financial statements” section of this report for more information
about OTC derivatives settled through central counterparties
› Refer to “Note 22 Offsetting financial assets and financial liabilities”
in the “Consolidated financial statements” section of this report
for more information about the effect of netting and collateral
arrangements on derivative exposures
Credit risk arising from traded products, after the effects of
master netting agreements but excluding credit valuation
adjustments and hedges, increased by USD 3 billion to USD 51
billion as of 31 December 2020. OTC derivatives accounted for
USD 19 billion, exposures from SFTs were USD 22 billion, and
ETD exposures amounted to USD 10 billion. OTC derivatives
exposures are generally measured as net positive replacement
values after the application of legally enforceable netting
agreements and the deduction of cash and marketable securities
held as collateral. SFT exposures are reported taking into
account collateral received, and ETD exposures take into account
collateral margin calls.
Of the total of USD 51 billion gross traded products
exposures, USD 40 billion was within the Investment Bank, Non-
core and Legacy Portfolio, and Group Treasury, compared with
USD 38 billion therein as of 31 December 2019. As counterparty
risk for traded products is managed at the counterparty level, no
further split is provided between exposures in the Investment
Bank and those in Non-core and Legacy Portfolio and Group
Treasury. The tables on the next page provide more information
about the OTC derivatives, SFT and ETD exposures of the
Investment Bank, Non-core and Legacy Portfolio, and Group
Treasury.
112
112
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
information
information
Traded products
Group Functions
counterparties, an initial margin is taken to cover some or all of
Gross banking products exposure within Group Functions, which
the calculated close-out exposure. This is in addition to the
arises primarily in connection with treasury activities, increased
variation margin taken to settle changes in market value of
by USD 22 billion to USD 52 billion. Of this increase, USD 18
transactions. Regulations on margining uncleared OTC derivatives
billion came from balances at central banks, as the Group
continue to evolve. These generally expand the scope of bilateral
increased its liquidity reserves in a volatile market environment.
derivatives activity subject to margining. They will also result in
› Refer to “Balance sheet assets” in the “Capital, liquidity and
funding, and balance sheet” section of this report for more
greater amounts of initial margin received from, and posted to,
certain bilateral trading counterparties than had been required in
the past. These changes should result in lower close-out risk over
› Refer to the “Group Functions” section of this report for more
time.
› Refer to “Note 10 Derivative instruments” in the “Consolidated
financial statements” section of this report for more information
about OTC derivatives settled through central counterparties
› Refer to “Note 22 Offsetting financial assets and financial liabilities”
in the “Consolidated financial statements” section of this report
for more information about the effect of netting and collateral
arrangements on derivative exposures
Audited | Counterparty credit risk arising from traded products,
which include over-the-counter (OTC) derivatives, exchange-
traded derivatives (ETD) exposures and securities financing
transactions (SFTs), originating in the Investment Bank, Non-core
and Legacy Portfolio, and Group Treasury is generally managed
Credit risk arising from traded products, after the effects of
on a close-out basis. This takes into account possible effects of
master netting agreements but excluding credit valuation
market movements on the exposure and any associated
adjustments and hedges, increased by USD 3 billion to USD 51
collateral over the time it would take to close out our positions.
billion as of 31 December 2020. OTC derivatives accounted for
In the Investment Bank, limits are applied to the potential future
USD 19 billion, exposures from SFTs were USD 22 billion, and
exposure per counterparty, with the size of the limit dependent
ETD exposures amounted to USD 10 billion. OTC derivatives
on the creditworthiness (as determined by Risk Control) of the
exposures are generally measured as net positive replacement
counterparty. Limit frameworks are also applied to control
values after the application of legally enforceable netting
overall exposure to specific classes or categories of collateral on
agreements and the deduction of cash and marketable securities
a portfolio level. Such portfolio limits are monitored and
held as collateral. SFT exposures are reported taking into
reported to senior management.
account collateral received, and ETD exposures take into account
Trading in OTC derivatives is conducted through central
collateral margin calls.
counterparties (CCPs) where practicable. Where CCPs are not
Of the total of USD 51 billion gross traded products
used, we have clearly defined policies and processes for trading on
exposures, USD 40 billion was within the Investment Bank, Non-
a bilateral basis. Trading is typically conducted under bilateral
core and Legacy Portfolio, and Group Treasury, compared with
International Swaps and Derivatives Association (ISDA) or similar
USD 38 billion therein as of 31 December 2019. As counterparty
master netting agreements, which generally allow for close-out
risk for traded products is managed at the counterparty level, no
and netting of transactions in case of default, subject to applicable
further split is provided between exposures in the Investment
law. For most major market participant counterparties, we use
Bank and those in Non-core and Legacy Portfolio and Group
two-way collateral agreements under which either party can be
Treasury. The tables on the next page provide more information
required to provide collateral in the form of cash or marketable
about the OTC derivatives, SFT and ETD exposures of the
securities when the exposure exceeds specified levels. This
Investment Bank, Non-core and Legacy Portfolio, and Group
collateral typically consists of well-rated government debt or other
Treasury.
collateral permitted by applicable
regulations. For certain
112
Investment Bank, Non-core and Legacy Portfolio and Group Treasury: traded products exposure
USD million
OOTTCC ddeerriivvaattiivveess
EETTDD
SSFFTTss
3311..1122..2200
Total exposure, before deduction of credit valuation adjustments and hedges
Less: credit valuation adjustments and allowances
Less: credit protection bought (credit default swaps, notional)
NNeett eexxppoossuurree aafftteerr ccrreeddiitt vvaalluuaattiioonn aaddjjuussttmmeennttss,, aalllloowwaanncceess aanndd hheeddggeess
1111,,223366
((5544))
((112266))
1111,,005566
2211,,775533
00
00
2211,,775533
77,,222277
00
00
77,,222277
TToottaall
4400,,221155
((5544))
((112266))
4400,,003355
TToottaall
31.12.19
38,232
(38)
(242)
37,952
Investment Bank, Non-core and Legacy Portfolio and Group Treasury: distribution of net OTC derivatives and SFT
exposure across internal UBS ratings and loss given default (LGD) buckets
USD million, except where indicated
31.12.19
Internal UBS rating1
NNeett OOTTCC ddeerriivvaattiivveess eexxppoossuurree
Investment grade
Sub-investment grade
of which: 6−9
of which: 10−12
of which: 13 and defaulted
TToottaall nneett OOTTCC ddeerriivvaattiivveess eexxppoossuurree,, aafftteerr ccrreeddiitt vvaalluuaattiioonn aaddjjuussttmmeennttss
aanndd hheeddggeess
NNeett SSFFTT eexxppoossuurree
Investment grade
3311..1122..2200
LLGGDD bbuucckkeettss
EExxppoossuurree
00––2255%% 2266––5500%% 5511––7755%% 7766––110000%%
WWeeiigghhtteedd
aavveerraaggee
LLGGDD ((%%))
Weighted
average
LGD (%)
Exposure
1100,,443366
662200
448877
111144
1199
119955
111133
9933
33
1177
88,,334433
110099
8877
2222
00
11,,447755
331133
224466
6677
00
1111,,005566
330077
88,,445533
11,,778888
442233
8855
6611
2211
22
550088
4499
5555
5555
6622
1122
4499
9,247
304
176
112
16
9,550
47
56
57
58
19
47
2211,,115555
225533
1188,,888833
11,,551188
550011
4400
20,524
40
Sub-investment grade
TToottaall nneett SSFFTT eexxppoossuurree
11 The ratings of the major credit rating agencies, and their mapping to our internal rating scale, are shown in the “Internal UBS rating scale and mapping of external ratings” table in this section.
559988
2211,,775533
297
20,821
222233
1199,,110066
8844
11,,660022
9944
334477
119977
669988
62
40
5599
4400
Investment Bank, Non-core and Legacy Portfolio and Group Treasury: net OTC derivatives and SFT exposure
by geographical region
Asia Pacific
Latin America
Middle East and Africa
North America
Switzerland
Rest of Europe
EExxppoossuurree
NNeett OOTTCC ddeerriivvaattiivveess eexxppoossuurree
NNeett SSFFTT eexxppoossuurree
3311..1122..2200
31.12.19
3311..1122..2200
31.12.19
UUSSDD mmiilllliioonn
22,,113399
116622
226633
22,,553399
666677
55,,228866
1111,,005566
%%
1199..33
11..55
22..44
2233..00
66..00
4477..88
110000..00
USD million
1,383
97
123
2,421
1,022
4,503
9,550
%
14.5
1.0
1.3
25.3
10.7
47.2
100.0
UUSSDD mmiilllliioonn
55,,112233
1188
993399
44,,777788
11,,332299
99,,556666
2211,,775533
%%
2233..66
00..11
44..33
2222..00
66..11
4444..00
110000..00
USD million
5,055
4
900
4,714
852
9,297
20,821
Investment Bank, Non-core and Legacy Portfolio and Group Treasury: net OTC derivatives and SFT exposure
by industry sector
Banks
Chemicals
Electricity, gas, water supply
Financial institutions, excluding banks
Manufacturing
Mining
Public authorities
Retail and wholesale
Transport, storage and communication
Other
EExxppoossuurree
NNeett OOTTCC ddeerriivvaattiivveess eexxppoossuurree
NNeett SSFFTT eexxppoossuurree
3311..1122..2200
31.12.19
3311..1122..2200
31.12.19
UUSSDD mmiilllliioonn
55,,118811
1100
112277
33,,443399
6688
1122
11,,333399
4444
448811
335566
1111,,005566
%%
4466..99
00..11
11..22
3311..11
00..66
00..11
1122..11
00..44
44..33
33..22
110000..00
USD million
4,608
4
99
3,188
67
9
1,019
17
383
156
9,550
%
48.3
0.0
1.0
33.4
0.7
0.1
10.7
0.2
4.0
1.6
100.0
UUSSDD mmiilllliioonn
33,,779966
00
00
1155,,990077
00
00
22,,005500
00
00
11
2211,,775533
%%
1177..55
00..00
00..00
7733..11
00..00
00..00
99..44
00..00
00..00
00..00
110000..00
USD million
3,713
0
0
15,593
0
0
1,514
0
0
0
20,821
%
24.3
0.0
4.3
22.6
4.1
44.7
100.0
%
17.8
0.0
0.0
74.9
0.0
0.0
7.3
0.0
0.0
0.0
100.0
113
113
Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Credit risk mitigation
Audited | We actively manage credit risk in our portfolios by taking
collateral against exposures and by utilizing credit hedging.
Lending secured by real estate
Audited | We use a scoring model as part of a standardized front-
to-back process for credit decisions on the originating or
modifying of Swiss mortgage loans. The model’s two key factors
are an affordability calculation relative to gross income and the
LTV ratio.
The calculation of affordability takes into account interest
payments, minimum amortization
requirements, potential
property maintenance costs and, for rental properties, the level
of rental income. Interest payments are estimated using a
predefined framework, which considers the potential for
significant interest rates increases over the lifetime of the loan.
The interest rate is set at 5% per annum.
For residential properties occupied by the borrower, the
maximum LTV for the standard approval process is 80% and
60% for holiday homes and luxury real estate. For other
properties, the maximum LTV allowed within the standard
approval process ranges from 30% to 80%, depending on the
type and age of the property, and the amount of renovation
work needed.
Audited | The value we assign to each property is based on the
lowest value determined from model-derived valuations, the
purchase price and, in some cases, an additional external
valuation.
Two separate models provided by a market-leading external
vendor are used to derive property valuations for owner-
occupied residential properties (ORPs) and income-producing
real estate (IPRE). We estimate the current value of an ORP using
a regression model (a hedonic model) based on statistical
comparison against current transaction data. We derive the
property value from the characteristics of the real estate itself, as
well as those of its location. In addition to the initial valuation,
values for ORPs are updated quarterly over the lifetime of the
loan using region-specific real estate price indices. The price
indices are sourced from an external vendor and subject to
internal validation and benchmarking. We use these valuations
quarterly to compute indexed LTV for all ORPs and consider
them along with other risk measures (e.g., rating migration and
behavioral information) to identify higher-risk loans, which are
then each reviewed by client advisors and credit officers, with
necessary action taken.
For IPRE, the capitalization rate model is used to determine
the property valuation by discounting estimated sustainable
future income using a capitalization rate based on various
attributes. These attributes consider regional and specific
property characteristics, such as market and location data (e.g.,
vacancy rates), benchmarks (e.g., for running costs) and certain
other standardized input parameters (e.g., property condition).
Rental income from IPRE is reviewed at least once every three
years, but indications of significant changes in the amount of
rental income or in the vacancy rate can trigger an interim
reappraisal.
To take market developments into account for these models,
the external vendor regularly updates the parameters and / or
refines the architecture for each model. Model changes and
parameter updates are subject to the same validation procedures
as our internally developed models.
Audited | We similarly apply underwriting guidelines for our
Global Wealth Management Region Americas mortgage loan
portfolio, taking into account loan affordability and collateral
sufficiency. LTV standards are defined for the various mortgage
types, such as residential mortgages or investment properties,
based on associated risk factors, such as property type, loan size,
and purpose. The maximum LTV allowed within the standard
approval process ranges from 45% to 80%. In addition to LTV,
other credit risk metrics, such as debt-to-income ratios, credit
scores and required client reserves, are also part of our
underwriting guidelines.
A risk limit framework is applied to the Global Wealth
Management Region Americas mortgage loan portfolio. Limits
are set to govern exposures within LTV categories, geographic
concentrations, portfolio growth and high-risk mortgage
segments, such as interest-only loans. These limits are monitored
by a specialized credit risk monitoring team and reported to
senior management. Supplementing this limit framework is a
real estate lending policy and procedures framework, set up to
govern real estate lending activities. Quality assurance and
quality control programs monitor compliance with mortgage
underwriting and documentation requirements.
› Refer to “Swiss mortgage loan portfolio” in this section for more
information about LTV in our Swiss mortgage portfolio
Lombard lending
Audited | Lombard loans are secured by pledges of marketable
securities, guarantees and other forms of collateral. Eligible
financial securities are primarily liquid and actively traded
transferable securities (such as bonds and equities), and other
transferable securities, such as approved structured products for
which regular prices are available and the issuer of the security
provides a market. To a lesser degree, less liquid collateral is also
used.
We derive lending values by applying discounts (haircuts) to
the pledged collateral’s market value. Haircuts for marketable
securities are calculated to cover possible change in value over a
given close-out period and confidence level. Less liquid or more
volatile collateral will typically have larger haircuts.
We assess concentration and correlation risks across collateral
posted at a counterparty level, and at a divisional level across
counterparties. We also perform targeted Group-wide reviews of
concentration. Concentration of collateral in single securities,
issuers or issuer groups, industry sectors, countries, regions or
currencies may result in higher risk and reduced liquidity. In such
cases, the lending value of the collateral, margin call and close-
out levels are adjusted accordingly.
114
114
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Credit risk mitigation
rental income or in the vacancy rate can trigger an interim
reappraisal.
Audited | We actively manage credit risk in our portfolios by taking
To take market developments into account for these models,
collateral against exposures and by utilizing credit hedging.
the external vendor regularly updates the parameters and / or
Lending secured by real estate
refines the architecture for each model. Model changes and
parameter updates are subject to the same validation procedures
Audited | We use a scoring model as part of a standardized front-
as our internally developed models.
to-back process for credit decisions on the originating or
Audited | We similarly apply underwriting guidelines for our
modifying of Swiss mortgage loans. The model’s two key factors
Global Wealth Management Region Americas mortgage loan
are an affordability calculation relative to gross income and the
portfolio, taking into account loan affordability and collateral
LTV ratio.
sufficiency. LTV standards are defined for the various mortgage
The calculation of affordability takes into account interest
types, such as residential mortgages or investment properties,
payments, minimum amortization
requirements, potential
based on associated risk factors, such as property type, loan size,
property maintenance costs and, for rental properties, the level
and purpose. The maximum LTV allowed within the standard
of rental income. Interest payments are estimated using a
approval process ranges from 45% to 80%. In addition to LTV,
predefined framework, which considers the potential for
other credit risk metrics, such as debt-to-income ratios, credit
significant interest rates increases over the lifetime of the loan.
scores and required client reserves, are also part of our
The interest rate is set at 5% per annum.
underwriting guidelines.
For residential properties occupied by the borrower, the
A risk limit framework is applied to the Global Wealth
maximum LTV for the standard approval process is 80% and
Management Region Americas mortgage loan portfolio. Limits
60% for holiday homes and luxury real estate. For other
are set to govern exposures within LTV categories, geographic
properties, the maximum LTV allowed within the standard
concentrations, portfolio growth and high-risk mortgage
approval process ranges from 30% to 80%, depending on the
segments, such as interest-only loans. These limits are monitored
type and age of the property, and the amount of renovation
by a specialized credit risk monitoring team and reported to
work needed.
senior management. Supplementing this limit framework is a
Audited | The value we assign to each property is based on the
real estate lending policy and procedures framework, set up to
lowest value determined from model-derived valuations, the
govern real estate lending activities. Quality assurance and
purchase price and, in some cases, an additional external
quality control programs monitor compliance with mortgage
valuation.
Two separate models provided by a market-leading external
vendor are used to derive property valuations for owner-
occupied residential properties (ORPs) and income-producing
underwriting and documentation requirements.
› Refer to “Swiss mortgage loan portfolio” in this section for more
information about LTV in our Swiss mortgage portfolio
real estate (IPRE). We estimate the current value of an ORP using
Lombard lending
a regression model (a hedonic model) based on statistical
Audited | Lombard loans are secured by pledges of marketable
comparison against current transaction data. We derive the
securities, guarantees and other forms of collateral. Eligible
property value from the characteristics of the real estate itself, as
financial securities are primarily liquid and actively traded
well as those of its location. In addition to the initial valuation,
transferable securities (such as bonds and equities), and other
values for ORPs are updated quarterly over the lifetime of the
transferable securities, such as approved structured products for
loan using region-specific real estate price indices. The price
which regular prices are available and the issuer of the security
indices are sourced from an external vendor and subject to
provides a market. To a lesser degree, less liquid collateral is also
internal validation and benchmarking. We use these valuations
used.
quarterly to compute indexed LTV for all ORPs and consider
We derive lending values by applying discounts (haircuts) to
them along with other risk measures (e.g., rating migration and
the pledged collateral’s market value. Haircuts for marketable
behavioral information) to identify higher-risk loans, which are
securities are calculated to cover possible change in value over a
then each reviewed by client advisors and credit officers, with
given close-out period and confidence level. Less liquid or more
necessary action taken.
volatile collateral will typically have larger haircuts.
For IPRE, the capitalization rate model is used to determine
We assess concentration and correlation risks across collateral
the property valuation by discounting estimated sustainable
posted at a counterparty level, and at a divisional level across
future income using a capitalization rate based on various
counterparties. We also perform targeted Group-wide reviews of
attributes. These attributes consider regional and specific
concentration. Concentration of collateral in single securities,
property characteristics, such as market and location data (e.g.,
issuers or issuer groups, industry sectors, countries, regions or
vacancy rates), benchmarks (e.g., for running costs) and certain
currencies may result in higher risk and reduced liquidity. In such
other standardized input parameters (e.g., property condition).
cases, the lending value of the collateral, margin call and close-
Rental income from IPRE is reviewed at least once every three
out levels are adjusted accordingly.
years, but indications of significant changes in the amount of
Exposures and collateral values are monitored daily with the
aim of ensuring that the credit exposure is always within the
established risk tolerance. A shortfall occurs when the lending
value drops below the exposure; if it exceeds a defined trigger
level, a margin call is initiated, requiring the client to provide
additional collateral, reduce the exposure or take other action to
bring exposure in line with the agreed lending value of the
collateral. If a shortfall increases and exceeds a further trigger
level, or the shortfall is not corrected within the required period,
a close-out is initiated, through which collateral is liquidated,
open derivative positions are closed and guarantees are called.
We conduct stress testing of collateralized exposures to
simulate market events that reduce collateral value, increase
exposure of traded products, or do both. For certain classes of
counterparties, limits on such calculated stress exposures are
applied and controlled at a counterparty level. Also, portfolio
limits are applied across certain businesses or collateral types.
› Refer to “Stress loss” in this section for more information about
our stress testing
Credit hedging
Audited | We use single-name credit default swaps (CDSs), credit-
index CDSs, bespoke protection and other instruments to
actively manage credit risk in the Investment Bank and Non-core
and Legacy Portfolio. The aim is reducing concentrations of risk
from specific counterparties, sectors or portfolios and, for
counterparty credit risk, the profit or loss effect arising from
changes in credit valuation adjustments (CVAs).
We have strict guidelines with regard to taking credit hedges
into account for credit risk mitigation purposes. For example,
when monitoring exposures against counterparty limits, we do
not usually apply certain credit risk mitigants, such as proxy
hedges (credit protection on a correlated but different name) or
credit-index CDSs, to reduce counterparty exposures. Buying
credit protection also creates credit exposure with regard to the
protection provider. We monitor and limit exposures to credit
protection providers, and also monitor the effectiveness of credit
hedges as part of our overall credit exposures to the relevant
counterparties. Trading with such counterparties is typically
collateralized. For credit protection purchased to hedge the
lending portfolio, this includes monitoring mismatches between
the maturity of credit protection purchased and the maturity of
the associated loan. Such mismatches result in basis risk and
the credit protection.
may
Mismatches are routinely reported to credit officers and
mitigating actions are taken when necessary.
the effectiveness of
reduce
Mitigation of settlement risk
To mitigate settlement risk, we reduce actual settlement
volumes by using multi-lateral and bilateral agreements with
counterparties including payment netting.
Foreign exchange transactions are our most significant source
of settlement risk. We are a member of Continuous Linked
Settlement (CLS), an industry utility that provides a multi-lateral
framework to settle transactions on a delivery-versus-payment
basis, thus reducing foreign exchange-related settlement risk
relative to the volume of business. However, mitigation of
settlement risk through CLS and other means does not fully
eliminate credit risk in foreign exchange transactions resulting
from changes in exchange rates prior to settlement, which is
managed as part of our overall credit risk management of OTC
derivatives.
Credit risk models
Basel III – A-IRB credit risk models
Audited | We have developed tools and models to estimate future
credit losses that may be implicit in our current portfolio.
Exposures to individual counterparties are measured using
three generally accepted parameters: PD, EAD and LGD. For a
given credit facility, the product of these three parameters
results in the expected loss. These parameters are the basis for
the majority of our internal measures of credit risk, and key
inputs for regulatory capital calculation under the advanced
internal
III
framework. We also use models to derive the portfolio credit risk
measures of expected loss, statistical loss and stress loss.
(A-IRB) approach of
ratings-based
the Basel
The “Key features of our main credit risk models” table on
the next page shows the number and key features of the models
we use to derive PD, LGD and EAD for our main portfolios and
asset classes, and is followed by more detailed explanations of
these models and parameters.
› Refer to the 31 December 2020 Pillar 3 report, available under
“Pillar 3 disclosures” at ubs.com/investors, for more information
about the regulatory capital calculation under the advanced
internal ratings-based approach
› Refer to “Note 10 Derivative instruments” in the “Consolidated
financial statements” section of this report for more information
114
115
115
Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Key features of our main credit risk models
PPrroobbaabbiilliittyy ooff
ddeeffaauulltt
PPoorrttffoolliioo iinn ssccooppee
Sovereigns and central banks
Owner-occupied mortgages in
Switzerland and the US
Income-producing real estate
mortgages
AAsssseett ccllaassss
Central governments and
central banks
Retail: residential
mortgages
Retail: residential
mortgages,
Corporates: specialized
lending
MMooddeell
aapppprrooaacchh
Scorecard
Scorecard
Scorecard
Lombard lending
Retail: other
Merton type
Small and medium-sized
enterprises
Corporates: other lending Scorecard
Banks
Commodity traders
Banks and securities
dealers
Corporates: specialized
lending
Aircraft financing
Corporates: other lending
Large corporates
Corporates: other lending
LLoossss ggiivveenn ddeeffaauulltt
Other portfolios
Owner-occupied mortgages in
Switzerland and the US
Income-producing real estate
mortgages
Corporates: other
lending,
Public-sector entities and
multi-lateral development
banks
Retail: residential
mortgages
Retail: residential
mortgages, Corporates:
specialized lending
Lombard lending
Retail: other
Small and medium-sized
enterprises
Corporates: other lending
Investment Bank – all
counterparties
Across the asset classes
EExxppoossuurree aatt ddeeffaauulltt Banking products
Across the asset classes
Scorecard
Scorecard
Rating
template
Scorecard /
market data
Scorecard /
pooled rating
approach /
rating
template
Statistical
model
Statistical
model
Statistical
model,
simulation
Statistical
model
Statistical
model
Statistical
model
NNuummbbeerr ooff
mmaaiinn mmooddeellss MMaaiinn ddrriivveerrss
NNuummbbeerr ooff
yyeeaarrss ooff lloossss
ddaattaa11
1 Political, institutional and economic indicators
>10
Behavioral data, affordability relative to income,
property type, loan-to-value. Separate models for
mortgages in Switzerland and the US
Loan-to-value, debt service coverage, financial data
(for large corporates only), behavioral data. Weights
of risk drivers differ between corporate and private
clients
Loan-to-value, historical asset returns, behavioral
data
Financial data including balance sheet ratios and
profit and loss, behavioral data. Weights of risk
drivers differ depending on the corporate client sub-
segment
Financial data including balance sheet ratios and
profit and loss. Separate models for banks –
developed markets, banks – emerging markets,
broker-dealers and investment banks, and private
banks
Financial data including balance sheet ratios and
profit and loss, as well as non-financial criteria
2
1
1
1
4
1
1 Financial structure of the transaction
Financial data including balance sheet ratios and
profit and loss, and market data. Separate rating
tools for corporates with publicly traded and highly
liquid stocks (market intelligence tool), private
corporates, and leveraged corporates
Financial data and / or historical portfolio
performance for pooled ratings. Separate models for
hedge funds, managed funds, insurance companies,
commercial real estate loans, mortgage originators,
public-sector entities and multi-lateral development
banks / supranationals
Loan-to-value, time since last valuation. Separate
models for mortgages in Switzerland and the US
Loan-to-value, time since last valuation, property
type, location indicator
3
9
2
1
1 Historical observed loss rates
2
2
3
Separate models for mortgage and non-mortgage
LGDs. Mortgage models: loan-to-value, time since
last valuation, property type, location indicator. Non-
mortgage models: historical observed loss rates
Counterparty and facility specific, including industry
segment, collateral, seniority, legal environment and
bankruptcy procedures. Specific model for sovereign
LGDs based on econometric modeling of past default
events using GDP per capita, government debt, and
other quantitative and qualitative factors such as the
share of multi-lateral debt service, the size of the
banking sector and institutional quality
Separate models based on exposure type (committed
credit lines, revocable credit lines, contingent
products)
Product-specific market drivers, e.g., interest rates.
Separate models for OTC derivatives, ETDs and SFTs
that generate the simulation of risk factors used for
the credit exposure measure
26
26
14
26
13
22
14
13
13
11
11
12
11–17
5–10
>10
n/a
2
1 For sovereign and Investment Bank PD models, the length of internal portfolio history is shown in “Number of years of loss data”.
Across the asset classes
Traded products
Statistical
model
116
116
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Key features of our main credit risk models
PPrroobbaabbiilliittyy ooff
ddeeffaauulltt
PPoorrttffoolliioo iinn ssccooppee
AAsssseett ccllaassss
Central governments and
Sovereigns and central banks
central banks
Scorecard
1 Political, institutional and economic indicators
MMooddeell
aapppprrooaacchh
NNuummbbeerr ooff
mmaaiinn mmooddeellss MMaaiinn ddrriivveerrss
NNuummbbeerr ooff
yyeeaarrss ooff lloossss
ddaattaa11
>10
Owner-occupied mortgages in
Retail: residential
Switzerland and the US
mortgages
Retail: residential
mortgages,
Income-producing real estate
Corporates: specialized
mortgages
lending
Scorecard
Lombard lending
Retail: other
Merton type
Scorecard
2
mortgages in Switzerland and the US
Small and medium-sized
enterprises
Corporates: other lending Scorecard
1
segment
Banks
Commodity traders
Banks and securities
dealers
lending
Corporates: specialized
Scorecard
Scorecard
Rating
Aircraft financing
Corporates: other lending
template
1 Financial structure of the transaction
Large corporates
Corporates: other lending
market data
3
corporates, and leveraged corporates
Behavioral data, affordability relative to income,
property type, loan-to-value. Separate models for
Loan-to-value, debt service coverage, financial data
(for large corporates only), behavioral data. Weights
of risk drivers differ between corporate and private
1
clients
1
data
Loan-to-value, historical asset returns, behavioral
Financial data including balance sheet ratios and
profit and loss, behavioral data. Weights of risk
drivers differ depending on the corporate client sub-
Financial data including balance sheet ratios and
profit and loss. Separate models for banks –
developed markets, banks – emerging markets,
broker-dealers and investment banks, and private
4
banks
Financial data including balance sheet ratios and
1
profit and loss, as well as non-financial criteria
Financial data including balance sheet ratios and
profit and loss, and market data. Separate rating
tools for corporates with publicly traded and highly
liquid stocks (market intelligence tool), private
Financial data and / or historical portfolio
performance for pooled ratings. Separate models for
hedge funds, managed funds, insurance companies,
commercial real estate loans, mortgage originators,
public-sector entities and multi-lateral development
9
banks / supranationals
Loan-to-value, time since last valuation. Separate
2
models for mortgages in Switzerland and the US
Separate models for mortgage and non-mortgage
LGDs. Mortgage models: loan-to-value, time since
last valuation, property type, location indicator. Non-
Counterparty and facility specific, including industry
segment, collateral, seniority, legal environment and
bankruptcy procedures. Specific model for sovereign
LGDs based on econometric modeling of past default
events using GDP per capita, government debt, and
other quantitative and qualitative factors such as the
share of multi-lateral debt service, the size of the
Separate models based on exposure type (committed
credit lines, revocable credit lines, contingent
Product-specific market drivers, e.g., interest rates.
Separate models for OTC derivatives, ETDs and SFTs
that generate the simulation of risk factors used for
26
26
14
26
13
22
14
13
13
11
11
12
5–10
>10
n/a
Scorecard /
template
Statistical
model
model
Statistical
model,
simulation
Statistical
Statistical
Statistical
Statistical
Corporates: other
lending,
Scorecard /
pooled rating
Public-sector entities and
approach /
multi-lateral development
rating
Other portfolios
banks
Owner-occupied mortgages in
Retail: residential
LLoossss ggiivveenn ddeeffaauulltt
Switzerland and the US
mortgages
Retail: residential
Income-producing real estate
mortgages, Corporates:
Statistical
Loan-to-value, time since last valuation, property
mortgages
specialized lending
1
type, location indicator
Lombard lending
Retail: other
1 Historical observed loss rates
Small and medium-sized
enterprises
Corporates: other lending
model
2
mortgage models: historical observed loss rates
11–17
Audited |
Internal UBS rating scale and mapping of external ratings
IInntteerrnnaall UUBBSS rraattiinngg
00 aanndd 11
22
33
44
55
66
77
88
99
1100
1111
1122
1133
CCoouunntteerrppaarrttyy iiss iinn ddeeffaauulltt
1-year PD range in %
0.00–0.02
0.02–0.05
0.05–0.12
0.12–0.25
0.25–0.50
0.50–0.80
0.80–1.30
1.30–2.10
2.10–3.50
3.50–6.00
6.00–10.00
10.00–17.00
>17
Default
Description
Investment grade
Sub-investment grade
Defaulted
Moody’s Investors
Service mapping
Aaa
Aa1 to Aa3
A1 to A3
Baa1 to Baa2
Baa3
Ba1
Ba2
Ba3
B1
B2
B3
Caa
Ca to C
Standard & Poor’s
mapping
AAA
AA+ to AA–
A+ to A–
BBB+ to BBB
BBB–
BB+
BB
BB–
B+
B
B–
CCC to C
D
Fitch mapping
AAA
AA+ to AA–
A+ to A–
BBB+ to BBB
BBB–
BB+
BB
BB–
B+
B
B–
CCC to C
D
Probability of default
PD estimates the likelihood of a counterparty defaulting on its
contractual obligations over the next 12 months. PD ratings are
used for credit risk measurement and are an important input for
determining credit risk approval authorities. For calculating RWA,
a three-basis-point PD floor is applied to banks, corporates and
retail exposures as required under the Basel III framework. We
apply an eight-basis-point PD floor for Swiss owner-occupied
mortgages and a four-basis-point PD floor for Lombard loans.
scale. Our internal rating of a counterparty may thus diverge
from one or more of the correlated external ratings shown in the
table. Observed defaults by rating agencies may vary through
economic cycles, and we do not necessarily expect the actual
number of defaults in our equivalent rating band to equal the
rating agencies’ average in any given period. We periodically
assess the long-term average default rates of credit rating
agencies’ ratings, and adjust their mapping to our masterscale as
needed to reflect any material changes.
PD is assessed using rating tools tailored to the various
categories of counterparties. Statistically developed scorecards,
based on key attributes of the obligor, are used to determine PD
for many corporate clients and loans secured by real estate.
Where available, market data may also be used to derive the PD
for large corporate counterparties. For low-default portfolios, we
take into account available relevant external default data in the
rating tool development. For Lombard
loans, our rating
approach uses Merton-type historical return-based model
simulations taking into account potential changes in securities
collateral value. These categories are also calibrated to our
internal credit rating scale (masterscale), designed to ensure a
across
consistent
counterparties. Our masterscale expresses one-year default
probabilities determined using our various rating tools by means
of distinct classes, with each class incorporating a range of
default probabilities. Counterparties move between rating
classes as our assessment of their PD changes.
probabilities
assessment
default
of
Investment Bank – all
counterparties
Across the asset classes
model
2
banking sector and institutional quality
EExxppoossuurree aatt ddeeffaauulltt Banking products
Across the asset classes
model
3
products)
1 For sovereign and Investment Bank PD models, the length of internal portfolio history is shown in “Number of years of loss data”.
Traded products
Across the asset classes
model
2
the credit exposure measure
The ratings of major credit rating agencies, and their mapping
to our masterscale and internal PD bands, are shown in the
“Internal UBS rating scale and mapping of external ratings”
table above. For Moody’s and Standard & Poor’s, the mapping is
based on the long-term average of one-year default rates
available from these rating agencies, with Fitch ratings being
mapped to the equivalent Standard & Poor’s ratings. For each
external rating category, average default rate is compared with
our internal PD bands to derive a mapping to our internal rating
Exposure at default
EAD is the amount we expect to be owed by a counterparty at
the time of a possible default. We derive EAD from current
exposure to the counterparty and possible future exposure
development.
The EAD of an on-balance sheet loan is its notional amount.
For off-balance sheet commitments that are not drawn, credit
conversion factors (CCFs) are used in order to obtain an expected
on-balance sheet amount. Such CCFs are based on historical
observations. To comply with regulatory guidance, we floor
individual observed CCF values at zero in the CCF model; i.e., we
assume that the drawn EAD will be no less than the drawn
amount one year prior to default.
For traded products, we derive EAD by modeling the range of
possible exposure outcomes at various points in time using
scenario and statistical techniques. We assess the net amount that
may be owed to us or that we may owe to others, taking into
account the effect of market movements over the potential time it
would take to close out positions. For ETDs, calculation of EAD
takes into account collateral margin calls. When measuring
individual counterparty exposure against credit limits, we consider
the maximum likely exposure measured to a high level of
confidence. However, when aggregating exposures to different
counterparties for portfolio risk measurement purposes, we use
the expected exposure to each counterparty at a given time period
(usually one year) generated by the same model.
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IFRS 9 – ECL credit risk models
Comparison of Basel III EL and IFRS 9 ECL credit risk models
The IFRS 9 expected credit loss (ECL) concept has a number of
key differences from our standard credit risk models, both in the
loss estimation process and the result thereof. Most notably,
regulatory Basel III EL parameters are through-the-cycle
/
downturn estimates, which might
include a margin of
conservatism, while IFRS 9 ECL parameters are typically point-in-
time, reflecting current economic conditions and future outlook.
The table on the next page summarizes the main differences.
Stage 1 and 2 ECL expenses in 2020 were USD 266 million and
respective allowances and provisions as of 31 December 2020
were USD 639 million. This includes ECL allowances and
provisions of USD 555 million related to positions under the
Basel III advanced internal ratings-based approach. Basel III
Expected Loss for non-defaulted positions increased by USD 123
million to USD 885 million.
› Refer to “Note 1 Summary of significant accounting policies” in
the “Consolidated financial statements” section of this report for
more information about our accounting policy for allowances
and provisions for ECL including key definitions relevant for the
ECL calculation under IFRS 9
Expected credit loss
Expected credit losses (ECLs) are defined as the difference
between contractual cash flows and those UBS expects to
receive, discounted at the effective interest rate (EIR). For loan
commitments and other credit facilities in scope of ECL
requirements, expected cash shortfalls are determined by
considering expected future drawdowns. Rather than focusing
on an average through-the-cycle expected annual loss, the
purpose of ECL is to estimate the amount of losses inherent in a
portfolio based on current conditions and future outlook (a
point-in-time measure), whereby such a forecast has to include
all information available without undue cost and effort, and
address multiple scenarios where there is perceived non-linearity
between changes in economic conditions and their effect on
credit losses. From a credit risk modeling perspective, ECL
parameters are generally derivations of the factors assessed for
regulatory Basel III EL.
the
factors driving
We assess exposures where there is a material correlation
between
the
counterparty and those driving the potential future value of our
traded products exposure (wrong-way risk), and we have
established specific controls to mitigate such risks.
the credit quality of
Loss given default
LGD is the magnitude of the likely loss if there is a default. Our
LGD estimates, which consider downturn conditions, include loss
of principal, interest and other amounts (such as workout costs,
including the cost of carrying an impaired position during the
workout process) less recovered amounts. We determine LGD
based on the likely recovery rate of claims against defaulted
counterparties, which depends on the type of counterparty and
any credit mitigation due to collateral or guarantees. Our
estimates are supported by internal loss data and external
information, where available. If we hold collateral, such as
marketable securities or a mortgage on a property, LTV ratios
are typically a key parameter in determining LGD. For low-
default portfolios, where available, we take into account
relevant external default data in the rating tool development. In
RWA calculation, a regulatory LGD floor of 10% is applied for
exposures secured by residential properties. Additionally, we
apply a 30% LGD floor for Lombard loans in Global Wealth
Management outside Region Americas and a 25% LGD floor for
Lombard loans in Global Wealth Management Region Americas.
All other LGDs are subject to a 5% floor.
Expected loss
Credit losses are an inherent cost of doing business and the
occurrence and amount of credit losses can be erratic. We use
the concept of expected loss to quantify future credit losses that
may be implicit in our current portfolio. The expected loss for a
given credit facility is a product of the three components
described above, i.e., PD, EAD and LGD. We aggregate the
individual counterparties to derive our
loss for
expected
expected portfolio credit losses.
Expected loss (EL) for regulatory and internal risk control
purposes is a statistical measure used to estimate the average
annual costs we expect to experience from positions that
become impaired. EL is the basis for quantifying credit risk in all
our portfolios. We use a statistical modeling approach to
estimate the loss profile of each of our credit portfolios over a
one-year period to a specified level of confidence. The mean
value of this loss distribution is the expected loss. EL provides an
indication of the level of risk in our portfolio and it may change
over time. Some parameters have to be estimated on a
conservative basis in order to meet the regulatory requirements
for banks applying the internal ratings-based approach to
determine RWA.
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between
the
factors driving
the credit quality of
the
Comparison of Basel III EL and IFRS 9 ECL credit risk models
counterparty and those driving the potential future value of our
The IFRS 9 expected credit loss (ECL) concept has a number of
traded products exposure (wrong-way risk), and we have
key differences from our standard credit risk models, both in the
established specific controls to mitigate such risks.
Loss given default
loss estimation process and the result thereof. Most notably,
regulatory Basel III EL parameters are through-the-cycle
/
downturn estimates, which might
include a margin of
LGD is the magnitude of the likely loss if there is a default. Our
conservatism, while IFRS 9 ECL parameters are typically point-in-
LGD estimates, which consider downturn conditions, include loss
time, reflecting current economic conditions and future outlook.
of principal, interest and other amounts (such as workout costs,
The table on the next page summarizes the main differences.
including the cost of carrying an impaired position during the
Stage 1 and 2 ECL expenses in 2020 were USD 266 million and
workout process) less recovered amounts. We determine LGD
respective allowances and provisions as of 31 December 2020
based on the likely recovery rate of claims against defaulted
were USD 639 million. This includes ECL allowances and
counterparties, which depends on the type of counterparty and
provisions of USD 555 million related to positions under the
any credit mitigation due to collateral or guarantees. Our
Basel III advanced internal ratings-based approach. Basel III
estimates are supported by internal loss data and external
Expected Loss for non-defaulted positions increased by USD 123
information, where available. If we hold collateral, such as
million to USD 885 million.
marketable securities or a mortgage on a property, LTV ratios
are typically a key parameter in determining LGD. For low-
default portfolios, where available, we take into account
relevant external default data in the rating tool development. In
› Refer to “Note 1 Summary of significant accounting policies” in
the “Consolidated financial statements” section of this report for
more information about our accounting policy for allowances
and provisions for ECL including key definitions relevant for the
RWA calculation, a regulatory LGD floor of 10% is applied for
ECL calculation under IFRS 9
exposures secured by residential properties. Additionally, we
apply a 30% LGD floor for Lombard loans in Global Wealth
Expected credit loss
Management outside Region Americas and a 25% LGD floor for
Expected credit losses (ECLs) are defined as the difference
Lombard loans in Global Wealth Management Region Americas.
between contractual cash flows and those UBS expects to
All other LGDs are subject to a 5% floor.
Expected loss
receive, discounted at the effective interest rate (EIR). For loan
commitments and other credit facilities in scope of ECL
requirements, expected cash shortfalls are determined by
Credit losses are an inherent cost of doing business and the
considering expected future drawdowns. Rather than focusing
occurrence and amount of credit losses can be erratic. We use
on an average through-the-cycle expected annual loss, the
may be implicit in our current portfolio. The expected loss for a
portfolio based on current conditions and future outlook (a
given credit facility is a product of the three components
point-in-time measure), whereby such a forecast has to include
described above, i.e., PD, EAD and LGD. We aggregate the
all information available without undue cost and effort, and
expected
loss for
individual counterparties to derive our
address multiple scenarios where there is perceived non-linearity
expected portfolio credit losses.
between changes in economic conditions and their effect on
Expected loss (EL) for regulatory and internal risk control
credit losses. From a credit risk modeling perspective, ECL
purposes is a statistical measure used to estimate the average
parameters are generally derivations of the factors assessed for
annual costs we expect to experience from positions that
regulatory Basel III EL.
become impaired. EL is the basis for quantifying credit risk in all
our portfolios. We use a statistical modeling approach to
estimate the loss profile of each of our credit portfolios over a
one-year period to a specified level of confidence. The mean
value of this loss distribution is the expected loss. EL provides an
indication of the level of risk in our portfolio and it may change
over time. Some parameters have to be estimated on a
conservative basis in order to meet the regulatory requirements
for banks applying the internal ratings-based approach to
determine RWA.
We assess exposures where there is a material correlation
IFRS 9 – ECL credit risk models
The table below shows the main differences between the two expected loss measures.
Basel III EL (advanced internal ratings-based approach)
IFRS 9 ECL
Scope
The Basel III advanced internal ratings-based (A-IRB)
approach applies to most credit risk exposures. It includes
transactions measured at amortized cost, at fair value
through profit or loss and at fair value through OCI,
including loan commitments and financial guarantees.
The IFRS 9 expected credit loss (ECL) calculation mainly applies to
financial assets measured at amortized cost and debt instruments
measured at fair value through OCI, as well as loan commitments
and financial guarantees not at fair value through profit or loss.
12-month versus
lifetime expected
loss
The Basel III A-IRB approach takes into account expected
losses resulting from expected default events occurring
within the next 12 months.
Exposure at default
(EAD)
Probability of
default
(PD)
EAD is the amount we expect a counterparty to owe us at
the time of a possible default. For banking products, EAD
equals book value as of the reporting date; for traded
products, such as securities financing transactions, EAD is
modeled. EAD is expected to remain constant over a 12-
month period. For loan commitments, a credit conversion
factor is applied to model expected future drawdowns over
the 12-month period, irrespective of the actual maturity of a
particular transaction. The credit conversion factor includes
downturn adjustments.
PD estimates are determined on a through-the-cycle (TTC)
basis. They represent historical average PDs, taking into
account observed losses over a prolonged historical period,
and therefore are less sensitive to movements in the
underlying economy.
In the absence of a significant increase in credit risk (SICR), a
maximum 12-month ECL is recognized to reflect lifetime cash
shortfalls that will result if a default event occurs in the 12 months
after the reporting date (or a shorter period if the expected lifetime
is less). Once an SICR event has occurred, a lifetime ECL is
recognized considering expected default events over the life of the
transaction.
EAD is generally calculated on the basis of the cash flows that are
expected to be outstanding at the individual points in time during
the life of the transaction, discounted to the reporting date using
the effective interest rate. For loan commitments, a credit
conversion factor is applied to model expected future drawdowns
over the life of the transaction without including downturn
assumptions. In both cases, the time period is capped at 12
months, unless an SICR has occurred.
PD estimates will be determined on a point-in-time (PIT) basis,
based on current conditions and incorporating forecasts for future
economic conditions at the reporting date.
Loss given default
(LGD)
LGD includes prudential adjustments, such as downturn LGD
assumptions and floors. Similar to PD, LGD is determined on
a TTC basis.
LGD should reflect the losses that are reasonably expected and
prudential adjustments should therefore not be applied. Similar to
PD, LGD is determined on the basis of a PIT approach.
the concept of expected loss to quantify future credit losses that
purpose of ECL is to estimate the amount of losses inherent in a
Use of scenarios
N/A
Multiple forward-looking scenarios have to be taken into account
to determine a probability-weighted ECL.
Further key aspects of credit risk models
Stress loss
We complement our statistical modeling approach with
scenario-based stress loss measures. Stress tests are run regularly
to monitor potential effects of extreme, but nevertheless
plausible, events on our portfolios, under which key credit risk
parameters are assumed to deteriorate substantially. Where we
consider it appropriate, we apply limits on this basis.
Stress scenarios and methodologies are tailored to portfolios’
natures, ranging from regionally focused to global systemic
events, and varying in time horizon. For example, for our loan
underwriting portfolio, we apply a global market event under
which, simultaneously, the market for loan syndication freezes,
market conditions significantly worsen, and credit quality
deteriorates. Similarly, for Lombard lending we use a range of
scenarios representing instantaneous market shocks to all
collateral and exposure positions, taking into consideration
liquidity and potential concentration. The portfolio-specific stress
test for our mortgage lending business in Switzerland reflects a
multi-year event, and the overarching stress test for global
wholesale and counterparty credit risk exposure to corporations
uses a one-year global stress event and takes into account
exposure concentration to single counterparties.
› Refer to “Stress testing” in this section for more information
about our stress testing framework
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Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Credit risk model confirmation
Our approach to model confirmation involves both quantitative
methods, e.g., monitoring compositional changes in portfolios
and results of backtesting, and qualitative assessments, such as
feedback from users on model output as a practical indicator of
a model’s performance and reliability.
Material changes in portfolio composition may invalidate the
conceptual soundness of a model. We therefore perform regular
analyses of the evolution of portfolios to identify such changes
in the structure and credit quality of portfolios. This includes
analyses of changes in key attributes, changes in portfolio
concentration measures and changes in RWA.
› Refer to “Risk measurement” in this section for more
information about our approach to model confirmation
procedures
Backtesting
We monitor the performance of models by backtesting and
benchmarking them, with model outcomes compared with
actual results, based on our internal experience and externally
observed results. To assess the predictive power of credit
exposure models for traded products, such as OTC derivatives
and ETD products, we statistically compare predicted future
exposure distributions at different forecast horizons with realized
values.
For PD, we use statistical modeling to derive a predicted
distribution of the number of defaults. The observed number of
defaults is compared with this distribution, letting us derive a
statistical level of confidence in the model conservatism. We also
derive a lower and upper limit for the average default rate. If the
portfolio average PD lies outside the derived interval, the rating
tool is, as a general rule, recalibrated.
For LGD, backtesting statistically tests whether the mean
difference between the observed and predicted LGD is zero. If
the test fails, there is evidence that our predicted LGD is too low.
In such cases, and where these differences are outside
expectations, models are recalibrated.
Main credit models backtesting by regulatory asset class
Length of time series
used for the calibration
(in years)
Actual rates in %
Average of last
5 years1
Min. of last
5 years2
Max. of last
5 years2
Estimated average rates
at the start of
2020 in %
PPrroobbaabbiilliittyy ooff ddeeffaauulltt33
Central governments and central banks
Banks and securities dealers
Public-sector entities, multi-lateral development banks
Corporates: specialized lending
Corporates: other lending
Retail: residential mortgages
Retail: other
LLoossss ggiivveenn ddeeffaauulltt
Central governments and central banks
Banks and securities dealers
Public-sector entities, multi-lateral development banks
Corporates: specialized lending
Corporates: other lending
Retail: residential mortgages
Retail: other
CCrreeddiitt ccoonnvveerrssiioonn ffaaccttoorrss
Corporates
>104
>10
>10
>10
>10
>20
>10
>10
>10
>10
>10
>10
>20
>10
>10
0.00
0.16
0.04
0.36
0.28
0.22
0.01
8.00
23.60
0.70
17.30
0.00
0.00
0.00
0.20
0.24
0.12
0.00
0.00
5.80
0.00
16.70
0.00
0.53
0.21
0.60
0.33
0.28
0.01
34.60
28.00
1.70
17.90
18.60
6.90
37.90
0.16
0.67
0.21
1.24
0.41
0.55
0.29
52.20
48.60
27.20
22.90
38.00
19.90
28.40
42.60
11 Average of all observations over the last five years. 22 Minimum / maximum annual average of observations in any single year from the last five years. Yearly averages are only calculated where five or more
observations occurred during that year. 33 Average PD estimation is based on all rated clients in the portfolio. 44 Sovereign PD model is calibrated to UBS masterscale, length of time series shows span of internal
history for this portfolio.
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Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Credit risk model confirmation
Backtesting
Our approach to model confirmation involves both quantitative
We monitor the performance of models by backtesting and
methods, e.g., monitoring compositional changes in portfolios
benchmarking them, with model outcomes compared with
and results of backtesting, and qualitative assessments, such as
actual results, based on our internal experience and externally
feedback from users on model output as a practical indicator of
observed results. To assess the predictive power of credit
a model’s performance and reliability.
exposure models for traded products, such as OTC derivatives
Material changes in portfolio composition may invalidate the
and ETD products, we statistically compare predicted future
conceptual soundness of a model. We therefore perform regular
exposure distributions at different forecast horizons with realized
analyses of the evolution of portfolios to identify such changes
values.
in the structure and credit quality of portfolios. This includes
For PD, we use statistical modeling to derive a predicted
analyses of changes in key attributes, changes in portfolio
distribution of the number of defaults. The observed number of
concentration measures and changes in RWA.
› Refer to “Risk measurement” in this section for more
information about our approach to model confirmation
procedures
defaults is compared with this distribution, letting us derive a
statistical level of confidence in the model conservatism. We also
derive a lower and upper limit for the average default rate. If the
portfolio average PD lies outside the derived interval, the rating
tool is, as a general rule, recalibrated.
For LGD, backtesting statistically tests whether the mean
difference between the observed and predicted LGD is zero. If
the test fails, there is evidence that our predicted LGD is too low.
In such cases, and where these differences are outside
expectations, models are recalibrated.
Main credit models backtesting by regulatory asset class
Length of time series
used for the calibration
(in years)
Average of last
5 years1
Min. of last
5 years2
Max. of last
5 years2
Estimated average rates
at the start of
2020 in %
Actual rates in %
PPrroobbaabbiilliittyy ooff ddeeffaauulltt33
Central governments and central banks
Banks and securities dealers
Public-sector entities, multi-lateral development banks
Corporates: specialized lending
Corporates: other lending
Retail: residential mortgages
Retail: other
LLoossss ggiivveenn ddeeffaauulltt
Central governments and central banks
Banks and securities dealers
Public-sector entities, multi-lateral development banks
Corporates: specialized lending
Corporates: other lending
Retail: residential mortgages
Retail: other
CCrreeddiitt ccoonnvveerrssiioonn ffaaccttoorrss
Corporates
history for this portfolio.
0.00
0.16
0.04
0.36
0.28
0.22
0.01
8.00
23.60
0.70
17.30
0.00
0.00
0.00
0.20
0.24
0.12
0.00
0.00
5.80
0.00
16.70
0.00
0.53
0.21
0.60
0.33
0.28
0.01
34.60
28.00
1.70
17.90
>104
>10
>10
>10
>10
>20
>10
>10
>10
>10
>10
>10
>20
>10
>10
0.16
0.67
0.21
1.24
0.41
0.55
0.29
52.20
48.60
27.20
22.90
38.00
19.90
28.40
42.60
11 Average of all observations over the last five years. 22 Minimum / maximum annual average of observations in any single year from the last five years. Yearly averages are only calculated where five or more
observations occurred during that year. 33 Average PD estimation is based on all rated clients in the portfolio. 44 Sovereign PD model is calibrated to UBS masterscale, length of time series shows span of internal
18.60
6.90
37.90
CCFs, used for the calculation of EAD for undrawn facilities
with corporate counterparties, are dependent on several credit
facility contractual dimensions. We compare the predicted
amount drawn with observed historical use of such facilities by
defaulted counterparties. If any statistically significant deviation
is observed, the relevant CCFs are redefined.
The “Main credit models backtesting by regulatory asset
class” table on the previous page compares the current model
calibration for PD, LGD and CCFs with historical observed values
over the last five years.
Changes to models and model parameters during the period
Part of our continuous efforts to enhance models to reflect
market developments and newly available data was updating
several models in 2020.
Personal & Corporate Banking introduced a redeveloped PD
and LGD model for the commodity trade finance business. The
RWA impact of the new model was neutralized, as requested by
FINMA, pending further analysis and review of the model’s
calibration level. We also recalibrated the risk parameters for real
estate portfolios and Lombard loans in Personal & Corporate
Banking and Global Wealth Management.
A new rating model for debt REITs went live in the Investment
Bank. Non-profit organization segment clients have been moved
to standardized RWA for capital calculation. Both changes have
an immaterial RWA impact.
For counterparty credit risk (CCR) models, we recalibrated the
market parameters in the securities financing transactions (SFT)
model.
Where required, changes to models and model parameters
were approved by FINMA before being made.
› Refer to “Risk-weighted assets” in the “Capital, liquidity and
funding, and balance sheet” section of this report for more
information about the effect of the changes to models and
model parameters on credit risk RWA
Future credit risk-related regulatory capital developments
In December 2017, the Basel Committee on Banking Supervision
(the BCBS) announced the finalization of the Basel III framework,
which we do not expect to become mandatory in Switzerland
until after the BCBS target effective date of 1 January 2023. The
updated framework makes a number of revisions to the internal
ratings-based (IRB) approaches, namely: (i) removing the option
of using the A-IRB approach for certain asset classes (including
large and medium-sized corporate clients, and banks and other
financial institutions); (ii) placing floors on certain model inputs
under the IRB approach, e.g., PD and LGD; and (iii) introducing
various requirements to reduce RWA variability (e.g., for LGD).
The published framework has a number of requirements that
are subject to national discretion. Also, revisions to the CVA
framework were published, including the removal of the
advanced CVA approach. UBS has a close dialog with FINMA to
discuss in detail the implementation objectives and prepare for a
smooth transition of the capital regime for credit risk.
› Refer to “Capital management objectives, planning and
activities” in the “Capital, liquidity and funding, and balance
sheet” section of this report for more information about the
development of RWA
› Refer to “Risk measurement” in this section for more
information about our approach to model confirmation
procedures
› Refer to the “Regulatory and legal developments” and “Risk
factors” sections of this report for more information
Credit policies for distressed assets
The “Exposure categorization” chart on the next page shows
how we categorize banking products and securities financing
transactions as non-performing, defaulted / credit-impaired and
purchased or originated credit-impaired.
Non-performing
Audited | In line with the regulatory definition, we report a claim as
non-performing when: (i) it is more than 90 days past due; (ii) it
is subject to restructuring proceedings, where preferential
conditions concerning interest rates, subordination, tenor, etc.
have been granted in order to avoid default of the counterparty
(forbearance); or (iii) the counterparty is subject to bankruptcy /
enforced liquidation proceedings in any form, even if there is
sufficient collateral to cover the due payment; or (iv) there is
other evidence that payment obligations will not be fully met
without recourse to collateral.
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Default and credit-impaired
UBS uses a single definition of default for classifying assets and
determining the PD of its obligors for risk modeling purposes.
The definition of default is based on quantitative and qualitative
criteria. A counterparty is classified as defaulted when material
payments of interest, principal or fees are overdue for more than
90 days, or more than 180 days for certain exposures in relation
to loans to private and commercial clients in Personal &
Corporate Banking and to private clients of Global Wealth
Management Region Switzerland. UBS does not consider the
general 90-day presumption for default recognition appropriate
for those portfolios, given the cure rates, which show that strict
application of the 90-day criterion would not accurately reflect
the inherent credit risk. Counterparties are also classified as
defaulted when: bankruptcy, insolvency proceedings or enforced
liquidation have commenced; obligations have been restructured
on preferential terms (forbearance); or there is other evidence
that payment obligations will not be fully met without recourse
to collateral. The latter may be the case even if, to date, all
(cid:39)(cid:90)(cid:82)(cid:81)(cid:85)(cid:87)(cid:84)(cid:71)(cid:2)(cid:69)(cid:67)(cid:86)(cid:71)(cid:73)(cid:81)(cid:84)(cid:75)(cid:92)(cid:67)(cid:86)(cid:75)(cid:81)(cid:80)
contractual payments have been made when due. If one claim
against a counterparty is defaulted on, generally all claims
against the counterparty are treated as defaulted.
if
An
instrument
is classified as credit-impaired
the
counterparty is classified as defaulted and / or the instrument is
identified as purchased or originated credit-impaired (POCI). An
instrument is POCI if it has been purchased at a deep discount to
its carrying amount following a risk event of the issuer or
originated with a defaulted counterparty. Once a financial asset
is classified as defaulted / credit-impaired (except POCI), it is
reported as a stage 3 instrument and remains as such unless all
past due amounts have been rectified, additional payments have
been made on time, the position is not classified as credit-
restructured, and there is general evidence of credit recovery. A
three-month probation period is applied before a transfer back
to stages 1 or 2 can be triggered. However, most instruments
remain in stage 3 for a longer period. As of 31 December 2020,
we have no instruments classified as POCI on our books.
(cid:50)(cid:71)(cid:84)(cid:72)(cid:81)(cid:84)(cid:79)(cid:75)(cid:80)(cid:73)
(cid:48)(cid:81)(cid:80)(cid:15)(cid:82)(cid:71)(cid:84)(cid:72)(cid:81)(cid:84)(cid:79)(cid:75)(cid:80)(cid:73)(cid:19)
(cid:53)(cid:86)(cid:67)(cid:73)(cid:71)(cid:2)(cid:19)
(cid:53)(cid:86)(cid:67)(cid:73)(cid:71)(cid:2)(cid:20)(cid:2)(cid:10)(cid:85)(cid:75)(cid:73)(cid:80)(cid:75)(cid:386)(cid:69)(cid:67)(cid:80)(cid:86)(cid:2)(cid:75)(cid:80)(cid:69)(cid:84)(cid:71)(cid:67)(cid:85)(cid:71)(cid:2)(cid:75)(cid:80)(cid:2)(cid:69)(cid:84)(cid:71)(cid:70)(cid:75)(cid:86)(cid:2)(cid:84)(cid:75)(cid:85)(cid:77)(cid:11)
(cid:53)(cid:86)(cid:67)(cid:73)(cid:71)(cid:2)(cid:21)(cid:2)(cid:10)(cid:69)(cid:84)(cid:71)(cid:70)(cid:75)(cid:86)(cid:15)(cid:75)(cid:79)(cid:82)(cid:67)(cid:75)(cid:84)(cid:71)(cid:70)(cid:19)(cid:11)(cid:2)
(cid:37)(cid:84)(cid:71)(cid:70)(cid:75)(cid:86)(cid:2)(cid:71)(cid:90)(cid:82)(cid:81)(cid:85)(cid:87)(cid:84)(cid:71)(cid:85)(cid:2)(cid:89)(cid:75)(cid:86)(cid:74)(cid:2)(cid:80)(cid:81)(cid:2)(cid:85)(cid:75)(cid:73)(cid:80)(cid:75)(cid:386)(cid:69)(cid:67)(cid:80)(cid:86)(cid:2)(cid:75)(cid:80)(cid:69)(cid:84)(cid:71)(cid:67)(cid:85)(cid:71)(cid:2)
(cid:75)(cid:80)(cid:2)(cid:86)(cid:74)(cid:71)(cid:2)(cid:84)(cid:75)(cid:85)(cid:77)(cid:2)(cid:81)(cid:72)(cid:2)(cid:70)(cid:71)(cid:72)(cid:67)(cid:87)(cid:78)(cid:86)(cid:2)(cid:85)(cid:75)(cid:80)(cid:69)(cid:71)(cid:2)(cid:75)(cid:80)(cid:75)(cid:86)(cid:75)(cid:67)(cid:78)(cid:2)(cid:84)(cid:71)(cid:69)(cid:81)(cid:73)(cid:80)(cid:75)(cid:86)(cid:75)(cid:81)(cid:80)
(cid:37)(cid:84)(cid:71)(cid:70)(cid:75)(cid:86)(cid:2)(cid:71)(cid:90)(cid:82)(cid:81)(cid:85)(cid:87)(cid:84)(cid:71)(cid:85)(cid:2)(cid:89)(cid:75)(cid:86)(cid:74)(cid:2)(cid:67)(cid:2)(cid:85)(cid:75)(cid:73)(cid:80)(cid:75)(cid:386)(cid:69)(cid:67)(cid:80)(cid:86)(cid:2)(cid:75)(cid:80)(cid:69)(cid:84)(cid:71)(cid:67)(cid:85)(cid:71)
(cid:75)(cid:80)(cid:2)(cid:86)(cid:74)(cid:71)(cid:2)(cid:84)(cid:75)(cid:85)(cid:77)(cid:2)(cid:81)(cid:72)(cid:2)(cid:70)(cid:71)(cid:72)(cid:67)(cid:87)(cid:78)(cid:86)(cid:2)(cid:85)(cid:75)(cid:80)(cid:69)(cid:71)(cid:2)(cid:75)(cid:80)(cid:75)(cid:86)(cid:75)(cid:67)(cid:78)(cid:2)(cid:84)(cid:71)(cid:69)(cid:81)(cid:73)(cid:80)(cid:75)(cid:86)(cid:75)(cid:81)(cid:80)
(cid:37)(cid:84)(cid:71)(cid:70)(cid:75)(cid:86)(cid:2)(cid:71)(cid:90)(cid:82)(cid:81)(cid:85)(cid:87)(cid:84)(cid:71)(cid:85)(cid:2)(cid:86)(cid:74)(cid:67)(cid:86)(cid:2)(cid:67)(cid:84)(cid:71)(cid:2)(cid:69)(cid:78)(cid:67)(cid:85)(cid:85)(cid:75)(cid:386)(cid:71)(cid:70)(cid:2)(cid:67)(cid:85)(cid:2)(cid:75)(cid:80)(cid:2)
(cid:70)(cid:71)(cid:72)(cid:67)(cid:87)(cid:78)(cid:86)(cid:2)
(cid:18)(cid:115)(cid:21)(cid:18)(cid:2)(cid:70)(cid:67)(cid:91)(cid:85)(cid:2)(cid:82)(cid:67)(cid:85)(cid:86)(cid:2)(cid:70)(cid:87)(cid:71)
(cid:21)(cid:19)(cid:115)(cid:27)(cid:18)(cid:2)(cid:70)(cid:67)(cid:91)(cid:85)(cid:2)(cid:82)(cid:67)(cid:85)(cid:86)(cid:2)(cid:70)(cid:87)(cid:71)
(cid:27)(cid:19)(cid:115)(cid:19)(cid:26)(cid:18)(cid:2)(cid:70)(cid:67)(cid:91)(cid:85)(cid:2)
(cid:82)(cid:67)(cid:85)(cid:86)(cid:2)(cid:70)(cid:87)(cid:71)(cid:2)
(cid:10)(cid:69)(cid:71)(cid:84)(cid:86)(cid:67)(cid:75)(cid:80)(cid:2)
(cid:71)(cid:90)(cid:82)(cid:81)(cid:85)(cid:87)(cid:84)(cid:71)(cid:85)(cid:11)
(cid:47)(cid:81)(cid:84)(cid:71)(cid:2)(cid:86)(cid:74)(cid:67)(cid:80)(cid:2)(cid:27)(cid:18)(cid:2)(cid:70)(cid:67)(cid:91)(cid:85)(cid:2)(cid:82)(cid:67)(cid:85)(cid:86)(cid:2)(cid:70)(cid:87)(cid:71)(cid:2)(cid:10)(cid:79)(cid:81)(cid:84)(cid:71)(cid:2)(cid:86)(cid:74)(cid:67)(cid:80)(cid:2)
(cid:19)(cid:26)(cid:18)(cid:2)(cid:70)(cid:67)(cid:91)(cid:85)(cid:2)(cid:72)(cid:81)(cid:84)(cid:2)(cid:69)(cid:71)(cid:84)(cid:86)(cid:67)(cid:75)(cid:80)(cid:2)(cid:71)(cid:90)(cid:82)(cid:81)(cid:85)(cid:87)(cid:84)(cid:71)(cid:85)(cid:11)
(cid:40)(cid:81)(cid:84)(cid:68)(cid:71)(cid:67)(cid:84)(cid:67)(cid:80)(cid:69)(cid:71)(cid:2)(cid:17)(cid:2)(cid:69)(cid:84)(cid:71)(cid:70)(cid:75)(cid:86)(cid:2)(cid:84)(cid:71)(cid:85)(cid:86)(cid:84)(cid:87)(cid:69)(cid:86)(cid:87)(cid:84)(cid:75)(cid:80)(cid:73)(cid:20)
(cid:37)(cid:84)(cid:71)(cid:70)(cid:75)(cid:86)(cid:2)(cid:71)(cid:90)(cid:82)(cid:81)(cid:85)(cid:87)(cid:84)(cid:71)(cid:85)(cid:2)(cid:89)(cid:74)(cid:71)(cid:84)(cid:71)(cid:2)(cid:69)(cid:81)(cid:80)(cid:69)(cid:71)(cid:85)(cid:85)(cid:75)(cid:81)(cid:80)(cid:85)(cid:2)
(cid:71)(cid:90)(cid:69)(cid:71)(cid:71)(cid:70)(cid:75)(cid:80)(cid:73)(cid:2)(cid:81)(cid:87)(cid:84)(cid:2)(cid:84)(cid:75)(cid:85)(cid:77)(cid:2)(cid:86)(cid:81)(cid:78)(cid:71)(cid:84)(cid:67)(cid:80)(cid:69)(cid:71)(cid:2)(cid:74)(cid:67)(cid:88)(cid:71)
(cid:68)(cid:71)(cid:71)(cid:80)(cid:2)(cid:73)(cid:84)(cid:67)(cid:80)(cid:86)(cid:71)(cid:70)(cid:2)(cid:87)(cid:80)(cid:70)(cid:71)(cid:84)(cid:2)(cid:75)(cid:79)(cid:79)(cid:75)(cid:80)(cid:71)(cid:80)(cid:86)(cid:2)(cid:82)(cid:67)(cid:91)(cid:79)(cid:71)(cid:80)(cid:86)(cid:2)
(cid:70)(cid:71)(cid:72)(cid:67)(cid:87)(cid:78)(cid:86)(cid:2)(cid:81)(cid:84)(cid:2)(cid:75)(cid:80)(cid:2)(cid:70)(cid:71)(cid:72)(cid:67)(cid:87)(cid:78)(cid:86)
(cid:50)(cid:87)(cid:84)(cid:69)(cid:74)(cid:67)(cid:85)(cid:71)(cid:70)(cid:2)(cid:81)(cid:84)(cid:2)(cid:81)(cid:84)(cid:75)(cid:73)(cid:75)(cid:80)(cid:67)(cid:86)(cid:71)(cid:70)(cid:2)(cid:69)(cid:84)(cid:71)(cid:70)(cid:75)(cid:86)(cid:15)(cid:75)(cid:79)(cid:82)(cid:67)(cid:75)(cid:84)(cid:71)(cid:70)(cid:2)(cid:10)(cid:50)(cid:49)(cid:37)(cid:43)(cid:11)
(cid:37)(cid:84)(cid:71)(cid:70)(cid:75)(cid:86)(cid:2)(cid:71)(cid:90)(cid:82)(cid:81)(cid:85)(cid:87)(cid:84)(cid:71)(cid:85)(cid:2)(cid:69)(cid:78)(cid:67)(cid:85)(cid:85)(cid:75)(cid:386)(cid:71)(cid:70)(cid:2)(cid:67)(cid:85)(cid:2)(cid:50)(cid:49)(cid:37)(cid:43)(cid:2)(cid:67)(cid:86)(cid:2)(cid:75)(cid:80)(cid:75)(cid:86)(cid:75)(cid:67)(cid:78)(cid:2)(cid:84)(cid:71)(cid:69)(cid:81)(cid:73)(cid:80)(cid:75)(cid:86)(cid:75)(cid:81)(cid:80)(cid:2)(cid:72)(cid:81)(cid:84)(cid:2)(cid:89)(cid:74)(cid:75)(cid:69)(cid:74)(cid:2)(cid:86)(cid:74)(cid:71)(cid:2)(cid:69)(cid:84)(cid:71)(cid:70)(cid:75)(cid:86)(cid:2)(cid:85)(cid:75)(cid:86)(cid:87)(cid:67)(cid:86)(cid:75)(cid:81)(cid:80)(cid:2)(cid:74)(cid:67)(cid:85)(cid:2)
(cid:85)(cid:87)(cid:68)(cid:85)(cid:71)(cid:83)(cid:87)(cid:71)(cid:80)(cid:86)(cid:78)(cid:91)(cid:2)(cid:75)(cid:79)(cid:82)(cid:84)(cid:81)(cid:88)(cid:71)(cid:70)
(cid:37)(cid:84)(cid:71)(cid:70)(cid:75)(cid:86)(cid:2)(cid:71)(cid:90)(cid:82)(cid:81)(cid:85)(cid:87)(cid:84)(cid:71)(cid:85)(cid:2)(cid:89)(cid:74)(cid:71)(cid:84)(cid:71)(cid:2)(cid:72)(cid:87)(cid:78)(cid:78)(cid:2)(cid:69)(cid:81)(cid:78)(cid:78)(cid:71)(cid:69)(cid:86)(cid:75)(cid:81)(cid:80)
(cid:81)(cid:72)(cid:2)(cid:75)(cid:80)(cid:75)(cid:86)(cid:75)(cid:67)(cid:78)(cid:2)(cid:69)(cid:81)(cid:80)(cid:86)(cid:84)(cid:67)(cid:69)(cid:86)(cid:87)(cid:67)(cid:78)(cid:2)(cid:69)(cid:78)(cid:67)(cid:75)(cid:79)(cid:85)(cid:2)(cid:74)(cid:67)(cid:85)
(cid:68)(cid:71)(cid:71)(cid:80)(cid:2)(cid:70)(cid:81)(cid:87)(cid:68)(cid:86)(cid:72)(cid:87)(cid:78)(cid:2)(cid:85)(cid:75)(cid:80)(cid:69)(cid:71)(cid:2)(cid:75)(cid:80)(cid:75)(cid:86)(cid:75)(cid:67)(cid:78)(cid:2)(cid:84)(cid:71)(cid:69)(cid:81)(cid:73)(cid:80)(cid:75)(cid:86)(cid:75)(cid:81)(cid:80)(cid:2)
(cid:19)(cid:2)(cid:39)(cid:90)(cid:69)(cid:78)(cid:87)(cid:70)(cid:75)(cid:80)(cid:73)(cid:2)(cid:82)(cid:87)(cid:84)(cid:69)(cid:74)(cid:67)(cid:85)(cid:71)(cid:70)(cid:2)(cid:81)(cid:84)(cid:2)(cid:81)(cid:84)(cid:75)(cid:73)(cid:75)(cid:80)(cid:67)(cid:86)(cid:71)(cid:70)(cid:2)(cid:69)(cid:84)(cid:71)(cid:70)(cid:75)(cid:86)(cid:15)(cid:75)(cid:79)(cid:82)(cid:67)(cid:75)(cid:84)(cid:71)(cid:70)(cid:2)(cid:75)(cid:80)(cid:85)(cid:86)(cid:84)(cid:87)(cid:79)(cid:71)(cid:80)(cid:86)(cid:85)(cid:16)(cid:2)(cid:2)(cid:2)(cid:2)(cid:20)(cid:2)(cid:47)(cid:67)(cid:91)(cid:2)(cid:75)(cid:80)(cid:69)(cid:78)(cid:87)(cid:70)(cid:71)(cid:2)(cid:82)(cid:87)(cid:84)(cid:69)(cid:74)(cid:67)(cid:85)(cid:71)(cid:70)(cid:2)(cid:81)(cid:84)(cid:2)(cid:81)(cid:84)(cid:75)(cid:73)(cid:75)(cid:80)(cid:67)(cid:86)(cid:71)(cid:70)(cid:2)(cid:69)(cid:84)(cid:71)(cid:70)(cid:75)(cid:86)(cid:15)(cid:75)(cid:79)(cid:82)(cid:67)(cid:75)(cid:84)(cid:71)(cid:70)(cid:2)(cid:75)(cid:80)(cid:85)(cid:86)(cid:84)(cid:87)(cid:79)(cid:71)(cid:80)(cid:86)(cid:85)(cid:16)
122
122
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Default and credit-impaired
contractual payments have been made when due. If one claim
UBS uses a single definition of default for classifying assets and
against a counterparty is defaulted on, generally all claims
determining the PD of its obligors for risk modeling purposes.
against the counterparty are treated as defaulted.
The definition of default is based on quantitative and qualitative
An
instrument
is classified as credit-impaired
if
the
criteria. A counterparty is classified as defaulted when material
counterparty is classified as defaulted and / or the instrument is
payments of interest, principal or fees are overdue for more than
identified as purchased or originated credit-impaired (POCI). An
90 days, or more than 180 days for certain exposures in relation
instrument is POCI if it has been purchased at a deep discount to
to loans to private and commercial clients in Personal &
its carrying amount following a risk event of the issuer or
Corporate Banking and to private clients of Global Wealth
originated with a defaulted counterparty. Once a financial asset
Management Region Switzerland. UBS does not consider the
is classified as defaulted / credit-impaired (except POCI), it is
general 90-day presumption for default recognition appropriate
reported as a stage 3 instrument and remains as such unless all
for those portfolios, given the cure rates, which show that strict
past due amounts have been rectified, additional payments have
application of the 90-day criterion would not accurately reflect
been made on time, the position is not classified as credit-
the inherent credit risk. Counterparties are also classified as
restructured, and there is general evidence of credit recovery. A
defaulted when: bankruptcy, insolvency proceedings or enforced
three-month probation period is applied before a transfer back
liquidation have commenced; obligations have been restructured
to stages 1 or 2 can be triggered. However, most instruments
on preferential terms (forbearance); or there is other evidence
remain in stage 3 for a longer period. As of 31 December 2020,
that payment obligations will not be fully met without recourse
we have no instruments classified as POCI on our books.
to collateral. The latter may be the case even if, to date, all
Forbearance (credit restructuring)
Audited | If payment default is imminent or default has already
occurred, we may grant concessions to borrowers in financial
difficulties that we would otherwise not consider in the normal
course of business, such as offering preferential interest rates,
extending maturity, modifying the schedule of repayments, debt
/ equity swap, subordination, etc. When a forbearance measure
takes place, each case is considered individually and the
exposure
is generally classified as defaulted. Forbearance
classification remains until the loan is repaid or written off, non-
preferential conditions are granted
the
preferential conditions or the counterparty has recovered and
the preferential conditions no longer exceed our risk tolerance.
supersede
that
Contractual adjustments when there is no evidence of
imminent payment default, or where changes to terms and
conditions are within our usual risk tolerance, are not considered
to be forborne.
Loss history statistics
An instrument is classified as credit-impaired if the counterparty
has defaulted. This also includes credit-impaired exposures for
which no loss has occurred or for which no allowance has been
recognized (e.g., because we expect to fully recover the
exposures via collateral held).
Loss history statistics
USD million, except where indicated
Loans and advances to banks and customers (gross)
Credit-impaired loans and advances to banks and customers
Non-performing loans and advances to banks and customers
ECL allowances and provisions for credit losses1,2
of which: allowances for loans and advances to banks and customers 1
Write-offs
of which: write-offs for loans and advances to banks and customers
The “Loss history statistics” table below provides a five-year
history of credit loss experience for loans and advances to banks
and customers, and ratios of those credit losses relative to credit-
impaired and non-performing loans and advances to banks and
customers. For 2016 and 2017, the amounts are based on
IAS 37 and IAS 39; for 2018 and onward, the amounts are
based on IFRS 9.
Credit-impaired loans and advances to banks and customers
(stage 3 pursuant to the IFRS 9 ECL framework) were USD 2.9
billion as of 31 December 2020, compared with USD 2.3 billion
as of 31 December 2019.
The majority of the credit-impaired exposure relates to loans
and advances in our Swiss domestic business. The ratio of credit-
impaired loans and advances to banks and customers to total
loans and advances to banks and customers was 0.7%,
unchanged compared with 31 December 2019.
› Refer “Note 9 Financial assets at amortized cost and other
positions in scope of expected credit loss measurement” and
“Note 20 Expected credit loss measurement” in the
“Consolidated financial statements” section of this report for
more information about ECL measurement
› Refer to “Note 14a Other financial assets measured at amortized
cost” in the “Consolidated financial statements” section of this
report for more details
3311..1122..2200
IIFFRRSS 99
339966,,004499
22,,994455
33,,117766
11,,446688
11,,007766
335566
334488
((669944))
31.12.19
IFRS 9
340,003
2,309
2,466
1,029
770
142
122
(78)
31.12.18
IFRS 9
338,000
2,300
2,419
1,054
780
210
192
(118)
31.12.17
IAS 37, IAS 39
342,604
1,104
2,149
712
678
101
101
(131)
31.12.16
IAS 37, IAS 39
314,485
958
2,357
642
589
121
121
(38)
Credit loss (expense) / release3
RRaattiiooss
Credit-impaired loans and advances to banks and customers as a percentage of loans and advances to banks
and customers (gross)
Non-performing loans and advances to banks and customers as a percentage of loans and advances to banks
and customers (gross)
ECL allowances for loans and advances to banks and customers as a percentage of loans and advances to
banks and customers (gross)
Write-offs as a percentage of average loans and advances to banks and customers (gross) outstanding during
the period
11 Includes collective loan loss allowances (until 31 December 2017). Until 31 December 2017 did not include allowances for other receivables (31 December 2017: USD 19 million; 31 December 2016:
USD 0 million). 22 Includes provisions for ECL of guarantees and loan commitments and allowances for securities financing transactions. 33 Includes credit loss (expense) / release for other financial assets at
amortized cost, guarantees, loan commitments, and securities financing transactions.
00..33
00..88
00..11
00..77
0.0
0.7
0.7
0.2
0.7
0.1
0.6
0.2
0.0
0.7
0.3
0.0
0.2
0.3
0.7
0.2
122
123
123
Risk, capital, liquidity and funding, and balance sheet
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Market risk
Key developments
Market risk remained at low levels as a result of our continued
focus on managing tail risks. Average management VaR (1-day,
95% confidence level) increased to USD 13 million from USD 11
million in the prior year, mainly driven by the Investment Bank’s
Global Markets business. The
to
unprecedented and sharp market moves across asset classes, as
well as updates to the VaR model time series to incorporate the
extreme shocks observed in March. The number of negative
backtesting exceptions within a 250-business-day window
increased from 0 to 3 in March, and remained at 3 as of year-
end. The FINMA VaR multiplier for market risk RWA remained
unchanged at 3 as of 31 December 2020.
increase was due
Audited | Main sources of market risk
Market risks arise from both trading and non-trading business
activities.
– Trading market risks are mainly connected with primary debt
and equity underwriting and securities and derivatives trading
for market-making and client facilitation in our Investment
Bank, as well as the remaining positions in Non-core and
Legacy Portfolio in Group Functions and our municipal
securities trading business in Global Wealth Management.
– Non-trading market risks arise predominantly in the form of
interest rate and foreign exchange risks connected with
personal banking and lending in our wealth management
businesses, our Swiss personal and corporate banking
business and the Investment Bank’s lending business, as well
as treasury activities.
– Group Treasury assumes market risks in the process of
managing interest rate risk, structural foreign exchange risk
and the Group’s liquidity and funding profile, including
HQLA.
– Equity and debt investments can also give rise to market risks,
as can some aspects of employee benefits, such as defined
benefit pension schemes.
Audited | Overview of measurement, monitoring and
management techniques
– Market risk limits are set for the Group, the business divisions,
Group Treasury and Non-core and Legacy Portfolio at
granular levels in the various business lines, reflecting the
nature and magnitude of the market risks.
– Management VaR measures exposures under the market risk
framework, including trading market risks and some non-
trading market risks. Non-trading market risks not included in
VaR are also covered in the risks controlled by Market &
Treasury Risk Control, as set out below.
– Our primary portfolio measures of market risk are liquidity-
adjusted stress (LAS) loss and VaR. Both are common to all
124
124
business divisions and subject to limits that are approved by
the Board of Directors (the BoD).
– These measures are complemented by concentration and
granular limits for general and specific market risk factors.
Our trading businesses are subject to multiple market risk
limits, which take into account the extent of market liquidity
and volatility, available operational capacity, valuation
uncertainty and, for our single-name exposures, issuer credit
quality.
– Trading market risks are managed on an integrated basis at
portfolio level. As risk factor sensitivities change due to new
transactions, transaction expiries or changes in market levels,
risk factors are dynamically rehedged to remain within limits.
Thus we do not generally seek to distinguish in the trading
portfolio between specific positions and associated hedges.
– Issuer risk is controlled by limits applied at business division
level based on jump-to-zero measures, which estimate
maximum default exposure (the default event loss assuming
zero recovery).
– Non-trading foreign exchange risks are managed under
market risk limits, with the exception of Group Treasury
management of consolidated capital activity.
Our Market & Treasury Risk Control function applies a holistic
risk framework, setting the appetite for treasury-related risk-
taking activities across the Group. A key element of the
framework is an overarching economic value sensitivity limit, set
by the BoD. That limit is linked to the level of Basel III common
equity tier 1 (CET1) capital, and takes into account risks arising
from interest rates, foreign exchange and credit spreads. Also,
the sensitivity of net interest income to changes in interest rates
is monitored against targets set by the Group CEO, so as to
analyze the outlook and volatility of net interest income based
on market-expected interest rates. Limits are also set by the BoD
to balance the effect of foreign exchange movements on our
CET1 capital and CET1 capital ratio. Non-trading interest rate
and foreign exchange risks are included in Group-wide statistical
and stress testing metrics, which flow into our risk appetite
framework.
Equity and debt investments are subject to a range of risk
controls, including preapproval of new investments by business
management and Risk Control and regular monitoring and
reporting. They are also included in Group-wide statistical and
stress testing metrics.
› Refer to “Currency management” in the “Capital, liquidity and
funding, and balance sheet” section of this report for more
information about Group Treasury’s management of foreign
exchange risks
› Refer to the “Capital, liquidity and funding, and balance sheet”
section of this report for more information about the sensitivity
of our CET1 capital and CET1 capital ratio to currency
movements
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Market risk
Key developments
business divisions and subject to limits that are approved by
the Board of Directors (the BoD).
Market risk remained at low levels as a result of our continued
– These measures are complemented by concentration and
focus on managing tail risks. Average management VaR (1-day,
granular limits for general and specific market risk factors.
95% confidence level) increased to USD 13 million from USD 11
Our trading businesses are subject to multiple market risk
million in the prior year, mainly driven by the Investment Bank’s
limits, which take into account the extent of market liquidity
Global Markets business. The
increase was due
to
and volatility, available operational capacity, valuation
unprecedented and sharp market moves across asset classes, as
uncertainty and, for our single-name exposures, issuer credit
well as updates to the VaR model time series to incorporate the
quality.
extreme shocks observed in March. The number of negative
– Trading market risks are managed on an integrated basis at
backtesting exceptions within a 250-business-day window
portfolio level. As risk factor sensitivities change due to new
increased from 0 to 3 in March, and remained at 3 as of year-
transactions, transaction expiries or changes in market levels,
end. The FINMA VaR multiplier for market risk RWA remained
risk factors are dynamically rehedged to remain within limits.
unchanged at 3 as of 31 December 2020.
Audited | Main sources of market risk
Market risks arise from both trading and non-trading business
activities.
Thus we do not generally seek to distinguish in the trading
portfolio between specific positions and associated hedges.
– Issuer risk is controlled by limits applied at business division
level based on jump-to-zero measures, which estimate
maximum default exposure (the default event loss assuming
zero recovery).
– Trading market risks are mainly connected with primary debt
– Non-trading foreign exchange risks are managed under
and equity underwriting and securities and derivatives trading
market risk limits, with the exception of Group Treasury
for market-making and client facilitation in our Investment
management of consolidated capital activity.
Bank, as well as the remaining positions in Non-core and
Legacy Portfolio in Group Functions and our municipal
Our Market & Treasury Risk Control function applies a holistic
securities trading business in Global Wealth Management.
risk framework, setting the appetite for treasury-related risk-
– Non-trading market risks arise predominantly in the form of
taking activities across the Group. A key element of the
interest rate and foreign exchange risks connected with
framework is an overarching economic value sensitivity limit, set
personal banking and lending in our wealth management
by the BoD. That limit is linked to the level of Basel III common
businesses, our Swiss personal and corporate banking
equity tier 1 (CET1) capital, and takes into account risks arising
business and the Investment Bank’s lending business, as well
from interest rates, foreign exchange and credit spreads. Also,
as treasury activities.
the sensitivity of net interest income to changes in interest rates
– Group Treasury assumes market risks in the process of
is monitored against targets set by the Group CEO, so as to
managing interest rate risk, structural foreign exchange risk
analyze the outlook and volatility of net interest income based
and the Group’s liquidity and funding profile, including
on market-expected interest rates. Limits are also set by the BoD
HQLA.
to balance the effect of foreign exchange movements on our
– Equity and debt investments can also give rise to market risks,
CET1 capital and CET1 capital ratio. Non-trading interest rate
as can some aspects of employee benefits, such as defined
and foreign exchange risks are included in Group-wide statistical
benefit pension schemes.
and stress testing metrics, which flow into our risk appetite
Audited | Overview of measurement, monitoring and
management techniques
framework.
Equity and debt investments are subject to a range of risk
controls, including preapproval of new investments by business
management and Risk Control and regular monitoring and
– Market risk limits are set for the Group, the business divisions,
reporting. They are also included in Group-wide statistical and
Group Treasury and Non-core and Legacy Portfolio at
stress testing metrics.
granular levels in the various business lines, reflecting the
nature and magnitude of the market risks.
– Management VaR measures exposures under the market risk
framework, including trading market risks and some non-
trading market risks. Non-trading market risks not included in
VaR are also covered in the risks controlled by Market &
Treasury Risk Control, as set out below.
› Refer to “Currency management” in the “Capital, liquidity and
funding, and balance sheet” section of this report for more
information about Group Treasury’s management of foreign
exchange risks
› Refer to the “Capital, liquidity and funding, and balance sheet”
section of this report for more information about the sensitivity
of our CET1 capital and CET1 capital ratio to currency
– Our primary portfolio measures of market risk are liquidity-
movements
adjusted stress (LAS) loss and VaR. Both are common to all
Market risk stress loss
We measure and manage market risks through a comprehensive
framework of non-statistical measures and related limits, as well
as VaR. This includes an extensive set of stress tests and scenario
analyses, continuously evaluated to ensure that losses resulting
from an extreme yet plausible event do not exceed our risk
appetite.
Liquidity-adjusted stress
LAS is our primary stress loss measure for Group-wide market
risk. The LAS framework captures the economic losses that could
arise under specified stress scenarios. This is, partially, done by
replacing the standard 1-day and 10-day holding period
assumptions used for management and regulatory VaR with
liquidity-adjusted holding periods, as explained below. Shocks
are applied to positions based on expected market movements
in the liquidity-adjusted holding periods resulting from the
specified scenario.
The holding periods used for LAS are calibrated to reflect the
amount of time needed to reduce or hedge the risk of positions
in each major risk factor in a stressed environment, assuming
maximum utilization of the relevant position limits. We apply
minimum holding periods, regardless of observed liquidity levels,
as identification of and reaction to a crisis may not always be
immediate.
The expected market movements are derived using historical
market behavior (based on analysis of historical events) and
forward-looking analysis including consideration of defined
scenarios that have not occurred in the past.
LAS-based limits apply at several levels: Group, business
division, Group Treasury and Non-core and Legacy Portfolio;
business area; and sub-portfolio. LAS is also the core market risk
component of our combined stress test framework and
therefore integral to our overall risk appetite framework.
› Refer to “Risk appetite framework” in this section for more
information
› Refer to “Stress testing” in this section for more information
about our stress testing framework
Value-at-risk
VaR definition
Audited | VaR is a statistical measure of market risk, representing
the potential market risk losses over a set time horizon (holding
period) at an established level of confidence. VaR assumes no
change in the Group’s trading positions over the set time
horizon.
We calculate VaR daily. The profit or loss distribution VaR is
derived from our internally developed VaR model, which
simulates returns over the holding period for those risk factors to
which our trading positions are sensitive, and subsequently
quantifies the profit / loss effect of these risk factor returns on
trading positions. Risk factor returns associated with general
interest rate, foreign exchange and commodities risk factor
classes are based on a pure historical simulation approach, using
a five-year look-back window. Risk factor returns for selected
issuer-based risk factors, e.g., equity price and credit spreads,
are split into systematic and residual issuer-specific components
using a factor model approach. Systematic returns are based on
historical simulation, and residual returns on a Monte Carlo
simulation. VaR model profit or loss distribution is derived from
the sum of systematic and residual returns in such a way that we
consistently capture systematic and residual risk. Correlations
among risk factors are implicitly captured via a historical
simulation approach. When modeling risk factor returns, we
consider the stationarity properties of the historical time series of
risk factor changes. Depending on the stationarity properties of
the risk factors within a given factor class, we model the factor
returns using absolute returns or logarithmic returns. Risk factor
return distributions are updated fortnightly.
Our VaR model does not have full revaluation capability, but
we source full revaluation grids and sensitivities from front-office
systems, enabling us to capture material non-linear profit or loss
effects.
We use a single VaR model for both internal management
purposes and determining market RWA, although we consider
different confidence levels and time horizons. For internal
management purposes, we establish risk limits and measure
exposures using VaR at a 95% confidence level with a 1-day
holding period, aligned to the way we consider the risks
associated with our trading activities. The regulatory measure of
market risk used to underpin the market risk capital requirement
under Basel III requires a measure equivalent to a 99%
confidence level using a 10-day holding period. To calculate a
10-day holding period VaR, we use 10-day risk factor returns,
with all observations equally weighted.
Additionally, the portfolio population for management and
regulatory VaR is slightly different. The one for regulatory VaR
meets regulatory requirements for inclusion in regulatory VaR.
Management VaR includes a broader range of positions. For
example, regulatory VaR excludes credit spread risks from the
securitization portfolio, which are treated instead under the
securitization approach for regulatory purposes.
124
125
125
Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Risk management and control
We also use stressed VaR (SVaR) for the calculation of market
risk RWA. SVaR uses broadly the same methodology as
regulatory VaR and is calculated using the same population,
holding period (10-day) and confidence level (99%). Unlike
regulatory VaR, the historical data set for SVaR is not limited to
five years, instead spanning the period from 1 January 2007 to
the present. In deriving SVaR, we seek the largest 10-day
holding period VaR for the current Group portfolio across all
one-year look-back windows from 1 January 2007 to the
present. SVaR is computed weekly.
› Refer to the 31 December 2020 Pillar 3 report, available under
“Pillar 3 disclosures” at ubs.com/investors, for more information
about the regulatory capital calculation under the advanced
internal ratings-based approach
Management VaR for the period
The tables below show minimum, maximum, average and
period-end management VaR by business division and Group
Functions, and by general market risk type. We continued to
maintain management VaR at low levels, with average VaR
increasing to USD 13 million from USD 11 million in the prior
year.
Audited |
Management value-at-risk (1-day, 95% confidence, 5 years of historical data) of our business divisions and Group
Functions by general market risk type1
FFoorr tthhee yyeeaarr eennddeedd 3311..1122..2200
USD million
TToottaall mmaannaaggeemmeenntt VVaaRR,, GGrroouupp
Global Wealth Management
Personal & Corporate Banking
Asset Management
Investment Bank
Group Functions
Diversification effect2,3
USD million
MMiinn..
88
00
00
00
77
44
Min.
MMaaxx..
AAvveerraaggee
3311
22
00
00
3322
77
3311..1122..2200
1111
11
00
00
1100
66
((88))
1133
11
00
00
1122
55
((55))
EEqquuiittyy
33
2299
1100
66
00
00
00
1100
00
00
IInntteerreesstt
rraatteess
66
1111
88
88
CCrreeddiitt
sspprreeaaddss
55
1111
77
88
AAvveerraaggee ((ppeerr bbuussiinneessss ddiivviissiioonn aanndd rriisskk ttyyppee))
FFoorreeiiggnn
eexxcchhaannggee
22
77
44
33
CCoommmmooddiittiieess
22
66
44
33
11
00
00
77
44
((44))
11
00
00
66
33
((44))
00
00
00
44
11
((11))
00
00
00
44
00
00
For the year ended 31.12.19
Max.
Average
31.12.19
9
Equity
2
14
6
5
Interest
rates
6
12
9
8
Credit
spreads
3
8
5
5
Average (per business division and risk type)
Foreign
exchange
2
8
3
3
Commodities
1
6
2
3
6
11
18
TToottaall mmaannaaggeemmeenntt VVaaRR,, GGrroouupp
Global Wealth Management
0
Personal & Corporate Banking
0
Asset Management
0
Investment Bank
2
Group Functions
0
Diversification effect2,3
0
11 Statistics at individual levels may not be summed to deduce the corresponding aggregate figures. The minima and maxima for each level may well occur on different days, and likewise, the VaR for each business
line or risk type, being driven by the extreme loss tail of the corresponding distribution of simulated profits and losses for that business line or risk type, may well be driven by different days in the historical time
series, rendering invalid the simple summation of figures to arrive at the aggregate total. 22 Difference between the sum of the standalone VaR for the business divisions and Group Functions and the VaR for the
Group as a whole. 33 As the minima and maxima for different business divisions and Group Functions occur on different days, it is not meaningful to calculate a portfolio diversification effect.
0
0
0
6
1
(1)
1
0
0
4
2
(2)
1
0
0
7
5
(4)
0
0
0
3
1
(1)
1
0
0
7
5
(4)
1
0
0
9
5
(5)
1
0
0
17
8
0
0
0
4
4
126
126
150
125
100
75
50
0
150
-25
125
-50
100
75
50
0
-25
-50
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
We also use stressed VaR (SVaR) for the calculation of market
Management VaR for the period
risk RWA. SVaR uses broadly the same methodology as
The tables below show minimum, maximum, average and
regulatory VaR and is calculated using the same population,
period-end management VaR by business division and Group
holding period (10-day) and confidence level (99%). Unlike
Functions, and by general market risk type. We continued to
regulatory VaR, the historical data set for SVaR is not limited to
maintain management VaR at low levels, with average VaR
five years, instead spanning the period from 1 January 2007 to
increasing to USD 13 million from USD 11 million in the prior
the present. In deriving SVaR, we seek the largest 10-day
year.
holding period VaR for the current Group portfolio across all
one-year look-back windows from 1 January 2007 to the
present. SVaR is computed weekly.
› Refer to the 31 December 2020 Pillar 3 report, available under
“Pillar 3 disclosures” at ubs.com/investors, for more information
about the regulatory capital calculation under the advanced
internal ratings-based approach
Management value-at-risk (1-day, 95% confidence, 5 years of historical data) of our business divisions and Group
Functions by general market risk type1
Audited |
USD million
TToottaall mmaannaaggeemmeenntt VVaaRR,, GGrroouupp
Global Wealth Management
Personal & Corporate Banking
Asset Management
Investment Bank
Group Functions
Diversification effect2,3
USD million
TToottaall mmaannaaggeemmeenntt VVaaRR,, GGrroouupp
Global Wealth Management
Personal & Corporate Banking
Asset Management
Investment Bank
Group Functions
Diversification effect2,3
FFoorr tthhee yyeeaarr eennddeedd 3311..1122..2200
EEqquuiittyy
IInntteerreesstt
rraatteess
CCrreeddiitt
sspprreeaaddss
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CCoommmmooddiittiieess
AAvveerraaggee ((ppeerr bbuussiinneessss ddiivviissiioonn aanndd rriisskk ttyyppee))
MMiinn..
MMaaxx..
AAvveerraaggee
88
00
00
00
77
44
6
0
0
0
4
4
3311
22
00
00
77
3322
18
1
0
0
8
17
Min.
Max.
Average
3311..1122..2200
1111
11
00
00
66
1100
((88))
31.12.19
9
1
0
0
7
5
1133
11
00
00
55
1122
((55))
11
1
0
0
9
5
(5)
33
2299
1100
66
00
00
00
00
00
1100
14
2
6
5
0
0
0
6
1
1111
66
88
88
11
00
00
77
44
12
6
9
8
1
0
0
7
5
1111
55
77
88
11
00
00
66
33
3
8
5
5
1
0
0
4
2
22
77
44
33
00
00
00
44
11
2
8
3
3
0
0
0
3
1
((44))
((44))
((11))
For the year ended 31.12.19
Equity
Interest
rates
Credit
spreads
Foreign
exchange
Commodities
22
66
44
33
00
00
00
44
00
00
1
6
2
3
0
0
0
2
0
0
11 Statistics at individual levels may not be summed to deduce the corresponding aggregate figures. The minima and maxima for each level may well occur on different days, and likewise, the VaR for each business
line or risk type, being driven by the extreme loss tail of the corresponding distribution of simulated profits and losses for that business line or risk type, may well be driven by different days in the historical time
series, rendering invalid the simple summation of figures to arrive at the aggregate total. 22 Difference between the sum of the standalone VaR for the business divisions and Group Functions and the VaR for the
Group as a whole. 33 As the minima and maxima for different business divisions and Group Functions occur on different days, it is not meaningful to calculate a portfolio diversification effect.
(4)
(1)
(4)
(2)
(1)
VaR limitations
Audited | Actual realized market risk losses may differ from those
implied by VaR for a variety of reasons.
– VaR is calibrated to a specified level of confidence and may
not indicate potential losses beyond this confidence level.
2007–2009 financial crisis is no longer contained in the historical
five-year period used for management and regulatory VaR, SVaR
continues to use that data. This approach aims to reduce the
procyclicality of the regulatory capital requirements for market
risks.
– The 1-day
time horizon used
internal
management purposes (10-day for regulatory VaR) may not
fully capture market risk of positions that cannot be closed
out or hedged within the specified period.
for VaR
for
– In some cases, VaR calculations approximate the effect of
changes in risk factors on the values of positions and
portfolios. This may happen due to the number of risk factors
included in the VaR model needing to be limited.
– Effects of extreme market movements are subject to
estimation errors, which may result from non-linear risk
sensitivities, and the potential for actual volatility and
correlation levels to differ from assumptions implicit in VaR
calculations.
– Using a five-year window means sudden increases in market
volatility will tend not to increase VaR as quickly as the use of
shorter historical observation periods, but such increases will
affect VaR for a longer period of time. Similarly, after periods
of increased volatility, as markets stabilize VaR predictions will
remain more conservative for a period of time influenced by
the length of the historical observation period.
SVaR is subject to the limitations noted for VaR above, but
the use of one-year data sets avoids the smoothing effect of the
five-year data set used for VaR, and the absence of the five-year
window gives a
loss events.
Therefore, although the significant period of stress during the
longer history of potential
both
We recognize that no single measure can encompass all risks
associated with a position or portfolio. Thus, we use a set of
metrics with
complementary
overlapping
characteristics to create a holistic framework that aims to ensure
material completeness of risk identification and measurement.
As a statistical aggregate risk measure, VaR supplements our
liquidity-adjusted stress and comprehensive stress
testing
frameworks.
and
We also have a framework to identify and quantify potential
risks not fully captured by our VaR model and refer to such risks
as risks not in VaR. The framework underpins these potential
risks with regulatory capital, calculated as a multiple of
regulatory VaR and stressed VaR.
Backtesting of VaR
VaR backtesting is a performance measurement process in which
a 1-day VaR prediction is compared with the realized 1-day
profit or loss (P&L). We compute backtesting VaR using a 99%
confidence level and 1-day holding period for the regulatory VaR
population. Since 99% VaR at UBS is defined as a risk measure
that operates on the lower tail of the P&L distribution, 99%
backtesting VaR is a negative number. Backtesting revenues
exclude non-trading revenues, such as valuation reserves, fees
and commissions, and revenues from intraday trading, to
provide for a like-for-like comparison. A backtesting exception
occurs when backtesting revenues are lower than the previous
day’s backtesting VaR.
25
25
Average (per business division and risk type)
(cid:44)(cid:67)(cid:80)
(cid:40)(cid:71)(cid:68)
(cid:47)(cid:67)(cid:84)
(cid:35)(cid:82)(cid:84)
(cid:47)(cid:67)(cid:91)
(cid:44)(cid:87)(cid:80)
(cid:44)(cid:87)(cid:78)
(cid:35)(cid:87)(cid:73)
(cid:53)(cid:71)(cid:82)
(cid:49)(cid:69)(cid:86)
(cid:48)(cid:81)(cid:88)
(cid:38)(cid:71)(cid:69)
(cid:55)(cid:53)(cid:38)(cid:2)(cid:79)(cid:75)(cid:78)(cid:78)(cid:75)(cid:81)(cid:80)
(cid:41)(cid:84)(cid:81)(cid:87)(cid:82)(cid:28)(cid:2)(cid:70)(cid:71)(cid:88)(cid:71)(cid:78)(cid:81)(cid:82)(cid:79)(cid:71)(cid:80)(cid:86)(cid:2)(cid:81)(cid:72)(cid:2)(cid:84)(cid:71)(cid:73)(cid:87)(cid:78)(cid:67)(cid:86)(cid:81)(cid:84)(cid:91)(cid:2)(cid:68)(cid:67)(cid:69)(cid:77)(cid:86)(cid:71)(cid:85)(cid:86)(cid:75)(cid:80)(cid:73)(cid:2)(cid:84)(cid:71)(cid:88)(cid:71)(cid:80)(cid:87)(cid:71)(cid:85)(cid:19)(cid:2)(cid:67)(cid:80)(cid:70)(cid:2)(cid:67)(cid:69)(cid:86)(cid:87)(cid:67)(cid:78)(cid:2)(cid:86)(cid:84)(cid:67)(cid:70)(cid:75)(cid:80)(cid:73)(cid:2)(cid:84)(cid:71)(cid:88)(cid:71)(cid:80)(cid:87)(cid:71)(cid:85)(cid:20)(cid:2)(cid:67)(cid:73)(cid:67)(cid:75)(cid:80)(cid:85)(cid:86)(cid:2)(cid:68)(cid:67)(cid:69)(cid:77)(cid:86)(cid:71)(cid:85)(cid:86)(cid:75)(cid:80)(cid:73)(cid:2)(cid:56)(cid:67)(cid:52)(cid:21)
(cid:10)(cid:19)(cid:15)(cid:70)(cid:67)(cid:91)(cid:14)(cid:2)(cid:27)(cid:27)(cid:7)(cid:2)(cid:69)(cid:81)(cid:80)(cid:386)(cid:70)(cid:71)(cid:80)(cid:69)(cid:71)(cid:11)
(cid:20)(cid:18)(cid:18)
(cid:19)(cid:25)(cid:23)
(cid:19)(cid:23)(cid:18)
(cid:19)(cid:20)(cid:23)
(cid:19)(cid:18)(cid:18)
(cid:25)(cid:23)
(cid:23)(cid:18)
(cid:20)(cid:23)
(cid:18)
(cid:10)(cid:20)(cid:23)(cid:11)
(cid:10)(cid:23)(cid:18)(cid:11)
(cid:10)(cid:25)(cid:23)(cid:11)
(cid:36)(cid:67)(cid:69)(cid:77)(cid:86)(cid:71)(cid:85)(cid:86)(cid:75)(cid:80)(cid:73)(cid:2)(cid:84)(cid:71)(cid:88)(cid:71)(cid:80)(cid:87)(cid:71)(cid:85)
(cid:27)(cid:27)(cid:7)(cid:2)(cid:82)(cid:81)(cid:85)(cid:75)(cid:86)(cid:75)(cid:88)(cid:71)(cid:2)(cid:86)(cid:67)(cid:75)(cid:78)(cid:2)(cid:81)(cid:72)(cid:2)(cid:86)(cid:74)(cid:71)(cid:2)(cid:68)(cid:67)(cid:69)(cid:77)(cid:86)(cid:71)(cid:85)(cid:86)(cid:75)(cid:80)(cid:73)(cid:2)(cid:56)(cid:67)(cid:52)(cid:2)(cid:70)(cid:75)(cid:85)(cid:86)(cid:84)(cid:75)(cid:68)(cid:87)(cid:86)(cid:75)(cid:81)(cid:80)
(cid:35)(cid:69)(cid:86)(cid:87)(cid:67)(cid:78)(cid:2)(cid:86)(cid:84)(cid:67)(cid:70)(cid:75)(cid:80)(cid:73)(cid:2)(cid:84)(cid:71)(cid:88)(cid:71)(cid:80)(cid:87)(cid:71)(cid:85)
(cid:36)(cid:67)(cid:69)(cid:77)(cid:86)(cid:71)(cid:85)(cid:86)(cid:75)(cid:80)(cid:73)(cid:2)(cid:56)(cid:67)(cid:52)(cid:2)(cid:10)(cid:19)(cid:15)(cid:70)(cid:67)(cid:91)(cid:14)(cid:2)(cid:27)(cid:27)(cid:7)(cid:2)(cid:69)(cid:81)(cid:80)(cid:386)(cid:70)(cid:71)(cid:80)(cid:69)(cid:71)(cid:2)(cid:31)(cid:2)(cid:19)(cid:7)(cid:2)(cid:80)(cid:71)(cid:73)(cid:67)(cid:86)(cid:75)(cid:88)(cid:71)(cid:2)(cid:86)(cid:67)(cid:75)(cid:78)(cid:11)
(cid:19) (cid:39)(cid:90)(cid:69)(cid:78)(cid:87)(cid:70)(cid:71)(cid:85)(cid:2)(cid:80)(cid:81)(cid:80)(cid:15)(cid:86)(cid:84)(cid:67)(cid:70)(cid:75)(cid:80)(cid:73)(cid:2)(cid:84)(cid:71)(cid:88)(cid:71)(cid:80)(cid:87)(cid:71)(cid:85)(cid:14)(cid:2)(cid:85)(cid:87)(cid:69)(cid:74)(cid:2)(cid:67)(cid:85)(cid:2)(cid:88)(cid:67)(cid:78)(cid:87)(cid:67)(cid:86)(cid:75)(cid:81)(cid:80)(cid:2)(cid:84)(cid:71)(cid:85)(cid:71)(cid:84)(cid:88)(cid:71)(cid:85)(cid:14)(cid:2)(cid:69)(cid:81)(cid:79)(cid:79)(cid:75)(cid:85)(cid:85)(cid:75)(cid:81)(cid:80)(cid:85)(cid:2)(cid:67)(cid:80)(cid:70)(cid:2)(cid:72)(cid:71)(cid:71)(cid:85)(cid:14)(cid:2)(cid:67)(cid:80)(cid:70)(cid:2)(cid:84)(cid:71)(cid:88)(cid:71)(cid:80)(cid:87)(cid:71)(cid:85)(cid:2)(cid:72)(cid:84)(cid:81)(cid:79)(cid:2)(cid:75)(cid:80)(cid:86)(cid:84)(cid:67)(cid:70)(cid:67)(cid:91)(cid:2)(cid:86)(cid:84)(cid:67)(cid:70)(cid:75)(cid:80)(cid:73)(cid:16)(cid:2)(cid:2)(cid:2)(cid:2)(cid:20)(cid:2)(cid:43)(cid:80)(cid:69)(cid:78)(cid:87)(cid:70)(cid:71)(cid:85)(cid:2)(cid:68)(cid:67)(cid:69)(cid:77)(cid:86)(cid:71)(cid:85)(cid:86)(cid:75)(cid:80)(cid:73)(cid:2)(cid:84)(cid:71)(cid:88)(cid:71)(cid:80)(cid:87)(cid:71)(cid:85)(cid:2)(cid:67)(cid:80)(cid:70)(cid:2)(cid:84)(cid:71)(cid:88)(cid:71)(cid:80)(cid:87)(cid:71)(cid:85)(cid:2)(cid:72)(cid:84)(cid:81)(cid:79)(cid:2)(cid:75)(cid:80)(cid:86)(cid:84)(cid:67)(cid:70)(cid:67)(cid:91)(cid:2)(cid:86)(cid:84)(cid:67)(cid:70)(cid:75)(cid:80)(cid:73)(cid:16)(cid:2)(cid:2)(cid:2)(cid:2)(cid:21)(cid:2)(cid:36)(cid:67)(cid:85)(cid:71)(cid:70)(cid:2)(cid:81)(cid:80)(cid:2)(cid:36)(cid:67)(cid:85)(cid:71)(cid:78)(cid:2)(cid:43)(cid:43)(cid:43)(cid:2)(cid:84)(cid:71)(cid:73)(cid:87)(cid:78)(cid:67)(cid:86)(cid:81)(cid:84)(cid:91)(cid:2)
(cid:56)(cid:67)(cid:52)(cid:14)(cid:2)(cid:71)(cid:90)(cid:69)(cid:78)(cid:87)(cid:70)(cid:71)(cid:85)(cid:2)(cid:37)(cid:56)(cid:35)(cid:2)(cid:82)(cid:81)(cid:85)(cid:75)(cid:86)(cid:75)(cid:81)(cid:80)(cid:85)(cid:2)(cid:67)(cid:80)(cid:70)(cid:2)(cid:86)(cid:74)(cid:71)(cid:75)(cid:84)(cid:2)(cid:71)(cid:78)(cid:75)(cid:73)(cid:75)(cid:68)(cid:78)(cid:71)(cid:2)(cid:74)(cid:71)(cid:70)(cid:73)(cid:71)(cid:85)(cid:2)(cid:86)(cid:74)(cid:67)(cid:86)(cid:2)(cid:67)(cid:84)(cid:71)(cid:2)(cid:85)(cid:87)(cid:68)(cid:76)(cid:71)(cid:69)(cid:86)(cid:2)(cid:86)(cid:81)(cid:2)(cid:86)(cid:74)(cid:71)(cid:2)(cid:85)(cid:86)(cid:67)(cid:80)(cid:70)(cid:67)(cid:78)(cid:81)(cid:80)(cid:71)(cid:2)(cid:37)(cid:56)(cid:35)(cid:2)(cid:69)(cid:74)(cid:67)(cid:84)(cid:73)(cid:71)(cid:16)
150
150
125
125
100
100
75
75
50
50
0
0
-25
-25
-50
-50
126
127
127
25
25
Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Statistically, given the 99% confidence level, two or three
backtesting exceptions a year can be expected. More than four
exceptions could indicate that the VaR model is not performing
appropriately, as could too few exceptions over a long period.
However, as noted for VaR limitations above, a sudden increase
(or decrease) in market volatility relative to the five-year window
could lead to a higher (or lower) number of exceptions.
Accordingly, Group-level
are
investigated, as are exceptional positive backtesting revenues,
with results reported to senior business management, the Group
CRO and the Group Chief Market & Treasury Risk Officer.
Internal and external auditors and relevant regulators are also
informed of backtesting exceptions.
backtesting
exceptions
The “Group: development of regulatory backtesting revenues
and actual trading revenues against backtesting VaR” chart on
the previous page shows the 12-month development of
backtesting VaR against the Group’s backtesting revenues and
actual trading revenues for 2020. The chart shows both the
99% and the 1% backtesting VaR. The asymmetry between the
negative and positive tails is due to the long gamma risk profile
historically run in the Investment Bank.
the
final standards on
Future market risk-related regulatory capital developments
In January 2019, the Basel Committee on Banking Supervision
published
the minimum capital
requirements for market risk (the Fundamental Review of the
Trading Book). We do not expect these standards to become
mandatory in Switzerland until after the BCBS target effective
date of 1 January 2023.
Key elements of the revised market risk framework include:
(i) changes to the internal model-based approach, including
changes to the model approval and performance measurement
process; (ii) changes to the standardized approach with the aim
of it being a credible fallback method for an internal model-
based approach; and (iii) a revised boundary between trading
book and banking book. UBS maintains a close dialog with
FINMA to discuss the implementation objectives in more detail
and to provide a smooth transition of the capital regime for
market risk.
› Refer to “Risk-weighted assets” in the “Capital, liquidity and
funding, and balance sheet” section of this report for more
information about the development of RWA
› Refer to “Risk measurement” in this section for more
The actual trading revenues include, as well as backtesting
information about our approach to model confirmation
revenues, intraday revenues.
The number of negative backtesting exceptions within a 250-
business-day window increased from 0 to 3 in March, and
remained at 3 as of year-end. The FINMA VaR multiplier for
market risk RWA remained unchanged at 3 as of 31 December
2020. FINMA’s freeze on backtesting exceptions did not affect
this multiplier.
VaR model confirmation
As well as for regulatory-purposes backtesting described above,
we conduct extended backtesting for our internal model
confirmation purposes. This
includes observing model
performance across the entire P&L distribution, not just the tails,
and at multiple levels within the business division hierarchies.
› Refer to “Risk measurement” in this section for more
information about our approach to model confirmation
procedures
VaR model developments in 2020
Audited | There were no material changes to the VaR model in
2020.
procedures
› Refer to the “Regulatory and legal developments” and “Risk
factors” sections of this report for more information
Interest rate risk in the banking book
Interest rate risk in the banking book disclosure
Our financial reports’ interest rate risk in the banking book
(IRRBB) disclosure is aligned to the Pillar 3 requirements set by
FINMA Circular “2019/2 Interest Rate Risk – Banks,” which sets
minimum standards for measuring, managing, monitoring and
controlling IRRBB. In particular, the economic value of equity
(EVE) sensitivity is assessed under the six regulatory rate-shock
scenarios set in the FINMA circular, which are currency-specific
and not subject to flooring.
Sources of interest rate risk in the banking book
Audited | IRRBB arises from balance sheet positions such as Loans
and advances to banks, Loans and advances to customers,
Financial assets at fair value not held for trading, Financial assets
measured at amortized cost, Customer deposits, Debt issued
measured at amortized cost, and derivatives, including those
used for cash flow hedging purposes. Fair value changes to
these positions may affect other comprehensive income (OCI) or
the
their accounting
treatment.
income statement, depending on
128
128
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Statistically, given the 99% confidence level, two or three
Future market risk-related regulatory capital developments
backtesting exceptions a year can be expected. More than four
In January 2019, the Basel Committee on Banking Supervision
exceptions could indicate that the VaR model is not performing
published
the
final standards on
the minimum capital
appropriately, as could too few exceptions over a long period.
requirements for market risk (the Fundamental Review of the
However, as noted for VaR limitations above, a sudden increase
Trading Book). We do not expect these standards to become
(or decrease) in market volatility relative to the five-year window
mandatory in Switzerland until after the BCBS target effective
could lead to a higher (or lower) number of exceptions.
date of 1 January 2023.
Accordingly, Group-level
backtesting
exceptions
are
Key elements of the revised market risk framework include:
investigated, as are exceptional positive backtesting revenues,
(i) changes to the internal model-based approach, including
with results reported to senior business management, the Group
changes to the model approval and performance measurement
CRO and the Group Chief Market & Treasury Risk Officer.
process; (ii) changes to the standardized approach with the aim
Internal and external auditors and relevant regulators are also
of it being a credible fallback method for an internal model-
informed of backtesting exceptions.
based approach; and (iii) a revised boundary between trading
The “Group: development of regulatory backtesting revenues
book and banking book. UBS maintains a close dialog with
and actual trading revenues against backtesting VaR” chart on
FINMA to discuss the implementation objectives in more detail
the previous page shows the 12-month development of
and to provide a smooth transition of the capital regime for
backtesting VaR against the Group’s backtesting revenues and
market risk.
actual trading revenues for 2020. The chart shows both the
99% and the 1% backtesting VaR. The asymmetry between the
negative and positive tails is due to the long gamma risk profile
historically run in the Investment Bank.
› Refer to “Risk-weighted assets” in the “Capital, liquidity and
funding, and balance sheet” section of this report for more
information about the development of RWA
› Refer to “Risk measurement” in this section for more
The actual trading revenues include, as well as backtesting
information about our approach to model confirmation
revenues, intraday revenues.
The number of negative backtesting exceptions within a 250-
business-day window increased from 0 to 3 in March, and
remained at 3 as of year-end. The FINMA VaR multiplier for
procedures
› Refer to the “Regulatory and legal developments” and “Risk
factors” sections of this report for more information
market risk RWA remained unchanged at 3 as of 31 December
Interest rate risk in the banking book
2020. FINMA’s freeze on backtesting exceptions did not affect
this multiplier.
VaR model confirmation
Interest rate risk in the banking book disclosure
Our financial reports’ interest rate risk in the banking book
(IRRBB) disclosure is aligned to the Pillar 3 requirements set by
As well as for regulatory-purposes backtesting described above,
FINMA Circular “2019/2 Interest Rate Risk – Banks,” which sets
we conduct extended backtesting for our internal model
minimum standards for measuring, managing, monitoring and
confirmation purposes. This
includes observing model
controlling IRRBB. In particular, the economic value of equity
performance across the entire P&L distribution, not just the tails,
(EVE) sensitivity is assessed under the six regulatory rate-shock
and at multiple levels within the business division hierarchies.
scenarios set in the FINMA circular, which are currency-specific
› Refer to “Risk measurement” in this section for more
information about our approach to model confirmation
procedures
and not subject to flooring.
Audited | There were no material changes to the VaR model in
Financial assets at fair value not held for trading, Financial assets
VaR model developments in 2020
2020.
Sources of interest rate risk in the banking book
Audited | IRRBB arises from balance sheet positions such as Loans
and advances to banks, Loans and advances to customers,
measured at amortized cost, Customer deposits, Debt issued
measured at amortized cost, and derivatives, including those
used for cash flow hedging purposes. Fair value changes to
these positions may affect other comprehensive income (OCI) or
the
income statement, depending on
their accounting
treatment.
Our largest banking book interest rate exposures arise from
customer deposits and lending products in Global Wealth
Management and Personal & Corporate Banking. The inherent
interest rate risks are generally transferred from Global Wealth
Management and Personal & Corporate Banking to Group
Treasury, to manage them centrally. This enables the netting of
interest rate risks across different sources, while leaving the
originating businesses with commercial margin and volume
management. The residual interest rate risk is mainly hedged
with interest rate swaps, to the vast majority of which we apply
hedge accounting. Short-term exposures and high-quality liquid
assets classified as Financial assets at fair value not held for
trading are hedged with derivatives accounted for on a mark-to-
market basis. Long-term fixed-rate debt issued is hedged with
interest rate swaps designated in fair value hedge accounting
relationships.
Risk management and governance
IRRBB is measured using several metrics, the most relevant of
which are the following.
– Interest rate sensitivities to changes in yield curves, calculated
as changes in the present value of future cash flows
irrespective of accounting treatment. These are also the key
risk factors for statistical and stress-based measures, e.g.,
value-at-risk and stress scenarios (including EVE sensitivity),
and are measured and reported daily. EVE sensitivity is the
exposure arising from the most adverse regulatory interest
rate scenario after netting across currencies. As well as the
regulatory measure, we apply an internal EVE sensitivity
metric that
includes equity, goodwill, real estate and
additional tier 1 (AT1) capital instruments.
– Net interest income (NII) sensitivity assesses NII change over a
set time horizon compared with baseline NII, which we
internally calculate by assuming interest rates in all currencies
develop according to their market-implied forward rates and
assuming constant business volumes and no specific
management actions. Internal NII sensitivity, which includes
the contribution from cash held at central banks, unlike the
Pillar 3 disclosure requirements, is measured and reported
monthly.
We actively manage IRRBB, aiming to reduce the volatility of
NII, while keeping the EVE sensitivity within set internal risk
limits.
EVE and NII sensitivity are monitored against limits and
triggers, at consolidated and significant legal entity levels. We
also assess the sensitivity of EVE and NII under stressed market
conditions by applying a suite of parallel and non-parallel
interest rate scenarios, as well as specific economic scenarios.
The
Interest Rate Risk
in the Banking Book Strategy
Committee, a sub-committee of the Group Asset and Liability
Committee (ALCO), and, where relevant, ALCOs at a legal entity
level perform independent oversight over the management of
IRRBB. IRRBB is also subject to Group Internal Audit and model
governance.
› Refer to “Group Internal Audit” in the “Corporate governance”
section of this report and to “Risk measurement” in this section
for more information
Key modeling assumptions
The cash flows from customer deposits and lending products
used in calculation of EVE sensitivity exclude commercial margins
and other spread components, are aggregated by daily time-
buckets and are discounted using risk-free rates. Our external
issuances are discounted using UBS’s senior debt curve, and
capital instruments are modeled to the first call date. NII
sensitivity, which includes commercial margins, is calculated over
a one-year time horizon, assuming constant balance sheet
structure and volumes, and considers the flooring effect of
embedded interest rate options.
The average repricing maturity of non-maturing deposits and
loans is determined via replication portfolio strategies designed
to protect product margin. Optimal replicating portfolios are
determined at granular currency- and product-specific levels by
simulating and applying a real-world market rate model to
historically calibrated client rate and volume models.
We use an econometric prepayment model to forecast
prepayment rates on US mortgage loans in UBS Bank USA and
agency mortgage-backed securities (MBSs) held in various
liquidity portfolios of UBS Americas Holding LLC consolidated.
These prepayment rates are used to forecast both mortgage
loan and MBS balances under various macroeconomic scenarios.
The prepayment model is used for a variety of purposes,
including risk management and regulatory stress testing. Swiss
mortgages and fixed-term deposits generally do not carry similar
optionality, due to prepayment and early redemption penalties.
128
129
129
Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Effect of interest rate changes on shareholders’ equity and
CET1 capital
The “Accounting and capital effect of changes in interest rates”
table below shows the effects on shareholders’ equity and CET1
capital of gains and losses from changes in interest rates in the
main banking book positions. For instruments held at fair value,
changes in interest rates result in an immediate fair value gain or
loss, recognized either in the income statement or through OCI.
Typically, increases in interest rates would lead to immediate
reductions in the value of our long-term assets held at fair value,
but we would expect such reductions to be offset over time
through higher NII on core banking products.
For assets and liabilities measured at amortized cost, changes
in interest rates do not result in changes in the carrying amount
of the instruments, but could affect the amount of interest
income or expense recognized over time in the income
statement.
In addition to the differing accounting treatments, banking
book positions have different sensitivities to different points on
yield curves. For example, portfolios of debt securities, whether
measured at amortized cost or at fair value, and interest rate
swaps, whether designated as cash flow hedges or transacted as
economic hedges, are generally more sensitive to changes in
longer-duration interest rates, whereas deposits and a significant
portion of loans contributing to NII are more sensitive to short-
term rates. These factors are important, as yield curves may not
shift on a parallel basis and could, for example, exhibit an initial
steepening followed by a flattening over time.
Due to the accounting treatment and yield curve sensitivities
outlined above, in a rising rate scenario we would expect to
have an initial decrease in shareholders’ equity, as a result of fair
value losses recognized in OCI. This would be compensated over
time by increased NII, as increases in interest rates affect the
shorter end of the yield curve in particular. The effect on CET1
capital would be less pronounced, as gains and losses on interest
rate swaps designated as cash flow hedges are not recognized
for regulatory capital purposes. Fair value losses on instruments
designated at fair value should be offset by economic hedges.
Accounting and capital effect of changes in interest rates1
Loans and deposits at amortized cost2,3
Other financial assets and liabilities measured at amortized cost2
Debt issued measured at amortized cost2,3
Receivables and payables from securities financing transactions2
Financial assets at fair value not held for trading
Financial assets at fair value through other comprehensive income
Derivatives designated as cash flow hedges
Derivatives designated as fair value hedges5
Derivatives transacted as economic hedges
RReeccooggnniittiioonn
SShhaarreehhoollddeerrss’’ eeqquuiittyy
CCEETT11 ccaappiittaall
TTiimmiinngg
Gradual
Gradual
Gradual
Gradual
Immediate
Immediate
Immediate
Immediate
Immediate
IInnccoommee ssttaatteemmeenntt // OOCCII
Income statement
Income statement
Income statement
Income statement
Income statement
OCI
OCI4
Income statement
Income statement
Gains
Losses
Gains
Losses
11 Refer to the “Reconciliation of IFRS equity to Swiss SRB common equity tier 1 capital” table in the “Capital, liquidity and funding, and balance sheet” section of this report for more information about the
differences between shareholders’ equity and CET1 capital. 22 For fixed-rate financial instruments, changes in interest rates affect the income statement when these instruments roll over and reprice. 33 For hedge
accounted items, a fair value adjustment is applied in line with the treatment of the hedging derivatives. 44 Excluding hedge ineffectiveness that is recognized in the income statement in accordance with IFRS.
55 The fair value of the derivatives is offset by the fair value adjustment of the hedged items. Under the fair value hedge program applied to cross-currency swaps and foreign currency debt, the foreign currency basis
spread is excluded from the hedge designation and accounted for through OCI, which is included in CET1.
Net interest income sensitivity
The NII sensitivity of Global Wealth Management and Personal &
Corporate Banking is assessed using a number of scenarios
assuming parallel and non-parallel shifts in yield curves, with
various degrees of severity. The results are compared with a
baseline NII, calculated assuming that interest rates in all
currencies develop according to their market-implied forward
rates and under the assumption of constant business volumes
and no specific management actions.
In addition to the above scenario analysis, we monitor NII
sensitivity to immediate parallel shocks of –200 and +200 basis
points against the defined thresholds, under the assumption of
constant balance sheet volume and structure.
As of 31 December 2020, the baseline NII would have been
approximately 8% lower under a parallel shock of –200 basis
points, whereas under a parallel +200-basis-point shock the
baseline NII would have been approximately 51% higher.
To shelter our NII level from the persistently low and negative
interest rate environment, in particular in Swiss francs, we rely
on self-funding our lending businesses through our deposit base
in Global Wealth Management and Personal & Corporate
Banking, along with appropriate additional adjustments to our
interest rate-linked product pricing. The loss of such equilibrium
130
130
on the balance sheet, for example due to unattractive pricing
relative to peers for either mortgages or deposits, could lead to
our NII decreasing in a persistently low and negative interest rate
environment. As we assume constant business volumes, these
risks do not appear in the aforementioned interest rate
scenarios.
low and negative
Moreover, should the
interest rate
environment worsen, our NII could come under additional
pressure and we could face additional costs for holding our
Swiss franc HQLA portfolio. A reduction of the Swiss National
Bank’s deposit exemption threshold for banks would also reduce
our NII, as we might not be able to offset higher costs for our
cash holdings, for example by passing on some of the costs to
our depositors. Should euro interest rates also decline further,
that could likewise increase liquidity costs and put NII generated
from euro-denominated loans and deposits under pressure.
Depending on the overall economic and market environment,
sustained and significant negative rates could also lead to Global
Wealth Management and Personal & Corporate Banking clients
paying down their loans, along with reducing any excess cash
they hold with us as deposits. That would reduce the underlying
business volume and lower our NII accordingly.
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Effect of interest rate changes on shareholders’ equity and
yield curves. For example, portfolios of debt securities, whether
CET1 capital
measured at amortized cost or at fair value, and interest rate
The “Accounting and capital effect of changes in interest rates”
swaps, whether designated as cash flow hedges or transacted as
table below shows the effects on shareholders’ equity and CET1
economic hedges, are generally more sensitive to changes in
capital of gains and losses from changes in interest rates in the
longer-duration interest rates, whereas deposits and a significant
main banking book positions. For instruments held at fair value,
portion of loans contributing to NII are more sensitive to short-
changes in interest rates result in an immediate fair value gain or
term rates. These factors are important, as yield curves may not
loss, recognized either in the income statement or through OCI.
shift on a parallel basis and could, for example, exhibit an initial
Typically, increases in interest rates would lead to immediate
steepening followed by a flattening over time.
reductions in the value of our long-term assets held at fair value,
Due to the accounting treatment and yield curve sensitivities
but we would expect such reductions to be offset over time
outlined above, in a rising rate scenario we would expect to
through higher NII on core banking products.
have an initial decrease in shareholders’ equity, as a result of fair
For assets and liabilities measured at amortized cost, changes
value losses recognized in OCI. This would be compensated over
in interest rates do not result in changes in the carrying amount
time by increased NII, as increases in interest rates affect the
of the instruments, but could affect the amount of interest
shorter end of the yield curve in particular. The effect on CET1
income or expense recognized over time in the income
capital would be less pronounced, as gains and losses on interest
statement.
rate swaps designated as cash flow hedges are not recognized
In addition to the differing accounting treatments, banking
for regulatory capital purposes. Fair value losses on instruments
book positions have different sensitivities to different points on
designated at fair value should be offset by economic hedges.
RReeccooggnniittiioonn
SShhaarreehhoollddeerrss’’ eeqquuiittyy
CCEETT11 ccaappiittaall
IInnccoommee ssttaatteemmeenntt // OOCCII
Gains
Losses
Gains
Losses
Accounting and capital effect of changes in interest rates1
Loans and deposits at amortized cost2,3
Other financial assets and liabilities measured at amortized cost2
Debt issued measured at amortized cost2,3
Receivables and payables from securities financing transactions2
Financial assets at fair value not held for trading
Financial assets at fair value through other comprehensive income
Derivatives designated as cash flow hedges
Derivatives designated as fair value hedges5
Derivatives transacted as economic hedges
TTiimmiinngg
Gradual
Gradual
Gradual
Gradual
Immediate
Immediate
Immediate
Immediate
Immediate
Income statement
Income statement
Income statement
Income statement
Income statement
OCI
OCI4
Income statement
Income statement
11 Refer to the “Reconciliation of IFRS equity to Swiss SRB common equity tier 1 capital” table in the “Capital, liquidity and funding, and balance sheet” section of this report for more information about the
differences between shareholders’ equity and CET1 capital. 22 For fixed-rate financial instruments, changes in interest rates affect the income statement when these instruments roll over and reprice. 33 For hedge
accounted items, a fair value adjustment is applied in line with the treatment of the hedging derivatives. 44 Excluding hedge ineffectiveness that is recognized in the income statement in accordance with IFRS.
55 The fair value of the derivatives is offset by the fair value adjustment of the hedged items. Under the fair value hedge program applied to cross-currency swaps and foreign currency debt, the foreign currency basis
spread is excluded from the hedge designation and accounted for through OCI, which is included in CET1.
Net interest income sensitivity
on the balance sheet, for example due to unattractive pricing
The NII sensitivity of Global Wealth Management and Personal &
relative to peers for either mortgages or deposits, could lead to
Corporate Banking is assessed using a number of scenarios
our NII decreasing in a persistently low and negative interest rate
assuming parallel and non-parallel shifts in yield curves, with
environment. As we assume constant business volumes, these
various degrees of severity. The results are compared with a
risks do not appear in the aforementioned interest rate
baseline NII, calculated assuming that interest rates in all
scenarios.
currencies develop according to their market-implied forward
Moreover, should the
low and negative
interest rate
rates and under the assumption of constant business volumes
environment worsen, our NII could come under additional
and no specific management actions.
pressure and we could face additional costs for holding our
In addition to the above scenario analysis, we monitor NII
Swiss franc HQLA portfolio. A reduction of the Swiss National
points against the defined thresholds, under the assumption of
our NII, as we might not be able to offset higher costs for our
constant balance sheet volume and structure.
cash holdings, for example by passing on some of the costs to
As of 31 December 2020, the baseline NII would have been
our depositors. Should euro interest rates also decline further,
approximately 8% lower under a parallel shock of –200 basis
that could likewise increase liquidity costs and put NII generated
points, whereas under a parallel +200-basis-point shock the
from euro-denominated loans and deposits under pressure.
baseline NII would have been approximately 51% higher.
Depending on the overall economic and market environment,
To shelter our NII level from the persistently low and negative
sustained and significant negative rates could also lead to Global
interest rate environment, in particular in Swiss francs, we rely
Wealth Management and Personal & Corporate Banking clients
on self-funding our lending businesses through our deposit base
paying down their loans, along with reducing any excess cash
in Global Wealth Management and Personal & Corporate
they hold with us as deposits. That would reduce the underlying
Banking, along with appropriate additional adjustments to our
business volume and lower our NII accordingly.
interest rate-linked product pricing. The loss of such equilibrium
The NII impact of a net decrease in deposits would depend on
various factors, including the currency, its interest rate level and
the balance sheet situation, as the impact could be offset by a
reduction in negative-yielding liquidity portfolios or require
alternative funding. If funding were required, the cost would
also significantly depend on term and nature of replacement
funding, whether such funding is raised in wholesale markets or
from swapping with available other currency-denominated
funding. Furthermore, imbalances leading to an excess deposit
position could require additional investments at negative yields,
which our excess deposit balance charging mechanisms might
not be able to sufficiently compensate for.
Economic value sensitivity
Audited | Interest rate risk in the banking book is subject to a
regulatory EVE sensitivity threshold of 15% of tier 1 capital. The
exposure is calculated as the theoretical change in the present
value of the banking book under the most adverse of the six
FINMA interest rate scenarios.
As of 31 December 2020, the interest rate sensitivity of our
banking book to a +1-basis-point parallel shift in yield curves
was negative USD 27.2 million. The reported interest rate
sensitivity excludes the additional tier 1 (AT1) capital instruments
as per FINMA Pillar 3 disclosure requirements, with a sensitivity
of USD 4.2 million per basis point, and our equity, goodwill and
real estate, with a modeled sensitivity of USD 22.2 million per
basis point, of which USD 5.6 million and USD 15.9 million are
attributable to the Swiss franc and the US dollar portfolios,
respectively.
The most adverse of the six FINMA interest rate scenarios
would be the “Parallel up” scenario, which would result in a
change in the economic value of equity of negative USD 5.6
billion, representing a pro forma reduction of 10.0% of tier 1
capital, which would be well below the regulatory outlier test of
15% of tier 1 capital. The immediate effect of the “Parallel up”
scenario on tier 1 capital as of 31 December 2020 would be a
reduction of 1.2%, or USD 0.7 billion, arising from the part of
our banking book that is measured at fair value through profit
or loss and from the financial assets measured at fair value
through OCI. This scenario would, however, have a positive
effect on net interest income.
› Refer to “Note 11 Financial assets measured at fair value
through other comprehensive income” in the “Consolidated
financial statements” section of this report for more information
› Refer to the “Group performance” section of this report for more
information about sensitivity to interest rate movements
Audited |
Interest rate risk – banking book
USD million
CHF
EUR
GBP
USD
Other
TToottaall eeffffeecctt oonn eeccoonnoommiicc vvaalluuee ooff eeqquuiittyy aass ppeerr PPiillllaarr 33 rreeqquuiirreemmeenntt aass ooff
3311..1122..2200
Additional tier 1 (AT1) capital instruments
TToottaall iinncclluuddiinngg AATT11 ccaappiittaall iinnssttrruummeennttss aass ooff 3311..1122..2200
++11 bbpp
((55..22))
((00..99))
00..22
((2200..77))
((00..66))
((2277..22))
44..22
((2233..00))
PPaarraalllleell uupp11 PPaarraalllleell ddoowwnn11
883322..33
116633..22
((4422..00))
33,,999999..88
33..66
((773355..88))
((116644..99))
4488..77
((44,,661122..88))
((114400..00))
SStteeeeppeenneerr22
((336699..66))
((7733..11))
((3311..77))
((339955..55))
2200..88
FFllaatttteenneerr33 SShhoorrtt--tteerrmm uupp44 SShhoorrtt--tteerrmm ddoowwnn55
7799..00
((7744..55))
((44..77))
((2200..44))
((4477..55))
5566..99
22,,339977..99
((22,,118888..99))
1100..55
((110055..77))
222255..55
2299..99
4400..22
((663300..55))
((5599..33))
((55,,660044..88))
881155..11
((44,,778899..77))
44,,995566..99
((886688..44))
44,,008888..55
((884499..11))
((9922..88))
((994422..00))
((339944..11))
227722..88
((112211..22))
((22,,333322..77))
557733..66
((11,,775599..11))
22,,443355..22
((559999..00))
11,,883366..22
11 Rates across all tenors move by ±150 bps for Swiss franc, ±200 bps for euro and US dollar and ±250 bps for pound sterling. 22 Short-term rates decrease and long-term rates increase. 33 Short-term rates
increase and long-term rates decrease. 44 Short-term rates increase more than long-term rates. 55 Short-term rates decrease more than long-term rates.
Other market risk exposures
Own credit
We are exposed to changes in UBS’s own credit reflected in the
valuation of financial liabilities designated at fair value when
UBS’s own credit risk would be considered by market
participants, except for fully collateralized liabilities or other
obligations for which it is established market practice to not
include an own-credit component.
› Refer to “Note 21 Fair value measurement” in the “Consolidated
financial statements” section of this report for more information
sensitivity to immediate parallel shocks of –200 and +200 basis
Bank’s deposit exemption threshold for banks would also reduce
about own credit
Structural foreign exchange risk
Upon consolidation, assets and
in foreign
operations are translated into US dollars at the closing foreign
exchange rate on the balance sheet date. Value changes (in US
dollars) of non-US dollar assets or liabilities due to foreign
exchange movements are recognized in OCI and therefore affect
shareholders’ equity and CET1 capital.
liabilities held
Group Treasury uses strategies to manage this foreign
currency exposure, including matched funding of assets and
liabilities and net investment hedging.
› Refer to the “Capital, liquidity and funding, and balance sheet”
section of this report for more information about our exposure
to and management of structural foreign exchange risk
› Refer to “Note 10 Derivative instruments” in the “Consolidated
financial statements” section of this report for more information
about our hedges of net investments in foreign operations
Equity investments
Audited | Under International Financial Reporting Standards (IFRS)
effective on 31 December 2020, equity investments not in the
trading book may be classified as Financial assets at fair value
not held for trading or Investments in associates.
We make direct investments in a variety of entities and buy
equity holdings in both listed and unlisted companies, for a
variety of purposes, including investments such as exchange and
clearing house memberships held to support our business
activities. We may also make investments in funds that we
manage in order to fund or seed them at inception or to
demonstrate that our interests align with those of investors. We
also buy, and are sometimes required by agreement to buy,
securities and units from funds that we have sold to clients.
130
131
131
Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Pension risk
We provide a number of pension plans for past and current
employees, some classified as defined benefit pension plans
under IFRS that can have a material effect on our IFRS equity and
CET1 capital.
In order to meet the expected future benefit payments, the
plans invest employee and employer contributions in various
asset classes. A plan’s funded status is the difference between
the fair value of its assets and the present value of the expected
future benefit payments to plan members, i.e., the defined
benefit obligation.
Pension risk is the risk that defined benefit plans’ funded
status might decrease, negatively affecting our IFRS equity and /
or CET1 capital. This can result from falls in the value of a plan’s
assets or in the investment returns, increases in defined benefit
obligations, or combinations of the above.
Important risk factors affecting the fair value of plans’ assets
include equity market returns, interest rates, bond yields and real
estate prices. Important risk factors affecting the present value
of expected future benefit payments include high-grade bond
yields, interest rates, inflation rates and life expectancy.
Pension risk is included in our Group-wide statistical and
stress testing metrics, which flow into our risk appetite
framework. The potential effects are thus captured in the post-
stress CET1 capital ratio calculation.
› Refer to “Note 1 Summary of significant accounting policies” and
“Note 26 Post-employment benefit plans” in the “Consolidated
financial statements” section of this report for more information
about defined benefit plans
UBS own share exposure
Group Treasury holds UBS Group AG shares to hedge future
share delivery obligations related to employee share-based
compensation awards, and also holds shares purchased under
the share repurchase program. In addition, the Investment Bank
holds a limited number of UBS Group AG shares, primarily in its
capacity as a market-maker with regard to UBS Group AG shares
and related derivatives, and to hedge certain issued structured
debt instruments.
› Refer to “UBS shares” in the “Capital, liquidity and funding, and
balance sheet” section of this report for more information
The fair value of equity investments tends to be influenced by
factors specific to the individual investments. Equity investments
are generally intended to be held for the medium or long term
and may be subject to lock-up agreements. For these reasons,
we generally do not control these exposures by using market risk
measures applied to trading activities. However, such equity
investments are subject to a different range of controls,
including preapproval of new
investments by business
management and Risk Control, portfolio and concentration
to senior
limits, and
management. They are also included in our Group-wide
statistical and stress testing metrics, which flow into our risk
appetite framework.
regular monitoring and
reporting
As of 31 December 2020, we held equity investments totaling
USD 3.1 billion, of which USD 1.5 billion was classified as
Financial assets at fair value not held for trading and USD 1.6
billion as Investments in associates.
› Refer to “Note 21 Fair value measurement” and “Note 28
Interests in subsidiaries and other entities” in the “Consolidated
financial statements” section of this report for more information
› Refer to “Note 1 Summary of significant accounting policies” in
the “Consolidated financial statements” section of this report for
more information about the classification of financial
instruments
Debt investments
Audited | Debt investments classified as Financial assets measured
at fair value through OCI as of 31 December 2020 were
measured at fair value with changes in fair value recorded
through Equity, and can broadly be categorized as money
market instruments and debt securities primarily held for
statutory, regulatory or liquidity reasons.
The risk control framework applied to debt instruments
classified as Financial assets measured at fair value through OCI
depends on the nature of the instruments and the purpose for
which we hold them. Our exposures may be included in market
risk limits or be subject to specific monitoring and interest rate
sensitivity analysis. They are also included in our Group-wide
statistical and stress testing metrics, which flow into our risk
appetite framework.
Debt instruments classified as Financial assets measured at
fair value through OCI had a fair value of USD 8.3 billion as of
31 December 2020 compared with USD 6.3 billion as of
31 December 2019.
› Refer to “Note 21 Fair value measurement” in the “Consolidated
financial statements” section of this report for more information
› Refer to “Economic value sensitivity” in this section for more
information
› Refer to “Note 1 Summary of significant accounting policies” in
the “Consolidated financial statements” section of this report for
more information about the classification of financial
instruments
132
132
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
The fair value of equity investments tends to be influenced by
Pension risk
factors specific to the individual investments. Equity investments
We provide a number of pension plans for past and current
are generally intended to be held for the medium or long term
employees, some classified as defined benefit pension plans
and may be subject to lock-up agreements. For these reasons,
under IFRS that can have a material effect on our IFRS equity and
we generally do not control these exposures by using market risk
CET1 capital.
measures applied to trading activities. However, such equity
In order to meet the expected future benefit payments, the
investments are subject to a different range of controls,
plans invest employee and employer contributions in various
including preapproval of new
investments by business
asset classes. A plan’s funded status is the difference between
management and Risk Control, portfolio and concentration
the fair value of its assets and the present value of the expected
limits, and
regular monitoring and
reporting
to senior
future benefit payments to plan members, i.e., the defined
management. They are also included in our Group-wide
benefit obligation.
statistical and stress testing metrics, which flow into our risk
Pension risk is the risk that defined benefit plans’ funded
appetite framework.
status might decrease, negatively affecting our IFRS equity and /
As of 31 December 2020, we held equity investments totaling
or CET1 capital. This can result from falls in the value of a plan’s
USD 3.1 billion, of which USD 1.5 billion was classified as
assets or in the investment returns, increases in defined benefit
Financial assets at fair value not held for trading and USD 1.6
obligations, or combinations of the above.
billion as Investments in associates.
› Refer to “Note 21 Fair value measurement” and “Note 28
Important risk factors affecting the fair value of plans’ assets
include equity market returns, interest rates, bond yields and real
Interests in subsidiaries and other entities” in the “Consolidated
estate prices. Important risk factors affecting the present value
financial statements” section of this report for more information
› Refer to “Note 1 Summary of significant accounting policies” in
of expected future benefit payments include high-grade bond
yields, interest rates, inflation rates and life expectancy.
the “Consolidated financial statements” section of this report for
Pension risk is included in our Group-wide statistical and
more information about the classification of financial
instruments
Debt investments
Audited | Debt investments classified as Financial assets measured
at fair value through OCI as of 31 December 2020 were
measured at fair value with changes in fair value recorded
through Equity, and can broadly be categorized as money
stress testing metrics, which flow into our risk appetite
framework. The potential effects are thus captured in the post-
stress CET1 capital ratio calculation.
› Refer to “Note 1 Summary of significant accounting policies” and
“Note 26 Post-employment benefit plans” in the “Consolidated
financial statements” section of this report for more information
about defined benefit plans
market instruments and debt securities primarily held for
UBS own share exposure
statutory, regulatory or liquidity reasons.
The risk control framework applied to debt instruments
classified as Financial assets measured at fair value through OCI
depends on the nature of the instruments and the purpose for
which we hold them. Our exposures may be included in market
risk limits or be subject to specific monitoring and interest rate
sensitivity analysis. They are also included in our Group-wide
Group Treasury holds UBS Group AG shares to hedge future
share delivery obligations related to employee share-based
compensation awards, and also holds shares purchased under
the share repurchase program. In addition, the Investment Bank
holds a limited number of UBS Group AG shares, primarily in its
capacity as a market-maker with regard to UBS Group AG shares
and related derivatives, and to hedge certain issued structured
statistical and stress testing metrics, which flow into our risk
debt instruments.
› Refer to “UBS shares” in the “Capital, liquidity and funding, and
balance sheet” section of this report for more information
appetite framework.
Debt instruments classified as Financial assets measured at
fair value through OCI had a fair value of USD 8.3 billion as of
31 December 2020 compared with USD 6.3 billion as of
31 December 2019.
› Refer to “Note 21 Fair value measurement” in the “Consolidated
financial statements” section of this report for more information
› Refer to “Economic value sensitivity” in this section for more
› Refer to “Note 1 Summary of significant accounting policies” in
the “Consolidated financial statements” section of this report for
more information about the classification of financial
information
instruments
Country risk
Country risk framework
Country risk exposure
Country risk includes all country-specific events occurring in a
sovereign jurisdiction that may lead to impairment of UBS’s
exposures. It may take the form of: sovereign risk, which is the
ability and willingness of a government to honor its financial
commitments; transfer risk, which arises if a counterparty or
issuer cannot acquire foreign currencies following a moratorium
by a central bank on foreign exchange transfers; or “other”
country risk. “Other” country risk may manifest itself through,
on the one hand, increased and multiple counterparty and issuer
default risk (systemic risk) and, on the other hand, events that
may affect a country’s standing, such as adverse shocks
affecting political stability or institutional and legal frameworks.
We have a well-established risk control framework to assess the
risk profiles of all countries where we have exposure.
We assign a country rating to each country, which reflects
our view of the country’s creditworthiness and of the probability
of a country risk event occurring. Country ratings are mapped to
statistically derived default probabilities, described under
“Probability of default” in this section. We use this internal
analysis to set the credit ratings of governments and central
banks, estimate the probability of a transfer event occurring, and
establish rules as to how aspects of country risk should be
incorporated in counterparty ratings of non-sovereign entities
domiciled in the respective country.
Country ratings are also used to define our risk appetite and
risk exposure to foreign countries. A country risk limit (i.e.,
maximum aggregate exposure) applies
to
counterparties or issuers of securities and financial investments
in the given foreign country. We may limit the extension of
credit, transactions in traded products or positions in securities
based on a country risk ceiling even if our exposure to a
counterparty is otherwise acceptable.
to exposures
For internal measurement and control of country risk, we also
consider the financial effect of market disruptions arising prior
to, during and after a country crisis. These may take the form of
a severe deterioration in a country’s debt, equity or other asset
markets or a sharp depreciation of its currency. We use stress
testing to assess potential financial effects of severe country or
sovereign crises. This involves the developing of plausible stress
scenarios for combined stress testing and the identification of
countries that may potentially be subject to a crisis event,
determining potential losses and making assumptions about
recovery rates depending on the types of credit transactions
involved and their economic
importance to the affected
countries.
Our exposures to market risks are subject to regular stress
tests covering major global scenarios, which are also used for
combined stress testing, where we apply market shock factors to
equity indices, interest rates and currency rates in all relevant
countries and consider the potential liquidity of the instruments.
Country risk exposure measure
The presentation of country risk follows our internal risk view,
where the basis for measuring exposures depends on the
product category in which we classified the exposures. In
addition to the classification of exposures into banking products
and traded products, covered in “Credit risk profile of the
Group” in this section, in trading inventory we classify issuer risk
on securities such as bonds and equities, as well as risk relating
to underlying reference assets for derivative positions.
As we manage the trading inventory on a net basis, we net
the value of long positions against short positions with the same
underlying issuer. Net exposures are, however, floored at zero
per issuer in the figures presented in the following tables. As a
result, we do not recognize potentially offsetting benefits of
certain hedges and short positions across issuers.
We do not recognize any expected recovery values when
reporting country exposures as exposure before hedges, except
for risk-reducing effects of master netting agreements and
collateral held
in either cash or portfolios of diversified
marketable securities, which we deduct from the positive
exposure values. Within banking products and traded products,
risk-reducing effects of credit protection is taken into account on
a notional basis when determining the net of hedge exposures.
Country risk exposure allocation
In general, exposures are shown against the country of
domicile of the contractual counterparty or the issuer of the
security. For some counterparties whose economic substance
in terms of assets or source of revenues is primarily located in a
different country, the exposure is allocated to the risk domicile
of those assets or revenues.
We apply a specific approach for banking products exposures
to branches of banks that are located in a country other than
the legal entity’s domicile. In such cases, exposures are recorded
in full against the country of domicile of the counterparty and
additionally in full against the country in which the branch is
located.
In the case of derivatives, we show counterparty risk
associated with positive replacement value (PRV) against the
counterparty’s country of domicile (presented within traded
products). In addition, risk associated with instantaneous fall in
value of underlying reference assets to zero (assuming no
recovery) is shown against the country of domicile of the issuer
of the reference asset (presented within trading inventory). This
approach allows us to capture both counterparty and, where
applicable, issuer elements of risk arising from derivatives and
applies comprehensively for all derivatives, including single-
name credit default swaps (CDSs) and other credit derivatives.
132
133
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Risk, capital, liquidity and funding, and balance sheet
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Exposures to selected Eurozone countries
Our exposure to peripheral European countries, i.e., Greece,
Italy, Ireland, Portugal, and Spain, remains limited, but we
nevertheless remain watchful of potential broader implications
of adverse developments in the Eurozone. As noted under
“Stress testing” in this section, a Eurozone crisis remains a core
part of the binding Global Crisis scenario for combined stress
test purposes, making it central to the regular monitoring of
risk exposure against minimum capital, earnings and leverage
ratio objectives in our risk appetite framework.
The “Exposures to Eurozone countries rated lower than AAA /
Aaa by at least one major rating agency” table below provides
an overview of our exposures to such countries as of
31 December 2020.
Exposures to Eurozone countries rated lower than AAA / Aaa by at least one major rating agency
Traded products
(counterparty risk from derivatives and
securities financing)
after master netting agreements
and net of collateral
Trading inventory
(securities and potential
benefits / remaining
exposure from
derivatives)
USD million
TToottaall
Banking products
(loans, guarantees, loan commitments)
Exposure
before
hedges
119988
0
0
33
165
117722
0
Net of
hedges1
119977
0
0
33
164
117722
0
44
6622
449900
of which:
unfunded
119900
Net of
hedges
661166
572
0
34
10
441122
0
155
17
4400
0
0
40
0
11,,330077
0
0
249
1,058
2200
0
155
17
4400
0
0
40
0
11,,330066
0
0
249
1,057
1122
0
380
32
6655
0
1
55
9
11,,553388
552
0
229
756
00
0
380
32
6655
0
1
55
9
11,,440099
424
0
229
756
00
0
Net long
per issuer
885511
99
0
595
157
228855
249
Exposure
before hedges
661166
572
0
34
10
441122
0
31.12.20
AAuussttrriiaa
Sovereign, agencies and central bank
Local governments
Banks
Other2
BBeellggiiuumm
Sovereign, agencies and central bank
Local governments
Banks
Other2
FFiinnllaanndd
Sovereign, agencies and central bank
Local governments
Banks
Other2
FFrraannccee
Sovereign, agencies and central bank
Local governments
Banks
Other2
GGrreeeeccee
Sovereign, agencies and central bank
Local governments
Banks
Other2
IIrreellaanndd
Sovereign, agencies and central bank
Local governments
Banks
Other2
IIttaallyy
Sovereign, agencies and central bank
Local governments
Banks
Other2
PPoorrttuuggaall
Sovereign, agencies and central bank
Local governments
Banks
Other2
SSppaaiinn
Sovereign, agencies and central bank
Local governments
29
Banks
Other2
145
OOtthheerr33
2288
TToottaall
66,,556611
11 Before deduction of IFRS 9 ECL allowances and provisions. 22 Includes corporates, insurance companies and funds. 33 Represents aggregate exposures to Andorra, Cyprus, Estonia, Latvia, Lithuania, Malta,
Monaco, Montenegro, San Marino, Slovakia and Slovenia.
11,,666655
671
0
662
333
886699
249
0
536
84
339944
123
153
106
12
77,,447733
4,299
0
543
2,632
2233
0
0
20
3
993388
96
0
43
800
11,,557711
614
52
611
295
5555
0
0
14
41
882222
10
0
86
727
11,,009966
1144,,990077
Net of
hedges1
11,,666644
671
0
662
331
886699
249
0
536
84
339944
123
153
106
12
77,,334444
4,170
0
543
2,631
1155
0
0
12
3
990099
96
0
43
771
11,,552288
614
51
601
262
5555
0
0
14
40
772244
10
0
86
629
11,,007711
1144,,557733
2
35
228899
123
152
11
2
44,,662288
3,746
0
64
818
33
0
30
579
11,,332288
611
0
567
151
3311
0
30
550
11,,228866
610
0
557
119
3311
0
0
173
2222
0
0
5
18
22
0
12
48
222200
4
51
39
126
2211
0
12
48
222211
4
52
39
126
2222
0
53
428
11,,000022
55,,110077
4
56
4411
33,,003355
53
526
11,,002277
55,,331111
4
56
4411
22,,990055
0
2
118844
10
0
3
226699
96
13
18
557799
0
12
0
558800
0
20
0
660099
0
13
18
448811
0
66
11,,778811
1
20
6600
0
1
20
6600
0
0
0
6611
0
0
0
6611
0
339933
557711
2233
3311
1111
134
134
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Exposures to selected Eurozone countries
test purposes, making it central to the regular monitoring of
Our exposure to peripheral European countries, i.e., Greece,
risk exposure against minimum capital, earnings and leverage
Italy, Ireland, Portugal, and Spain, remains limited, but we
ratio objectives in our risk appetite framework.
nevertheless remain watchful of potential broader implications
The “Exposures to Eurozone countries rated lower than AAA /
of adverse developments in the Eurozone. As noted under
Aaa by at least one major rating agency” table below provides
“Stress testing” in this section, a Eurozone crisis remains a core
an overview of our exposures to such countries as of
part of the binding Global Crisis scenario for combined stress
31 December 2020.
Exposures to Eurozone countries rated lower than AAA / Aaa by at least one major rating agency
TToottaall
(loans, guarantees, loan commitments)
Banking products
Net of
hedges1
11,,666644
671
11,,666655
671
Exposure
before
hedges
119988
Net of
hedges1
119977
of which:
unfunded
119900
Traded products
Trading inventory
(counterparty risk from derivatives and
(securities and potential
securities financing)
after master netting agreements
and net of collateral
benefits / remaining
exposure from
derivatives)
Exposure
before hedges
Net of
hedges
Net long
per issuer
0
0
33
165
117722
0
155
17
4400
40
0
0
0
0
0
2200
0
20
660099
0
0
0
567
151
3311
0
13
18
557799
0
0
0
33
164
117722
0
155
17
4400
40
0
0
0
0
0
1122
0
12
558800
0
0
0
557
119
3311
0
13
18
448811
0
11,,330077
11,,330066
449900
249
1,058
249
1,057
30
579
11,,332288
611
30
550
11,,228866
610
6622
44
1111
2233
557711
3311
339933
77,,447733
4,299
0
543
2,632
77,,334444
4,170
0
543
2,631
993388
990099
800
11,,557711
771
11,,552288
0
662
333
886699
249
0
536
84
339944
123
153
106
12
2233
0
0
20
3
96
0
43
614
52
611
295
5555
0
0
14
41
10
0
86
882222
0
662
331
886699
249
0
536
84
339944
123
153
106
12
1155
0
0
12
3
96
0
43
614
51
601
262
5555
0
0
14
40
10
0
86
772244
661166
572
0
34
10
441122
0
380
32
6655
55
11,,553388
552
229
756
0
1
9
0
00
0
0
0
0
6611
12
48
222211
4
52
39
126
2222
0
1
20
6600
0
4
56
4411
661166
572
0
34
10
441122
0
380
32
6655
55
11,,440099
424
229
756
0
1
9
0
00
0
0
0
0
6611
12
48
222200
4
51
39
126
2211
20
6600
0
1
0
4
56
4411
44,,662288
3,746
0
64
818
885511
99
0
595
157
228855
249
2
35
228899
123
152
11
2
226699
96
173
2222
18
33
0
0
3
0
0
0
5
22
0
0
2
118844
10
29
145
2288
66,,556611
727
11,,009966
1144,,990077
629
11,,007711
1144,,557733
53
526
11,,002277
55,,331111
53
428
11,,000022
55,,110077
66
11,,778811
33,,003355
22,,990055
11 Before deduction of IFRS 9 ECL allowances and provisions. 22 Includes corporates, insurance companies and funds. 33 Represents aggregate exposures to Andorra, Cyprus, Estonia, Latvia, Lithuania, Malta,
Monaco, Montenegro, San Marino, Slovakia and Slovenia.
USD million
31.12.20
AAuussttrriiaa
Sovereign, agencies and central bank
Local governments
Sovereign, agencies and central bank
Local governments
Sovereign, agencies and central bank
Local governments
Sovereign, agencies and central bank
Local governments
Sovereign, agencies and central bank
Local governments
Sovereign, agencies and central bank
Local governments
Sovereign, agencies and central bank
Local governments
Sovereign, agencies and central bank
Local governments
Sovereign, agencies and central bank
Local governments
Banks
Other2
BBeellggiiuumm
Banks
Other2
FFiinnllaanndd
Banks
Other2
FFrraannccee
Banks
Other2
GGrreeeeccee
Banks
Other2
IIrreellaanndd
Banks
Other2
IIttaallyy
Banks
Other2
PPoorrttuuggaall
Banks
Other2
SSppaaiinn
Banks
Other2
OOtthheerr33
TToottaall
134
CDSs are primarily bought and sold in relation to our
trading businesses, and to a much lesser degree used to hedge
credit valuation adjustments (CVAs). As of 31 December 2020,
and not taking into account risk-reducing effects of master
netting agreements, we had purchased USD 5.4 billion gross
notional of single-name CDS protection on issuers domiciled in
Italy and had sold USD 5.7 billion gross notional of single-
name CDS protection. The amount of CDSs bought and sold in
relation to Greece, Ireland, Portugal and Spain remains
from
immaterial. All gross protection purchased was
investment grade-rated counterparties (based on our internal
ratings) and on a collateralized basis.
Holding CDSs for credit default protection does not
necessarily protect the buyer of protection against losses, as
contracts only pay out under certain scenarios. The effectiveness
of our CDS protection as a hedge of default risk is influenced by
a number of factors, including the contractual terms under
which a CDS was written. Generally, only occurrence of credit
events as defined by the CDS terms (which may include, among
other events, failure to pay, restructuring or bankruptcy) result in
payments under the purchased credit protection contracts. For
CDS contracts on sovereign obligations, repudiation can also be
deemed as a default event. The determination as to whether a
credit event has occurred is made by the relevant International
Swaps and Derivatives Association
(ISDA) determination
committees (composed of various ISDA member firms) based on
the terms of the CDS and the facts and circumstances
surrounding the event.
Exposure to emerging market countries
The “Emerging markets net exposure by major geographical
region and product type” table on the next page shows the five
largest emerging market country exposures in each major
geographical area by product type as of 31 December 2020
compared with 31 December 2019. Based on the sovereign
rating categories, as of 31 December 2020, 83% of our
emerging market country exposure was rated investment grade,
compared with 79% as of 31 December 2019.
Our direct net exposure to China was USD 7.4 billion, an
increase of USD 2.7 billion compared with the prior year,
predominantly driven by banking products and trading inventory
across issuer risk and margin loans. Our direct net exposure to
South Korea was USD 2.3 billion, an increase of USD 1.1 billion,
largely driven by trading inventory.
Emerging markets net exposure¹ by internal UBS country rating category
USD million
Investment grade
Sub-investment grade
TToottaall
3311..1122..2200
31.12.19
1199,,558800
44,,000055
2233,,558855
13,693
3,721
17,414
11 Net of credit hedges (for banking products and for traded products); net long per issuer (for trading inventory). Before deduction of IFRS 9 ECL allowances and provisions.
135
135
Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Emerging markets net exposures by major geographical region and product type
USD million
EEmmeerrggiinngg AAmmeerriiccaa
Brazil
Mexico
Chile
Panama
Peru
Other
EEmmeerrggiinngg AAssiiaa
China
Hong Kong
South Korea
Thailand
Taiwan
Other
EEmmeerrggiinngg EEuurrooppee
Turkey
Russia
Azerbaijan
Poland
Croatia
Other
MMiiddddllee EEaasstt aanndd AAffrriiccaa
Saudi Arabia
United Arab Emirates
Kuwait
Qatar
South Africa
Other
TToottaall
TToottaall
Net of hedges1
Banking products
(loans, guarantees, loan
commitments)
Net of hedges1
Traded products
(counterparty risk from derivatives
and securities financing)
after master netting agreements
and net of collateral
Net of hedges
Trading inventory
(securities and potential
benefits / remaining
exposure from derivatives)
Net long per issuer
3311..1122..2200
31.12.19
3311..1122..2200
31.12.19
3311..1122..2200
31.12.19
3311..1122..2200
31.12.19
11,,559977
11,,111199
118877
6655
4499
4499
112288
1166,,556666
77,,338899
22,,884400
22,,225599
11,,449944
995588
11,,662277
11,,996622
887711
666688
118833
8877
3333
112200
33,,445599
880044
667777
445577
441166
333399
776666
1,512
1,262
121
20
18
4
87
11,627
4,717
2,850
1,118
616
584
1,742
1,382
398
547
186
42
5
205
2,893
556
624
277
187
668
581
772233
447744
4411
2222
4466
4466
9955
55,,990011
22,,555511
11,,449988
442266
114466
119911
11,,008877
11,,555522
882266
444477
114466
6633
3322
3388
11,,553322
116666
443311
110033
119977
5522
558833
613
498
22
9
17
3
63
3,306
1,140
1,000
60
62
133
911
1,076
359
380
184
17
2
133
1,316
147
404
56
120
176
414
224477
8888
113311
1100
22
00
1155
22,,773399
11,,001100
339955
552266
4411
556666
220011
115566
44
8844
3366
88
00
2244
11,,220022
443388
221188
335544
00
9933
9999
368
288
56
8
1
0
15
2,235
456
823
403
26
267
261
138
4
93
0
4
0
37
1,027
401
215
222
0
129
60
662277
555577
1144
3333
00
33
1188
77,,992277
33,,882288
994466
11,,330077
11,,330066
220000
333399
225533
4411
113377
00
1166
11
5588
772255
220011
2277
11
221199
119944
8844
2233,,558855
17,414
99,,770088
6,311
44,,334444
3,767
99,,553333
531
476
43
2
0
1
9
6,086
3,121
1,027
655
528
185
570
169
34
74
2
21
3
35
550
7
5
0
67
363
108
7,335
11 Before deduction of IFRS 9 ECL allowances and provisions.
136
136
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
USD million
EEmmeerrggiinngg AAmmeerriiccaa
Brazil
Mexico
Chile
Panama
Peru
Other
EEmmeerrggiinngg AAssiiaa
China
Hong Kong
South Korea
EEmmeerrggiinngg EEuurrooppee
Thailand
Taiwan
Other
Turkey
Russia
Azerbaijan
Poland
Croatia
Other
MMiiddddllee EEaasstt aanndd AAffrriiccaa
Saudi Arabia
United Arab Emirates
Kuwait
Qatar
South Africa
Other
TToottaall
TToottaall
Net of hedges1
Banking products
commitments)
Net of hedges1
(loans, guarantees, loan
after master netting agreements
Traded products
(counterparty risk from derivatives
and securities financing)
and net of collateral
Net of hedges
Trading inventory
(securities and potential
benefits / remaining
exposure from derivatives)
Net long per issuer
3311..1122..2200
31.12.19
3311..1122..2200
31.12.19
3311..1122..2200
31.12.19
3311..1122..2200
31.12.19
11,,559977
11,,111199
118877
6655
4499
4499
112288
1166,,556666
77,,338899
22,,884400
22,,225599
11,,449944
995588
11,,662277
11,,996622
112200
33,,445599
887711
666688
118833
8877
3333
880044
667777
445577
441166
333399
776666
1,512
1,262
121
20
18
4
87
11,627
4,717
2,850
1,118
616
584
1,742
1,382
205
2,893
398
547
186
42
5
556
624
277
187
668
581
772233
447744
4411
2222
4466
4466
9955
55,,990011
22,,555511
11,,449988
442266
114466
119911
11,,008877
11,,555522
882266
444477
114466
6633
3322
3388
116666
443311
110033
119977
5522
558833
3,306
1,140
1,000
1,076
613
498
22
9
17
3
63
60
62
133
911
359
380
184
17
2
147
404
56
120
176
414
133
1,316
22,,773399
11,,001100
224477
8888
113311
1100
22
00
1155
339955
552266
4411
556666
220011
115566
44
8844
3366
88
00
2244
443388
221188
335544
00
9933
9999
15
2,235
368
288
56
8
1
0
456
823
403
26
267
261
138
4
93
0
4
0
401
215
222
0
129
60
37
1,027
11,,553322
11,,220022
662277
555577
1144
3333
00
33
1188
77,,992277
33,,882288
994466
11,,330077
11,,330066
220000
333399
225533
4411
113377
1166
00
11
5588
772255
220011
2277
11
221199
119944
8844
6,086
3,121
1,027
531
476
43
2
0
1
9
655
528
185
570
169
34
74
2
21
3
35
7
5
0
550
67
363
108
7,335
11 Before deduction of IFRS 9 ECL allowances and provisions.
2233,,558855
17,414
99,,770088
6,311
44,,334444
3,767
99,,553333
Emerging markets net exposures by major geographical region and product type
Environmental, social and climate risk
Environmental and social risk
Climate risk
Environmental and social risk (ESR) can arise when UBS supports
clients and transactions, or sources products or services from
suppliers, that may cause or contribute to severe environmental
damage, climate change, or human rights infringements. ESR is
gaining importance amid a global drive to meet the Sustainable
Development Goals and transition to a low-carbon economy,
and further to this, regulators across multiple jurisdictions
increasingly focus on climate change impacts. Our broad and
wide-ranging ESR framework governs client and supplier
relationships, applies firm-wide to all activities, and is integrated
in management practices and control principles. The framework
reporting
identifying, assessing, monitoring and
includes
environmental and social risks in our standard risk, compliance
and operations processes. These include client onboarding,
transaction due diligence, product development and investment
decision processes, own operations, supply chain management,
and portfolio reviews. This framework
is geared toward
identifying clients, transactions or suppliers potentially in breach
of our
significant
environmental and human rights controversies, including climate
change.
standards or otherwise
subject
to
› Refer to “Environmental and social risk policy framework” in
appendix 6 to the Sustainability Report 2020, available from
11 March 2021 under “Annual reporting” at ubs.com/investors,
for more information
The physical and transition risks from a changing climate
contribute to a structural change across economies and
therefore affect banks and the financial sector as a whole. In
order to protect our clients’ assets and our own assets from
climate-related risks, we continue to drive the integration of
such risk into our standard risk management framework. We
manage climate risk in our own operations, balance sheet, client
assets and value chain. We are embedding climate risk into our
risk appetite framework and operational risk appetite statement.
In 2020, we further integrated climate risk in risk identification,
management,
reporting
processes across the organization. We have consistently reduced
our exposure to carbon-related assets and continued our multi-
year efforts to develop methodologies which enable more robust
and transparent disclosure of climate metrics. This work will
continue our efforts to ensure we are prepared to respond to
increased regulatory requirements on climate risk, align our
disclosure with the Task Force on Climate-related Financial
Disclosures (the TCFD) recommendations and collaborate within
the industry to close gaps.
testing methodology and
stress
We have led the effort, together with the United Nations
Environment Programme Finance Initiative (UNEP FI) and peer
banks, to define an inventory of climate-sensitive activities based
on TCFD,
risk
definitions. Our current exposure to climate-sensitive activities is
summarized in the table below at the sector level.
rating agencies’ climate
regulators’ and
› Refer to “Our climate strategy” in the Sustainability Report 2020,
available from 11 March 2021 under “Annual reporting” at
ubs.com/investors, for more information
136
137
137
Risk, capital, liquidity and funding, and balance sheet
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
UBS corporate lending to climate-sensitive sectors, 2020
Inventory of exposure to transition-risk-sensitive sectors, across the Investment Bank and
Personal & Corporate Banking
USD million, except where indicated
CClliimmaattee--sseennssiittiivvee sseeccttoorr22
Aerospace and defense
Automotive
Chemicals
Constructions and materials
Food and beverage
Industrial materials
Machinery and equipment
Mining
Oil and gas
Plastics and rubber
Primary materials
Textile products and apparel
Real estate
Transportation
Utilities
TToottaall eexxppoossuurree ttoo cclliimmaattee--sseennssiittiivvee sseeccttoorrss
TToottaall eexxppoossuurree ttoo aallll sseeccttoorrss
As of 31.12.20
GGrroossss eexxppoossuurree11
SShhaarree ooff ttoottaall eexxppoossuurree
ttoo aallll sseeccttoorrss ((%%))
996622
996666
22,,002211
33,,990055
11,,775544
115511
22,,777788
33,,227766
44,,995511
337733
224499
11,,112288
1133,,335577
22,,333377
449933
3388,,770000
228833,,337766
00..33
00..33
00..77
11..44
00..66
00..11
11..00
11..22
11..77
00..11
00..11
00..44
44..77
00..88
00..22
1133..77
110000..00
11 Banking products across the Investment Bank and Personal & Corporate Banking. 22 Climate-sensitive sectors defined as business activities that are rated as having high, moderately high, moderate, or
moderately low vulnerability to transition risks, including policy, technology, and demand risk factors. Further details on UBS’s sub-sector level exposures and exposures by transition risk rating are available in
our Sustainability Report 2020, available from 11 March 2021.
138
138
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
UBS corporate lending to climate-sensitive sectors, 2020
Inventory of exposure to transition-risk-sensitive sectors, across the Investment Bank and
As of 31.12.20
GGrroossss eexxppoossuurree11
SShhaarree ooff ttoottaall eexxppoossuurree
ttoo aallll sseeccttoorrss ((%%))
Operational risk
Key developments
Operational resilience, conduct and financial crime remain the
key non-financial risk themes for UBS and the financial services
industry. Operational resilience also continues to be a focus area
for regulators globally, with particular emphasis on measures
taken to respond to the COVID-19 pandemic.
To address developing regulatory requirements on resilience,
we have established a global program to enhance our current
capabilities. The existing resilience built into our operations and
the effectiveness of our business continuity management and
operational risk procedures (including those for third-party
service providers) have been critical in handling the ongoing
COVID-19 pandemic and enabled us to continue to serve our
clients without material impact. We have maintained stable
operations while complying with containment requirements
imposed in many of our principal locations, and we remain
focused on the safety and well-being of our staff.
Personal & Corporate Banking
USD million, except where indicated
CClliimmaattee--sseennssiittiivvee sseeccttoorr22
Aerospace and defense
Automotive
Chemicals
Constructions and materials
Food and beverage
Industrial materials
Machinery and equipment
Mining
Oil and gas
Plastics and rubber
Primary materials
Real estate
Transportation
Utilities
Textile products and apparel
TToottaall eexxppoossuurree ttoo cclliimmaattee--sseennssiittiivvee sseeccttoorrss
TToottaall eexxppoossuurree ttoo aallll sseeccttoorrss
996622
996666
22,,002211
33,,990055
11,,775544
115511
22,,777788
33,,227766
44,,995511
337733
224499
11,,112288
1133,,335577
22,,333377
449933
3388,,770000
228833,,337766
00..33
00..33
00..77
11..44
00..66
00..11
11..00
11..22
11..77
00..11
00..11
00..44
44..77
00..88
00..22
1133..77
110000..00
11 Banking products across the Investment Bank and Personal & Corporate Banking. 22 Climate-sensitive sectors defined as business activities that are rated as having high, moderately high, moderate, or
moderately low vulnerability to transition risks, including policy, technology, and demand risk factors. Further details on UBS’s sub-sector level exposures and exposures by transition risk rating are available in
our Sustainability Report 2020, available from 11 March 2021.
Increases
in
the
sophistication of COVID-19-themed
cyberattacks and frauds are being seen worldwide, and during
2020 we continuously enhanced our monitoring for such
COVID-19-related cyber threats. Regular communications were
and are provided to remind employees about associated risks,
including hints and tips for staying cybersafe with remote
working. To date, our security controls have been effective, and
no significant cyber incidents affected us during 2020.
information
Achieving fair outcomes for our clients, upholding market
integrity and cultivating the highest standards of employee
conduct are of critical importance to the firm. As such,
management of conduct risks is an integral part of our
operational risk framework. We continue to focus on effectively
embedding the conduct risk framework across our activities,
enhancing management
and maintaining
momentum on fostering a strong culture. Conduct-related
management information is reviewed at the business and
regional governance levels, providing metrics on employee
conduct, clients and markets. Employee conduct is a central
consideration in the annual compensation process, where our
incentive schemes distinguish clearly between quantitative
that
performance
achievement against financial targets is not the only determinant
of our employees’ performance assessment. Furthermore, we
continue to pursue behavioral initiatives, such as the Principles of
Good Supervision, and provide mandatory compliance and risk
training.
conduct-related behaviors,
and
so
Suitability risk, product selection, cross-divisional service
offerings, quality of advice and price transparency also remain
areas of heightened focus for UBS and for the industry as a
whole, as low interest rates, market volatility and major
legislative change programs (e.g., FIDLEG (the Swiss Financial
Services Act) in Switzerland, Regulation Best Interest in the US,
and the Markets in Financial Instruments Directive II (MiFID II) in
the EU) all significantly impact the industry and require
adjustments to control processes on a geographically aligned
basis. We regularly monitor our suitability, product and conflicts
of interest control frameworks to assess whether they are
reasonably designed to facilitate adherence to applicable laws
and regulatory expectations.
Financial crime (e.g., money laundering, terrorist financing,
sanctions violations, fraud, bribery and corruption) continues to
present a major risk, as technological innovation and geopolitical
developments increase the complexity of doing business and
heightened regulatory attention continues. An effective financial
crime prevention program remains essential for UBS. Money
laundering and financial fraud techniques are becoming
increasingly sophisticated, and geopolitical volatility makes the
sanctions landscape more complex, and new risks emerge, such
as virtual currencies and related activities or investments.
The Office of the Comptroller of the Currency issued a Cease
and Desist Order against UBS in May 2018 relating to this risk
category. In response, we initiated a comprehensive program for
the purpose of ensuring sustainable remediation of US-relevant
Bank Secrecy Act / anti-money-laundering (AML) issues across all
our US legal entities. We implemented significant improvement
measures
to continue
implementing such measures in the first half of 2021, and
expect to have delivered the planned enhancements to our AML
controls by then.
in 2019 and 2020, and expect
includes our significant
We continued to focus in 2020 on strategic enhancements
for AML, know-your-client (KYC) and sanctions programs on a
global scale to cope with evolving risk profiles and regulatory
in
expectations. This
detection capabilities and systems as part of our financial crime
prevention program. We are exploring new technologies to
combat financial crime, and implementing more sophisticated
rule-based monitoring by applying self-learning systems to
identify potentially suspicious transactions. We continue to
actively participate in AML public–private partnerships with
public-sector stakeholders,
law enforcement, to
improve information sharing and better detect financial crimes.
investments
including
Measures have been taken to respond to the COVID-19
pandemic, including programs to educate clients and employees
about fraud risk, and our protocols for interaction to mitigate
this risk have been updated. We stay abreast of emerging trends
in order to take further mitigating activity as necessary.
Cross-border risk remains an area of regulatory attention for
global financial institutions, with a strong focus on fiscal
transparency. There is also ongoing high attention on the risk
related to permanent establishments as a result of changes to
the global economy that could lead tax authorities to assert
permanent establishments retrospectively even on the basis of
new interpretations of existing law. UBS actively assesses and
applies permanent establishment-related controls.
During 2020, thanks to the continued focus on sustainable
remediation and resolution of underlying root causes, the
portfolio of significant operational risk issues was reduced by
more than two-thirds (68%), while the number of new
deficiencies discovered decreased by approximately three-
quarters (73%) compared with 2019.
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Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Risk management and control
(C&ORC)
Compliance & Operational Risk Control
is
responsible for providing an independent and objective view of
the adequacy of operational risk management across the Group,
and ensuring that operational risks are understood, owned and
managed in accordance with the firm’s risk appetite. C&ORC-
aligned teams sit within the Group Compliance, Regulatory &
Governance (GCRG) function, reporting to the Group Chief
Compliance and Governance Officer, who is a member of the
Group Executive Board. C&ORC teams are integrated, covering
both operational risk and compliance and conduct topics. The
head of Operational Risk Control, together with dedicated
divisional and regional ORC leaders, ensures a coherent global
approach to operational risk, fostering strong front-to-back
coverage. The ORF forms the common basis for managing and
assessing operational risk, and there are additional C&ORC
activities intended to ensure UBS is able to demonstrate
compliance with applicable laws, rules and regulations.
implemented
In 2020, UBS has continued to review and enhance the ORF,
considering feedback and input from both internal and external
stakeholders, and has
strengthened ORF
governance and stakeholder management through the setup of
the ORF design authority. The Risk Control Self-Assessment
process has been enhanced to increase the level of granularity
and data to drive front-to-back review and challenge. Ownership
of firm-wide risk appetite was transferred to Group Functions
that are responsible for management of the underlying
processes and associated risks.
All functions within UBS are required to assess the design and
operating effectiveness of their internal controls periodically. The
output of these assessments forms the basis for the assessment
and testing of internal controls over financial reporting as
required by the Sarbanes–Oxley Act, Section 404 (SOX 404).
Key control deficiencies identified during the internal control
and risk assessment processes must be reported
in the
operational risk inventory, and sustainable remediation must be
defined and executed. These control deficiencies are assigned to
owners at senior management level and the remediation
progress
in the respective manager’s annual
performance measurement and management objectives. To
assist with prioritizing the most material control deficiencies and
measuring aggregated risk exposure, irrespective of origin, a
common rating methodology is applied across all three lines of
defense, as well as by external audit.
is reflected
Operational risk framework
Operational risk is an inherent part of the firm’s business. Losses
can result from inadequate or failed internal processes, people
and systems, or from external causes. UBS follows a Group-wide
operational risk framework (ORF) that establishes requirements
for identifying, managing, assessing and mitigating operational
risks (including compliance and conduct risks) to achieve an
agreed balance between risk and return. It is built on the
following pillars:
– classifying
risk
taxonomy, which defines the universe of material operational
risks that can arise as a consequence of the firm’s business
activities and external factors;
the operational
inherent
through
risks
– assessing the design and operating effectiveness of controls
through the control assessment process;
– proactively and sustainably remediating identified control
deficiencies;
– defining operational risk appetite (including a financial
operational risk appetite statement at Group, UBS AG and
business division levels for operational risk events) through
quantitative metrics and thresholds and qualitative measures,
and assessing risk exposure against appetite; and
– assessing inherent and residual risk through risk assessment
processes, and determining whether additional remediation
plans are required to address identified deficiencies.
Divisional Presidents and legal entity responsible executives
are accountable for the effectiveness of operational risk
management and for the robustness of the front-to-back control
environment within their respective areas. Group function heads
are accountable for supporting the divisional Presidents and
legal entity responsible executives of our legal entities in the
discharge of this responsibility, by confirming completeness and
effectiveness of the control environment and operational risk
management within their Group function. Collectively, divisional
Presidents, central Group function heads and legal entity
responsible executives are in charge of implementing the
operational risk framework.
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Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Operational risk framework
Compliance & Operational Risk Control
(C&ORC)
is
responsible for providing an independent and objective view of
Operational risk is an inherent part of the firm’s business. Losses
the adequacy of operational risk management across the Group,
can result from inadequate or failed internal processes, people
and ensuring that operational risks are understood, owned and
and systems, or from external causes. UBS follows a Group-wide
managed in accordance with the firm’s risk appetite. C&ORC-
operational risk framework (ORF) that establishes requirements
aligned teams sit within the Group Compliance, Regulatory &
for identifying, managing, assessing and mitigating operational
Governance (GCRG) function, reporting to the Group Chief
risks (including compliance and conduct risks) to achieve an
Compliance and Governance Officer, who is a member of the
agreed balance between risk and return. It is built on the
Group Executive Board. C&ORC teams are integrated, covering
following pillars:
both operational risk and compliance and conduct topics. The
– classifying
inherent
risks
through
the operational
risk
head of Operational Risk Control, together with dedicated
taxonomy, which defines the universe of material operational
divisional and regional ORC leaders, ensures a coherent global
risks that can arise as a consequence of the firm’s business
approach to operational risk, fostering strong front-to-back
activities and external factors;
coverage. The ORF forms the common basis for managing and
– assessing the design and operating effectiveness of controls
assessing operational risk, and there are additional C&ORC
through the control assessment process;
activities intended to ensure UBS is able to demonstrate
– proactively and sustainably remediating identified control
compliance with applicable laws, rules and regulations.
deficiencies;
In 2020, UBS has continued to review and enhance the ORF,
– defining operational risk appetite (including a financial
considering feedback and input from both internal and external
operational risk appetite statement at Group, UBS AG and
stakeholders, and has
implemented
strengthened ORF
business division levels for operational risk events) through
governance and stakeholder management through the setup of
quantitative metrics and thresholds and qualitative measures,
the ORF design authority. The Risk Control Self-Assessment
and assessing risk exposure against appetite; and
process has been enhanced to increase the level of granularity
– assessing inherent and residual risk through risk assessment
and data to drive front-to-back review and challenge. Ownership
processes, and determining whether additional remediation
of firm-wide risk appetite was transferred to Group Functions
plans are required to address identified deficiencies.
that are responsible for management of the underlying
processes and associated risks.
Divisional Presidents and legal entity responsible executives
All functions within UBS are required to assess the design and
are accountable for the effectiveness of operational risk
operating effectiveness of their internal controls periodically. The
management and for the robustness of the front-to-back control
output of these assessments forms the basis for the assessment
environment within their respective areas. Group function heads
and testing of internal controls over financial reporting as
are accountable for supporting the divisional Presidents and
required by the Sarbanes–Oxley Act, Section 404 (SOX 404).
legal entity responsible executives of our legal entities in the
Key control deficiencies identified during the internal control
discharge of this responsibility, by confirming completeness and
and risk assessment processes must be reported
in the
effectiveness of the control environment and operational risk
operational risk inventory, and sustainable remediation must be
management within their Group function. Collectively, divisional
defined and executed. These control deficiencies are assigned to
Presidents, central Group function heads and legal entity
owners at senior management level and the remediation
responsible executives are in charge of implementing the
progress
is reflected
in the respective manager’s annual
operational risk framework.
performance measurement and management objectives. To
assist with prioritizing the most material control deficiencies and
measuring aggregated risk exposure, irrespective of origin, a
common rating methodology is applied across all three lines of
defense, as well as by external audit.
Advanced measurement approach model
AMA model calibration and review
The operational risk framework outlined above underpins the
calculation of regulatory capital for operational risk, which
enables us to quantify operational risk and define effective risk
mitigating management incentives as part of the related
operational risk capital allocation approach to the business
divisions.
A key assumption when calibrating data-driven frequency and
severity distributions is that historical losses form a reasonable
proxy for future events. In line with regulatory expectations, the
AMA methodology utilizes both historical internal losses and
external losses suffered by the broader industry for model
calibration.
We measure Group operational risk exposure and calculate
the advanced
regulatory capital using
operational
measurement approach (AMA) in accordance with FINMA
requirements.
risk
An entity-specific AMA model has been applied for UBS
Switzerland AG, while for other regulated entities the basic
indicators or standardized approaches are adopted
for
regulatory capital in agreement with local regulators. Also, the
methodology of the Group AMA is leveraged for entity-specific
Internal Capital Adequacy Assessment Processes.
Currently, the model includes 16 AMA units of measure
(UoM), which are aligned with our operational risk taxonomy as
closely as possible. Frequency and severity distributions are
calibrated for each of the model’s UoM. The modeled
distribution functions for both frequency and severity are used
to generate the annual loss distribution. The resulting 99.9%
quantile of the overall annual operational risk loss distribution
across all UoM determines the required regulatory capital.
Currently, we do not reflect mitigation through insurance or any
other risk transfer mechanism in our AMA model.
Initial model outputs driven by loss history are reviewed and
adjusted to reflect fast-changing external developments, such as
new regulations, geopolitical change, volatile market and
economic conditions, and internal factors (e.g., changes in
business strategy and control framework enhancements). The
severity
resulting baseline data-driven
distributions are reviewed by subject matter experts and where
necessary adjusted based on a review of qualitative information
about the business environment and internal control factors, as
well as expert judgment with the aim of forecasting losses.
frequency
and
Our model is reviewed regularly to maintain risk sensitivity
and recalibrated at least annually. Any changes to regulatory
capital as a result of a recalibration or methodology changes are
presented to FINMA for approval prior to use for disclosure
purposes.
AMA model governance
The Group and entity-specific AMA models are subject to an
independent validation performed by Model Risk Management
& Control in line with the Group’s model risk management
framework.
› Refer to “Capital planning and activities” in the “Capital,
liquidity and funding, and balance sheet” section of this report
for more information about the development of risk-weighted
assets
› Refer to “Risk measurement” in this section for more
information about our approach to model confirmation
procedures
› Refer to the “Regulatory and legal developments” and “Risk
factors” sections of this report for more information
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Risk, capital, liquidity and funding, and balance sheet
Capital, liquidity
and funding,
and balance sheet
Table of contents
144
144
145
149
153
155
157
158
158
158
159
160
161
162
162
168
170
Capital management
Capital management objectives, planning and activities
Swiss SRB total loss-absorbing capacity framework
Total loss-absorbing capacity
Risk-weighted assets
Leverage ratio denominator
Equity attribution and return on attributed equity
Liquidity and funding management
Strategy, objectives and governance
Liquidity management
Funding management
Liquidity coverage ratio
Net stable funding ratio
Balance sheet and off-balance sheet
Balance sheet
Off-balance sheet
Cash flows
171
Currency management
172
UBS shares
Risk, capital, liquidity and funding, and balance sheet | Capital management
Capital management
Capital management objectives, planning and activities
Capital management objectives
Capital planning and activities
Audited | We manage our balance sheet, RWA, leverage ratio
denominator (LRD) and TLAC ratio levels on the basis of our
regulatory TLAC requirements and within our internal limits and
targets. Our strategic focus
is on achieving an optimal
attribution and use of financial resources between our business
divisions and Group Functions, as well as between our legal
entities, while remaining within the limits defined for the Group
and allocated to the business divisions by the Board of Directors
(the BoD). These resource allocations, in turn, affect business
plans and earnings projections, which are reflected in our capital
plans.
The annual strategic planning process includes a capital-
planning component that is key in defining our capital targets. It
is based on an attribution of Group RWA and LRD internal limits
to the business divisions.
Limits and targets are established at Group and business
division levels, and are approved by the BoD at least annually. In
the target-setting process, we take into account the current and
potential future TLAC requirements, our aggregate risk exposure
in terms of capital-at-risk, the assessment by rating agencies,
comparisons with peers and the effect of expected accounting
policy changes. Monitoring is based on these internal limits
and targets and provides indications if changes are required. Any
breach of limits in place triggers a series of required remediating
actions.
Group Treasury plans for, and monitors, consolidated TLAC
information on an ongoing basis, reflecting business and legal
entity requirements, as well as regulatory developments in
capital regulations. In addition, capital planning and monitoring
are performed at legal entity level for our significant subsidiaries
and sub-groups that are subject to prudential supervision and
must meet capital and other supervisory requirements.
› Refer to “Capital and capital ratios of our significant regulated
subsidiaries” in this section for more information
Audited | An adequate level of total loss-absorbing capacity (TLAC)
meeting both internal assessment and regulatory requirements is
a prerequisite for conducting our business activities. We are
therefore committed to maintaining a strong TLAC position and
sound TLAC ratios at all times, in order to meet regulatory
capital requirements and our target capital ratios, and to support
the growth of our businesses.
As of 31 December 2020, our common equity tier 1 (CET1)
capital ratio was 13.8% and our CET1 leverage ratio 3.85%,
each above our capital guidance, along with the requirements
for Swiss systemically relevant banks (SRBs) and the Basel
Committee on Banking Supervision (the BCBS) requirements. We
believe that our capital strength is a source of confidence for our
stakeholders, contributes to our sound credit ratings and is one
of the foundations of our success.
The BCBS announced the finalization of the Basel III
framework in December 2017, and published the final rules on
the minimum capital requirements for market risk
(the
Fundamental Review of the Trading Book) in January 2019. In
response to COVID-19, the Group of Central Bank Governors
and Heads of Supervision, which acts as the Basel Committee’s
oversight body, endorsed the deferral of the implementation
date by one year, to 1 January 2023. The accompanying
transitional arrangements for the output floor have also been
extended by one year to 1 January 2028. We will monitor the
introduction and assess the effect on UBS once the final Swiss
regulations are available. We do not expect the Swiss regulations
to become mandatory until after the BCBS target effective date
of 1 January 2023. In the absence of the final Swiss regulations,
we continue to make progress on our internal assessment of
infrastructure design and operational governance to anticipate
the upcoming adoption of these rules. We currently estimate
that the revised Basel III framework may lead to a further net
increase in risk-weighted assets (RWA) of USD 20 billion to USD
30 billion, before taking into account mitigating actions. In
addition, the transition to the standardized measurement
approach for operational risk RWA is expected to result in a
further increase in RWA. These estimates are based on our
current understanding of the relevant standards and may
change as a result of new or changed regulatory interpretations,
the implementation of the Basel III standards into national law,
changes in business growth, market conditions and other
factors.
› Refer to the “Our strategy” and “Performance targets and
capital guidance” sections of this report for more information
about our capital and resource guidelines
› Refer to “Capital strength is a key component of our business
model” in the “Risk factors” section of this report for more
information about capital ratio-related risks
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Risk, capital, liquidity and funding, and balance sheet | Capital management
Capital management
Swiss SRB total loss-absorbing capacity framework
The disclosures in this section are provided for UBS Group AG on
a consolidated basis and focus on key developments during the
reporting period and information in accordance with the Basel III
framework, as applicable to Swiss SRBs.
Additional regulatory disclosures for UBS Group AG on a
consolidated basis are provided in our 31 December 2020
Pillar 3 report. The Pillar 3 report further includes information
relating to our significant regulated subsidiaries and sub-groups
(UBS AG standalone, UBS Switzerland AG standalone, UBS
Europe SE consolidated and UBS Americas Holding LLC
consolidated) as of 31 December 2020 and is available under
“Pillar 3 disclosures” at ubs.com/investors.
Capital and other regulatory
information for UBS AG
consolidated in accordance with the Basel III framework, as
applicable to Swiss SRBs, is provided in the combined UBS Group
AG and UBS AG Annual Report 2020, available under “Annual
reporting” at ubs.com/investors.
concern requirements can be met with instruments that have a
remaining maturity of between one and two years (i.e., are in
the last year of eligibility). However, once at least 75% of the
gone concern requirement has been met with instruments that
have a remaining maturity of greater than two years, all
instruments that have a remaining maturity of between one and
two years remain eligible to be included in the total gone
concern capital. Our gone concern instruments are reasonably
evenly distributed across maturities, with no major cliffs;
therefore this 25% restriction has not affected us and we do not
expect that it will affect us in the future.
› Refer to “Bondholder information,” available at
ubs.com/investors, for more information about the eligibility of
capital and senior unsecured debt instruments and key features
and terms and conditions of capital instruments
Total loss-absorbing capacity and leverage ratio requirements
Capital management objectives, planning and activities
Capital management objectives
Capital planning and activities
Audited | An adequate level of total loss-absorbing capacity (TLAC)
Audited | We manage our balance sheet, RWA, leverage ratio
meeting both internal assessment and regulatory requirements is
denominator (LRD) and TLAC ratio levels on the basis of our
a prerequisite for conducting our business activities. We are
regulatory TLAC requirements and within our internal limits and
therefore committed to maintaining a strong TLAC position and
targets. Our strategic focus
is on achieving an optimal
sound TLAC ratios at all times, in order to meet regulatory
attribution and use of financial resources between our business
capital requirements and our target capital ratios, and to support
divisions and Group Functions, as well as between our legal
the growth of our businesses.
entities, while remaining within the limits defined for the Group
As of 31 December 2020, our common equity tier 1 (CET1)
and allocated to the business divisions by the Board of Directors
capital ratio was 13.8% and our CET1 leverage ratio 3.85%,
(the BoD). These resource allocations, in turn, affect business
each above our capital guidance, along with the requirements
plans and earnings projections, which are reflected in our capital
for Swiss systemically relevant banks (SRBs) and the Basel
plans.
believe that our capital strength is a source of confidence for our
planning component that is key in defining our capital targets. It
stakeholders, contributes to our sound credit ratings and is one
is based on an attribution of Group RWA and LRD internal limits
of the foundations of our success.
to the business divisions.
The BCBS announced the finalization of the Basel III
Limits and targets are established at Group and business
framework in December 2017, and published the final rules on
division levels, and are approved by the BoD at least annually. In
the minimum capital requirements for market risk
(the
the target-setting process, we take into account the current and
Fundamental Review of the Trading Book) in January 2019. In
potential future TLAC requirements, our aggregate risk exposure
response to COVID-19, the Group of Central Bank Governors
in terms of capital-at-risk, the assessment by rating agencies,
and Heads of Supervision, which acts as the Basel Committee’s
comparisons with peers and the effect of expected accounting
oversight body, endorsed the deferral of the implementation
policy changes. Monitoring is based on these internal limits
date by one year, to 1 January 2023. The accompanying
and targets and provides indications if changes are required. Any
transitional arrangements for the output floor have also been
breach of limits in place triggers a series of required remediating
extended by one year to 1 January 2028. We will monitor the
actions.
introduction and assess the effect on UBS once the final Swiss
Group Treasury plans for, and monitors, consolidated TLAC
regulations are available. We do not expect the Swiss regulations
information on an ongoing basis, reflecting business and legal
to become mandatory until after the BCBS target effective date
entity requirements, as well as regulatory developments in
of 1 January 2023. In the absence of the final Swiss regulations,
capital regulations. In addition, capital planning and monitoring
we continue to make progress on our internal assessment of
are performed at legal entity level for our significant subsidiaries
infrastructure design and operational governance to anticipate
and sub-groups that are subject to prudential supervision and
the upcoming adoption of these rules. We currently estimate
must meet capital and other supervisory requirements.
› Refer to “Capital and capital ratios of our significant regulated
subsidiaries” in this section for more information
that the revised Basel III framework may lead to a further net
increase in risk-weighted assets (RWA) of USD 20 billion to USD
30 billion, before taking into account mitigating actions. In
addition, the transition to the standardized measurement
approach for operational risk RWA is expected to result in a
further increase in RWA. These estimates are based on our
current understanding of the relevant standards and may
change as a result of new or changed regulatory interpretations,
the implementation of the Basel III standards into national law,
changes in business growth, market conditions and other
factors.
› Refer to the “Our strategy” and “Performance targets and
capital guidance” sections of this report for more information
about our capital and resource guidelines
› Refer to “Capital strength is a key component of our business
model” in the “Risk factors” section of this report for more
information about capital ratio-related risks
Committee on Banking Supervision (the BCBS) requirements. We
The annual strategic planning process includes a capital-
Regulatory framework
The Basel III framework came into effect in Switzerland on
1 January 2013 and is embedded in the Swiss Capital Adequacy
Ordinance (the CAO). The CAO also includes the too-big-to-fail
provisions applicable to Swiss SRBs, which became effective on
1 July 2016 and have been fully phased-in since 1 January 2020.
Under the Swiss SRB framework, going and gone concern
requirements represent the Group’s TLAC requirement. TLAC
encompasses regulatory capital, such as CET1, loss-absorbing
additional tier 1 (AT1) and tier 2 capital instruments, and
liabilities that can be written down or converted into equity in
case of resolution or for the purpose of restructuring measures.
Capital and other instruments contributing to our total
loss-absorbing capacity
In addition to CET1 capital, the following instruments contribute
to our loss-absorbing capacity:
– loss-absorbing AT1 capital instruments (high- and low-trigger);
– loss-absorbing tier 2 capital instruments (high- and low-trigger);
– non-Basel III-compliant tier 2 capital instruments; and
– TLAC-eligible senior unsecured debt instruments.
Under the Swiss SRB rules applicable since 1 January 2020,
going concern capital includes CET1 and high-trigger loss-
absorbing AT1 capital instruments. Under the transitional rules
for the Swiss SRB framework, outstanding low-trigger loss-
absorbing AT1 capital instruments are available to meet the
going concern capital 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.
Going concern capital requirements
Under the Swiss SRB requirements fully phased-in since
1 January 2020, total going concern minimum requirements for
all Swiss SRBs are a capital ratio requirement of 12.86% of RWA
and a leverage ratio requirement of 4.5%. In addition to these
minimum requirements, an add-on reflecting the degree of
systemic importance is applied, based on market share and LRD.
The add-on for UBS remains unchanged at 1.08% of RWA and
0.375% of our LRD. Effective from 27 March 2020, the Swiss
Federal Council has deactivated the countercyclical buffer
requirement of 2% of RWA for mortgage loans on residential
property in Switzerland, to support the lending capacity of
additional
continued
banks. However, we
countercyclical buffer requirements introduced in other BCBS
member jurisdictions, which result in an additional buffer
requirement of 0.02%. The total going concern capital
requirements applicable are 13.96% of RWA
(including
countercyclical buffer requirements) and 4.875% of the LRD.
Furthermore, of the total going concern capital requirement of
13.96% of RWA, at least 9.66% must be met with CET1 capital,
while a maximum of 4.3% can be met with high-trigger loss-
absorbing AT1 capital instruments. Similarly, of the total going
concern leverage ratio requirement of 4.875%, 3.375% must be
met with CET1 capital, while a maximum of 1.5% can be met
with high-trigger loss-absorbing AT1 capital instruments.
Since the first quarter of 2020, and in connection with
COVID-19, FINMA permitted banks to temporarily exclude
central bank sight deposits from the LRD for the purpose of
calculating going concern ratios. This exemption applied until
1 January 2021. Applicable dividends or similar distributions
approved by shareholders after 25 March 2020 reduce the relief
by the LRD equivalent of the capital distribution. This exemption
increased our total going concern
leverage ratio as of
31 December 2020 from 5.42% to 5.95%.
loss-absorbing tier 2
capital
capital
senior unsecured debt
instruments
instruments are eligible to meet gone concern requirements until
one year before maturity. A maximum of 25% of the gone
instruments, non-Basel III-compliant
TLAC-eligible
Outstanding high- and
low-trigger
apply
tier 2
and
to
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Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Capital management
Until 31 December 2021, the gone concern requirement after
the application of the rebate for resolvability measures and the
reduction for the use of higher quality capital instruments is
floored at 8.6% and 3% for the RWA- and LRD-based
requirements, respectively. From 1 January 2022 onward, this
floor increases to 10% and 3.75% for the RWA- and LRD-based
requirements, respectively.
In this report, we refer to the RWA-based gone concern
requirements as gone
capacity
concern
requirements and the RWA-based gone concern ratio is referred
to as the gone concern loss-absorbing capacity ratio.
loss-absorbing
The table on the next page provides the RWA- and LRD-based
requirements and
information as of 31 December 2020,
excluding the effects of the temporary exemption of central
bank sight deposits for the going concern leverage ratio
calculation granted by FINMA on 25 March 2020 in connection
with COVID-19.
The effects of the temporary exemption are presented on the
page after next.
› Refer to the “Regulatory and legal developments” section of this
report for more information about COVID-19-related regulatory
and legal developments
Gone concern loss-absorbing capacity requirements
As an internationally active Swiss SRB, UBS is also subject to
gone concern loss-absorbing capacity requirements. The gone
concern requirements also include add-ons for market share and
the LRD, and may be met with senior unsecured debt that is
TLAC eligible.
Under the Swiss SRB framework, banks are eligible for a
rebate on the gone concern requirement if they take actions
that facilitate recovery and resolvability beyond the minimum
improved
requirements. The amount of
resolvability is assessed annually by FINMA. Based on actions we
had completed by December 2019 to improve resolvability,
FINMA granted a rebate on the gone concern requirement of
47.5% of the aforementioned maximum rebate in the third
quarter of 2020, which
reduction of
2.54 percentage points for the RWA-based requirement and
0.89 percentage points for the LRD-based requirement.
resulted
rebate
in a
the
for
to meet gone concern
Our gone concern requirements are further reduced when
higher quality capital instruments (CET1 capital, low-trigger loss-
absorbing AT1 or certain low-trigger tier 2 capital instruments)
are used
requirements. As of
31 December 2020, UBS has used low-trigger tier 2 capital
instruments to fulfill gone concern requirements, resulting in a
reduction of 1.25 percentage points for the RWA-based
requirement and 0.35 percentage points for the LRD-based
requirement.
146
146
Risk, capital, liquidity and funding, and balance sheet | Capital management
Gone concern loss-absorbing capacity requirements
Until 31 December 2021, the gone concern requirement after
As an internationally active Swiss SRB, UBS is also subject to
the application of the rebate for resolvability measures and the
gone concern loss-absorbing capacity requirements. The gone
reduction for the use of higher quality capital instruments is
concern requirements also include add-ons for market share and
floored at 8.6% and 3% for the RWA- and LRD-based
the LRD, and may be met with senior unsecured debt that is
requirements, respectively. From 1 January 2022 onward, this
TLAC eligible.
floor increases to 10% and 3.75% for the RWA- and LRD-based
Under the Swiss SRB framework, banks are eligible for a
requirements, respectively.
rebate on the gone concern requirement if they take actions
In this report, we refer to the RWA-based gone concern
that facilitate recovery and resolvability beyond the minimum
requirements as gone
concern
loss-absorbing
capacity
requirements. The amount of
the
rebate
for
improved
requirements and the RWA-based gone concern ratio is referred
resolvability is assessed annually by FINMA. Based on actions we
to as the gone concern loss-absorbing capacity ratio.
had completed by December 2019 to improve resolvability,
The table on the next page provides the RWA- and LRD-based
FINMA granted a rebate on the gone concern requirement of
requirements and
information as of 31 December 2020,
47.5% of the aforementioned maximum rebate in the third
excluding the effects of the temporary exemption of central
quarter of 2020, which
resulted
in a
reduction of
bank sight deposits for the going concern leverage ratio
2.54 percentage points for the RWA-based requirement and
calculation granted by FINMA on 25 March 2020 in connection
0.89 percentage points for the LRD-based requirement.
with COVID-19.
Our gone concern requirements are further reduced when
The effects of the temporary exemption are presented on the
higher quality capital instruments (CET1 capital, low-trigger loss-
page after next.
absorbing AT1 or certain low-trigger tier 2 capital instruments)
are used
to meet gone concern
requirements. As of
› Refer to the “Regulatory and legal developments” section of this
report for more information about COVID-19-related regulatory
31 December 2020, UBS has used low-trigger tier 2 capital
and legal developments
instruments to fulfill gone concern requirements, resulting in a
reduction of 1.25 percentage points for the RWA-based
requirement and 0.35 percentage points for the LRD-based
requirement.
Swiss SRB going and gone concern requirements and information
AAss ooff 3311..1122..2200
USD million, except where indicated
RReeqquuiirreedd ggooiinngg ccoonncceerrnn ccaappiittaall
TToottaall ggooiinngg ccoonncceerrnn ccaappiittaall
CCoommmmoonn eeqquuiittyy ttiieerr 11 ccaappiittaall
of which: minimum capital
of which: buffer capital
of which: countercyclical buffer
MMaaxxiimmuumm aaddddiittiioonnaall ttiieerr 11 ccaappiittaall
of which: additional tier 1 capital
of which: additional tier 1 buffer capital
EElliiggiibbllee ggooiinngg ccoonncceerrnn ccaappiittaall
TToottaall ggooiinngg ccoonncceerrnn ccaappiittaall
Common equity tier 1 capital
TToottaall lloossss--aabbssoorrbbiinngg aaddddiittiioonnaall ttiieerr 11 ccaappiittaall33
of which: high-trigger loss-absorbing additional tier 1 capital
of which: low-trigger loss-absorbing additional tier 1 capital
RReeqquuiirreedd ggoonnee ccoonncceerrnn ccaappiittaall44
TToottaall ggoonnee ccoonncceerrnn lloossss--aabbssoorrbbiinngg ccaappaacciittyy55
of which: base requirement
of which: additional requirement for market share and LRD
of which: applicable reduction on requirements
of which: rebate granted (equivalent to 47.5% of maximum rebate)
of which: reduction for usage of low-trigger tier 2 capital instruments
EElliiggiibbllee ggoonnee ccoonncceerrnn ccaappiittaall
TToottaall ggoonnee ccoonncceerrnn lloossss--aabbssoorrbbiinngg ccaappaacciittyy
TToottaall ttiieerr 22 ccaappiittaall
of which: low-trigger loss-absorbing tier 2 capital
of which: non-Basel III-compliant tier 2 capital
TTLLAACC--eelliiggiibbllee sseenniioorr uunnsseeccuurreedd ddeebbtt
TToottaall lloossss--aabbssoorrbbiinngg ccaappaacciittyy
RReeqquuiirreedd ttoottaall lloossss--aabbssoorrbbiinngg ccaappaacciittyy
EElliiggiibbllee ttoottaall lloossss--aabbssoorrbbiinngg ccaappaacciittyy
RRWWAA
iinn %%
LLRRDD11
iinn %%
1133..996622
99..6666
4.50
5.14
0.02
44..3300
3.50
0.80
1199..4433
13.80
55..6633
4.74
0.89
1100..1166
12.86
1.08
(3.78)
(2.54)
(1.25)
1155..7755
22..6688
2.49
0.19
1133..0088
4400,,334455
2277,,991144
13,010
14,860
45
1122,,443311
10,119
2,313
5566,,117788
39,890
1166,,228888
13,711
2,577
2299,,336677
37,178
3,122
(10,933)
(7,333)
(3,600)
4455,,554455
77,,774444
7,201
543
3377,,880011
2244..1111
3355..1199
6699,,771133
110011,,772222
44..888822
33..3388
1.50
1.88
11..5500
1.50
55..4422
3.85
11..5577
1.32
0.25
33..6644
4.50
0.38
(1.24)
(0.89)
(0.35)
44..3399
00..7755
0.69
0.05
33..6644
88..5511
99..8811
5500,,556611
3355,,000044
15,557
19,447
1155,,555577
15,557
5566,,117788
39,890
1166,,228888
13,711
2,577
3377,,772244
46,672
3,889
(12,838)
(9,237)
(3,600)
4455,,554455
77,,774444
7,201
543
3377,,880011
8888,,228855
110011,,772222
RRiisskk--wweeiigghhtteedd aasssseettss // lleevveerraaggee rraattiioo ddeennoommiinnaattoorr
Risk-weighted assets
Leverage ratio denominator1
11 LRD-based requirements and the LRD presented in this table do not reflect the effects of the temporary exemption that has been granted by FINMA in connection with COVID-19. Refer to the “Regulatory and legal
developments” section of this report and to the COVID-19-related information in this section. 22 Includes applicable add-ons of 1.08% for RWA and 0.375% for LRD. 33 Includes outstanding low-trigger loss-
absorbing additional tier 1 (AT1) capital instruments, which are available under the Swiss SRB framework to meet the going concern requirements until their first call date. As of their first call date, these instruments
are eligible to meet the gone concern requirements. 44 From 1 January 2020 onward, a maximum of 25% of the gone concern requirements can be met with instruments that have a remaining maturity of between
one and two years. Once at least 75% of the minimum gone concern requirement has been met with instruments that have a remaining maturity of greater than two years, all instruments that have a remaining
maturity of between one and two years remain eligible to be included in the total gone concern capital. 55 The gone concern requirement after the application of the rebate for resolvability measures and the
reduction for the use of higher quality capital instruments is floored at 8.6% and 3% for the RWA- and LRD-based requirements, respectively. This means that the combined reduction may not exceed 5.34
percentage points for the RWA-based requirement of 13.94% and 1.875 percentage points for the LRD-based requirement of 4.875%.
11,,003377,,115500
228899,,110011
146
147
147
Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Capital management
Application of the temporary COVID-19-related FINMA
exemption of central bank sight deposits
In line with the FINMA exemption rules that applied until
1 January 2021, the eligible LRD relief applicable to UBS is
reduced by the going concern LRD equivalent of the capital
distribution that UBS made for the 2019 financial year.
The table below summarizes the effects on our Swiss SRB
going concern capital requirements and information. The FINMA
exemption rules had no effect on our Swiss SRB gone concern
capital requirements and ratios.
Outside of this section, for simplicity and due to the short-
term nature of the FINMA exemption, we have chosen to
present the LRD excluding the temporary FINMA exemption.
Swiss SRB going concern requirements and information including temporary FINMA exemption
AAss ooff 3311..1122..2200
USD million, except where indicated
LLRRDD
iinn %%
LLeevveerraaggee rraattiioo ddeennoommiinnaattoorr bbeeffoorree tteemmppoorraarryy eexxeemmppttiioonn
Effective relief
of which: central bank sight deposits eligible for relief
of which: reduction of relief due to paid dividend distribution 1
LLeevveerraaggee rraattiioo ddeennoommiinnaattoorr aafftteerr tteemmppoorraarryy eexxeemmppttiioonn
RReeqquuiirreedd ggooiinngg ccoonncceerrnn ccaappiittaall
TToottaall ggooiinngg ccoonncceerrnn ccaappiittaall
Common equity tier 1 capital
11,,003377,,115500
((9922,,882277))
((114466,,330088))
5533,,448811
994444,,332233
44..8888
3.38
4466,,003366
31,871
EElliiggiibbllee ggooiinngg ccoonncceerrnn ccaappiittaall
TToottaall ggooiinngg ccoonncceerrnn ccaappiittaall
Common equity tier 1 capital
11 Represents the leverage ratio denominator equivalent to a 4.875% going concern leverage ratio requirement applied to the 2019 paid dividend of USD 2,607 million (USD 0.365 per share, paid on 7 May 2020
and 27 November 2020).
5566,,117788
39,890
55..9955
4.22
148
148
Risk, capital, liquidity and funding, and balance sheet | Capital management
Application of the temporary COVID-19-related FINMA
The table below summarizes the effects on our Swiss SRB
exemption of central bank sight deposits
going concern capital requirements and information. The FINMA
exemption rules had no effect on our Swiss SRB gone concern
In line with the FINMA exemption rules that applied until
capital requirements and ratios.
1 January 2021, the eligible LRD relief applicable to UBS is
Outside of this section, for simplicity and due to the short-
reduced by the going concern LRD equivalent of the capital
term nature of the FINMA exemption, we have chosen to
distribution that UBS made for the 2019 financial year.
present the LRD excluding the temporary FINMA exemption.
Swiss SRB going concern requirements and information including temporary FINMA exemption
AAss ooff 3311..1122..2200
USD million, except where indicated
LLeevveerraaggee rraattiioo ddeennoommiinnaattoorr bbeeffoorree tteemmppoorraarryy eexxeemmppttiioonn
Effective relief
of which: central bank sight deposits eligible for relief
of which: reduction of relief due to paid dividend distribution 1
LLeevveerraaggee rraattiioo ddeennoommiinnaattoorr aafftteerr tteemmppoorraarryy eexxeemmppttiioonn
RReeqquuiirreedd ggooiinngg ccoonncceerrnn ccaappiittaall
TToottaall ggooiinngg ccoonncceerrnn ccaappiittaall
Common equity tier 1 capital
EElliiggiibbllee ggooiinngg ccoonncceerrnn ccaappiittaall
TToottaall ggooiinngg ccoonncceerrnn ccaappiittaall
Common equity tier 1 capital
and 27 November 2020).
11 Represents the leverage ratio denominator equivalent to a 4.875% going concern leverage ratio requirement applied to the 2019 paid dividend of USD 2,607 million (USD 0.365 per share, paid on 7 May 2020
LLRRDD
iinn %%
11,,003377,,115500
((9922,,882277))
((114466,,330088))
5533,,448811
994444,,332233
44..8888
3.38
55..9955
4.22
4466,,003366
31,871
5566,,117788
39,890
Total loss-absorbing capacity
Swiss SRB going and gone concern information
USD million, except where indicated
EElliiggiibbllee ggooiinngg ccoonncceerrnn ccaappiittaall
TToottaall ggooiinngg ccoonncceerrnn ccaappiittaall
TToottaall ttiieerr 11 ccaappiittaall
Common equity tier 1 capital
TToottaall lloossss--aabbssoorrbbiinngg aaddddiittiioonnaall ttiieerr 11 ccaappiittaall
of which: high-trigger loss-absorbing additional tier 1 capital
of which: low-trigger loss-absorbing additional tier 1 capital
EElliiggiibbllee ggoonnee ccoonncceerrnn ccaappiittaall22
TToottaall ggoonnee ccoonncceerrnn lloossss--aabbssoorrbbiinngg ccaappaacciittyy
TToottaall ttiieerr 22 ccaappiittaall
of which: low-trigger loss-absorbing tier 2 capital
of which: non-Basel III-compliant tier 2 capital
TTLLAACC--eelliiggiibbllee sseenniioorr uunnsseeccuurreedd ddeebbtt
TToottaall lloossss--aabbssoorrbbiinngg ccaappaacciittyy
TToottaall lloossss--aabbssoorrbbiinngg ccaappaacciittyy
RRiisskk--wweeiigghhtteedd aasssseettss // lleevveerraaggee rraattiioo ddeennoommiinnaattoorr
Risk-weighted assets
Leverage ratio denominator3
CCaappiittaall aanndd lloossss--aabbssoorrbbiinngg ccaappaacciittyy rraattiiooss ((%%))
Going concern capital ratio
of which: common equity tier 1 capital ratio
Gone concern loss-absorbing capacity ratio
TToottaall lloossss--aabbssoorrbbiinngg ccaappaacciittyy rraattiioo
3311..1122..2200
31.12.191
5566,,117788
5566,,117788
3399,,889900
1166,,228888
1133,,771111
22,,557777
4455,,554455
77,,774444
77,,220011
554433
3377,,880011
5511,,884422
5511,,884422
35,535
1166,,330066
13,892
2,414
3377,,775533
77,,443311
6,892
540
3300,,332222
110011,,772222
8899,,559955
228899,,110011
11,,003377,,115500
259,208
911,322
1199..44
1133..88
1155..88
3355..22
20.0
13.7
14.6
3344..66
LLeevveerraaggee rraattiiooss ((%%))33
Going concern leverage ratio
of which: common equity tier 1 leverage ratio
5.7
3.90
Gone concern leverage ratio
4.1
TToottaall lloossss--aabbssoorrbbiinngg ccaappaacciittyy lleevveerraaggee rraattiioo
99..88
11 Refer to the “Accounting and financial reporting” and “Consolidated financial statements” sections of this report for information on the restatement of comparative information, where applicable. 22 As of
1 January 2020, instruments available to meet gone concern requirements remain eligible until one year before maturity without a haircut of 50% in the last year of eligibility. Refer to “Total loss-absorbing capacity
and movement” in the “Capital management” section of our first quarter 2020 report, available under “Quarterly reporting” at ubs.com/investors, for more information. 33 Leverage ratio denominators (LRDs) and
leverage ratios for 31 December 2020 do not reflect the effects of the temporary exemption that has been granted by FINMA in connection with COVID-19. Refer to the “Regulatory and legal developments” section
of this report and to the COVID-19-related information in this section.
55..44
33..8855
44..44
99..88
148
149
149
Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Capital management
Audited |
Reconciliation of IFRS equity to Swiss SRB common equity tier 1 capital
USD million
TToottaall IIFFRRSS eeqquuiittyy
Equity attributable to non-controlling interests
Defined benefit plans, net of tax
Deferred tax assets recognized for tax loss carry-forwards
Deferred tax assets on temporary differences, excess over threshold
Goodwill, net of tax2
Intangible assets, net of tax
Compensation-related components (not recognized in net profit)
Expected losses on advanced internal ratings-based portfolio less provisions
Unrealized (gains) / losses from cash flow hedges, net of tax
Own credit related to gains / losses on financial liabilities measured at fair value that existed at the balance sheet date
Own credit related to gains / losses on derivative financial instruments that existed at the balance sheet date
Unrealized gains related to debt instruments at fair value through OCI, net of tax
Prudential valuation adjustments
Accruals for dividends to shareholders
Capital reserve for potential share repurchases
Other
TToottaall ccoommmmoonn eeqquuiittyy ttiieerr 11 ccaappiittaall
3311..1122..2200
5599,,776655
((331199))
((4411))
((55,,661177))
((55))
((66,,331199))
((229966))
((11,,334499))
((333300))
((22,,332211))
338822
((4455))
((115522))
((115500))
((11,,331144))
((22,,000000))
00
3399,,889900
31.12.191
54,675
(174)
(9)
(6,121)
(235)
(6,178)
(195)
(1,717)
(495)
(1,260)
93
(46)
(32)
(104)
(2,628)
(40)
35,535
11 Refer to the “Accounting and financial reporting” and “Consolidated financial statements” sections of this report for information on the restatement of comparative information, where applicable. 22 Includes
goodwill related to significant investments in financial institutions of USD 413 million as of 31 December 2020 (31 December 2019: USD 178 million) presented on the balance sheet line Investments in associates.
Gone concern loss-absorbing capacity and movement
Audited | Our total gone concern loss-absorbing capacity included
USD 37.8 billion of TLAC-eligible senior unsecured debt, and
increased by USD 7.8 billion to USD 45.5 billion as of
31 December 2020. The increase was due to twelve issuances
of
instruments
denominated in US dollars, euro and Australian dollars, as well
as interest rate risk hedge, foreign currency translation and other
effects, partly offset by a net decrease in eligibility of two
instruments and the call of a TLAC-eligible senior unsecured
debt instrument denominated in Australian dollars.
TLAC-eligible
unsecured
senior
debt
Loss-absorbing capacity and leverage ratios
Our CET1 capital ratio increased 0.1 percentage points to
13.8%, reflecting a USD 4.4 billion increase in CET1 capital that
was partly offset by a USD 29.9 billion increase in RWA.
Our CET1 leverage ratio decreased from 3.90% to 3.85% as
of 31 December 2020, as the aforementioned increase in CET1
capital was more than offset by a USD 126 billion increase in the
LRD.
Our gone concern loss-absorbing capacity ratio increased
from 14.6% to 15.8%, whereas our gone concern leverage ratio
increased
the
aforementioned
loss-absorbing
capacity.
to 4.4%, mainly driven by
in gone concern
from 4.1%
increase
Total loss-absorbing capacity and movement
Our total loss-absorbing capacity increased by USD 12.1 billion
to USD 101.7 billion as of 31 December 2020.
Going concern capital and movement
Audited | Our CET1 capital mainly consists of: share capital; share
premium, which primarily consists of additional paid-in capital
related to shares issued; and retained earnings. A detailed
reconciliation of IFRS equity to CET1 capital is provided in the
“Reconciliation of IFRS equity to Swiss SRB common equity tier 1
capital” table.
Our CET1 capital increased by USD 4.4 billion to USD 39.9
billion as of 31 December 2020, mainly as a result of operating
profit before tax of USD 8.2 billion, foreign currency translation
effects of USD 1.2 billion and deferred tax assets on temporary
differences of USD 0.4 billion. The increase was partly offset by
our capital reserve for potential share repurchases of USD 2.0
billion, accruals for dividends of USD 1.3 billion, current tax
expenses of USD 1.2 billion, share repurchases under our share
repurchase program of USD 0.4 billion, and defined benefit
plans of USD 0.3 billion.
› Refer to “UBS shares” in this section for more information about
the share repurchase program
Our loss-absorbing additional tier 1 (AT1) capital was stable at
USD 16.3 billion, as the call of a USD 1.25 billion AT1 capital
instrument was offset by a USD 0.75 billion issuance of an AT1
capital instrument, as well as foreign currency translation and
interest rate risk hedge effects.
150
150
Risk, capital, liquidity and funding, and balance sheet | Capital management
Reconciliation of IFRS equity to Swiss SRB common equity tier 1 capital
Audited |
USD million
TToottaall IIFFRRSS eeqquuiittyy
Equity attributable to non-controlling interests
Defined benefit plans, net of tax
Deferred tax assets recognized for tax loss carry-forwards
Deferred tax assets on temporary differences, excess over threshold
Goodwill, net of tax2
Intangible assets, net of tax
Compensation-related components (not recognized in net profit)
Expected losses on advanced internal ratings-based portfolio less provisions
Unrealized (gains) / losses from cash flow hedges, net of tax
Own credit related to gains / losses on financial liabilities measured at fair value that existed at the balance sheet date
Own credit related to gains / losses on derivative financial instruments that existed at the balance sheet date
Unrealized gains related to debt instruments at fair value through OCI, net of tax
Prudential valuation adjustments
Accruals for dividends to shareholders
Capital reserve for potential share repurchases
Other
TToottaall ccoommmmoonn eeqquuiittyy ttiieerr 11 ccaappiittaall
11 Refer to the “Accounting and financial reporting” and “Consolidated financial statements” sections of this report for information on the restatement of comparative information, where applicable. 22 Includes
goodwill related to significant investments in financial institutions of USD 413 million as of 31 December 2020 (31 December 2019: USD 178 million) presented on the balance sheet line Investments in associates.
Total loss-absorbing capacity and movement
Gone concern loss-absorbing capacity and movement
Audited | Our total gone concern loss-absorbing capacity included
Our total loss-absorbing capacity increased by USD 12.1 billion
USD 37.8 billion of TLAC-eligible senior unsecured debt, and
to USD 101.7 billion as of 31 December 2020.
Going concern capital and movement
increased by USD 7.8 billion to USD 45.5 billion as of
31 December 2020. The increase was due to twelve issuances
of
TLAC-eligible
senior
unsecured
debt
instruments
Audited | Our CET1 capital mainly consists of: share capital; share
denominated in US dollars, euro and Australian dollars, as well
premium, which primarily consists of additional paid-in capital
as interest rate risk hedge, foreign currency translation and other
related to shares issued; and retained earnings. A detailed
effects, partly offset by a net decrease in eligibility of two
reconciliation of IFRS equity to CET1 capital is provided in the
instruments and the call of a TLAC-eligible senior unsecured
“Reconciliation of IFRS equity to Swiss SRB common equity tier 1
debt instrument denominated in Australian dollars.
capital” table.
Our CET1 capital increased by USD 4.4 billion to USD 39.9
Loss-absorbing capacity and leverage ratios
billion as of 31 December 2020, mainly as a result of operating
Our CET1 capital ratio increased 0.1 percentage points to
profit before tax of USD 8.2 billion, foreign currency translation
13.8%, reflecting a USD 4.4 billion increase in CET1 capital that
effects of USD 1.2 billion and deferred tax assets on temporary
was partly offset by a USD 29.9 billion increase in RWA.
differences of USD 0.4 billion. The increase was partly offset by
Our CET1 leverage ratio decreased from 3.90% to 3.85% as
our capital reserve for potential share repurchases of USD 2.0
of 31 December 2020, as the aforementioned increase in CET1
billion, accruals for dividends of USD 1.3 billion, current tax
capital was more than offset by a USD 126 billion increase in the
expenses of USD 1.2 billion, share repurchases under our share
LRD.
repurchase program of USD 0.4 billion, and defined benefit
Our gone concern loss-absorbing capacity ratio increased
plans of USD 0.3 billion.
› Refer to “UBS shares” in this section for more information about
the share repurchase program
from 14.6% to 15.8%, whereas our gone concern leverage ratio
increased
from 4.1%
to 4.4%, mainly driven by
the
aforementioned
increase
in gone concern
loss-absorbing
Our loss-absorbing additional tier 1 (AT1) capital was stable at
USD 16.3 billion, as the call of a USD 1.25 billion AT1 capital
instrument was offset by a USD 0.75 billion issuance of an AT1
capital instrument, as well as foreign currency translation and
interest rate risk hedge effects.
capacity.
3311..1122..2200
5599,,776655
((331199))
((4411))
((55,,661177))
((55))
((66,,331199))
((229966))
((11,,334499))
((333300))
((22,,332211))
338822
((4455))
((115522))
((115500))
((11,,331144))
((22,,000000))
00
3399,,889900
31.12.191
54,675
(174)
(9)
(6,121)
(235)
(6,178)
(195)
(1,717)
(495)
(1,260)
93
(46)
(32)
(104)
(2,628)
(40)
35,535
Swiss SRB total loss-absorbing capacity movement
USD million
Going concern capital
CCoommmmoonn eeqquuiittyy ttiieerr 11 ccaappiittaall aass ooff 3311..1122..119911
Operating profit before tax
Current tax (expense) / benefit
Foreign currency translation effects
Share repurchase program
Goodwill and intangible assets
Defined benefit plans2
Deferred tax assets on temporary differences
Capital reserve for potential share repurchases
Accruals for proposed dividends to shareholders
Other
CCoommmmoonn eeqquuiittyy ttiieerr 11 ccaappiittaall aass ooff 3311..1122..2200
LLoossss--aabbssoorrbbiinngg aaddddiittiioonnaall ttiieerr 11 ccaappiittaall aass ooff 3311..1122..1199
Issuance of high-trigger loss-absorbing additional tier 1 capital
Call of a high-trigger loss-absorbing additional tier 1 capital instrument
Interest rate risk hedge, foreign currency translation and other effects
LLoossss--aabbssoorrbbiinngg aaddddiittiioonnaall ttiieerr 11 ccaappiittaall aass ooff 3311..1122..2200
TToottaall ggooiinngg ccoonncceerrnn ccaappiittaall aass ooff 3311..1122..119911
TToottaall ggooiinngg ccoonncceerrnn ccaappiittaall aass ooff 3311..1122..2200
Gone concern loss-absorbing capacity
TTiieerr 22 ccaappiittaall aass ooff 3311..1122..1199
Interest rate risk hedge, foreign currency translation and other effects
TTiieerr 22 ccaappiittaall aass ooff 3311..1122..2200
TTLLAACC--eelliiggiibbllee sseenniioorr uunnsseeccuurreedd ddeebbtt aass ooff 3311..1122..1199
Issuance of TLAC-eligible senior unsecured debt instruments
Call of TLAC-eligible senior unsecured debt instruments
Decrease in eligibility due to shortening of residual tenor3
Interest rate risk hedge, foreign currency translation and other effects
TTLLAACC--eelliiggiibbllee sseenniioorr uunnsseeccuurreedd ddeebbtt aass ooff 3311..1122..2200
TToottaall ggoonnee ccoonncceerrnn lloossss--aabbssoorrbbiinngg ccaappaacciittyy aass ooff 3311..1122..1199
TToottaall ggoonnee ccoonncceerrnn lloossss--aabbssoorrbbiinngg ccaappaacciittyy aass ooff 3311..1122..2200
SSwwiissss SSRRBB
3355,,553355
8,155
(1,231)
1,227
(364)
(242)
(250)
412
(2,000)
(1,314)
(38)
3399,,889900
1166,,330066
750
(1,250)
482
1166,,228888
5511,,884411
5566,,117788
77,,443311
312
77,,774444
3300,,332222
7,126
(74)
(1,379)
1,806
3377,,880011
3377,,775533
4455,,554455
Total loss-absorbing capacity
TToottaall lloossss--aabbssoorrbbiinngg ccaappaacciittyy aass ooff 3311..1122..119911
TToottaall lloossss--aabbssoorrbbiinngg ccaappaacciittyy aass ooff 3311..1122..2200
11 Refer to the “Accounting and financial reporting” and “Consolidated financial statements” sections of this report for information on the restatement of comparative information, where applicable. 22 Includes a
USD 235 million payment of the first installment to employees’ retirement assets in the Swiss pension fund, as announced in 2018. Similar contributions to be made in the first quarters of 2021 and 2022,
respectively. Refer to “Note 29 Pension and other post-employment benefit plans” in the “Consolidated financial statements” section of the Annual Report 2019 for more information. 33 Includes the partial
cancellation of a TLAC-eligible senior unsecured debt instrument on 8 December 2020 (ISIN US90351DAD93 issued on 5 April 2016 and maturing on 15 April 2021), amounting to USD 150 million, as this
instrument became not eligible to meet gone concern requirements in its final year of eligibility since April 2020.
8899,,559944
110011,,772222
Additional information
Active management of sensitivity to currency movements
Group Treasury is mandated to minimize adverse effects from
changes in currency rates on our CET1 capital and / or CET1
capital ratio. A significant portion of our CET1 capital and RWA
are denominated in Swiss francs, euro, pounds sterling and
other currencies. In order to hedge the CET1 capital ratio, CET1
capital needs to have foreign currency exposure, leading to
currency sensitivity of CET1 capital. As a consequence, it is not
possible to simultaneously fully hedge the CET1 capital and the
capital ratio. As the proportion of RWA denominated in
currencies other than the US dollar outweighs the CET1 capital
in such currencies, a significant appreciation of the US dollar
against such currencies could benefit our capital ratios, while a
significant depreciation of the US dollar against these currencies
could adversely affect our capital ratios. The Group Asset and
Liability Committee (the Group ALCO), a committee of the
Group Executive Board, has mandated Group Treasury to adjust
the currency mix in capital, within limits set by the Board of
Directors, to balance the effect of foreign exchange movements
on the CET1 capital and capital ratio. Limits are in place for the
sensitivity of both CET1 capital and the CET1 capital ratio to an
appreciation or depreciation of 10% in the value of the
US dollar against other currencies.
Sensitivity to currency movements
Risk-weighted assets
We estimate that a 10% depreciation of the US dollar against
other currencies would have increased our RWA by USD 13
billion and our CET1 capital by USD 1.3 billion as of
31 December 2020 (31 December 2019: USD 11 billion and
USD 1.1 billion, respectively) and decreased our CET1 capital
ratio 15 basis points (31 December 2019: 14 basis points).
Conversely, we estimate that a 10% appreciation of the US
dollar against other currencies would have decreased our RWA
by USD 12 billion and our CET1 capital by USD 1.2 billion
(31 December 2019: USD 10 billion and USD 1.0 billion,
respectively) and increased our CET1 capital ratio 15 basis
points (31 December 2019: 14 basis points).
150
151
151
Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Capital management
Leverage ratio denominator
Our
is also sensitive to foreign exchange
leverage ratio
movements as a result of the currency mix of our capital and
LRD. When adjusting the currency mix in capital, potential
effects on the going concern leverage ratio are taken into
account and the sensitivity of the going concern leverage ratio
to an appreciation or depreciation of 10% in the value of the
US dollar against other currencies is actively monitored.
We estimate that a 10% depreciation of the US dollar against
other currencies would have increased our LRD by USD 65 billion
as of 31 December 2020 (31 December 2019: USD 57 billion)
and decreased our Swiss SRB going concern leverage ratio
16 basis points
(31 December 2019: 18 basis points).
Conversely, we estimate that a 10% appreciation of the US
dollar against other currencies would have decreased our LRD by
USD 58 billion
(31 December 2019: USD 51 billion) and
increased our Swiss SRB going concern leverage ratio 16 basis
points (31 December 2019: 18 basis points).
The aforementioned sensitivities do not consider foreign
currency translation effects related to defined benefit plans
other than those related to the currency translation of the net
equity of foreign operations.
Capital and capital ratios of our significant regulated subsidiaries
UBS Group AG is a holding company conducting substantially all
operations through UBS AG and subsidiaries thereof. UBS Group
AG and UBS AG have contributed a significant portion of their
respective capital to, and provided substantial liquidity to,
subsidiaries. Many of these subsidiaries are subject to regulations
requiring compliance with minimum capital, liquidity and similar
requirements. Regulatory capital components and capital ratios
of our significant regulated subsidiaries determined under the
regulatory framework of each subsidiary’s home jurisdiction are
provided in the “Financial and regulatory key figures for our
significant regulated subsidiaries and sub-groups” section of this
report. Supervisory authorities generally have discretion to
impose higher requirements, or to otherwise limit the activities
of subsidiaries. Supervisory authorities also may require entities
to measure capital and leverage ratios on a stressed basis, and
may limit the ability of the entity to engage in new activities or
take capital actions based on the results of those tests.
› Refer to the 31 December 2020 Pillar 3 report, available under
“Pillar 3 disclosures” at ubs.com/investors, for more capital and
other regulatory information about our significant regulated
subsidiaries and sub-groups
Joint liability of UBS AG and UBS Switzerland AG
In June 2015, upon the transfer of the Personal & Corporate
Banking and Global Wealth Management businesses booked in
Switzerland from UBS AG to UBS Switzerland AG, UBS AG and
UBS Switzerland AG assumed joint liability for obligations
transferred to UBS Switzerland AG and existing at UBS AG,
respectively. Under certain circumstances, the Swiss Banking Act
and FINMA’s Banking Insolvency Ordinance authorize FINMA to
modify, extinguish or convert to common equity liabilities of a
bank in connection with a resolution or insolvency of such bank.
The joint liability amounts have declined as obligations
matured, terminated or were novated following the transfer
date. As of 31 December 2020, the liability of UBS Switzerland
AG amounted to CHF 8.9 billion (the equivalent of USD 10.1
billion), a decrease by CHF 7.9 billion compared with 31
December 2019. The respective liability of UBS AG has been
substantially extinguished.
in
liabilities”
Estimated effect on capital from litigation, regulatory and similar
matters subject to provisions and contingent liabilities
We have estimated the loss in capital that we could incur as a
result of the risks associated with the matters described in
“Note 18 Provisions and contingent
the
“Consolidated financial statements” section of this report. We
have employed for this purpose the advanced measurement
approach (AMA) methodology that we use when determining
the capital requirements associated with operational risks, based
on a 99.9% confidence level over a 12-month horizon. The
methodology
industry
experience for the AMA operational risk categories to which
those matters correspond, as well as the external environment
affecting risks of these types, in isolation from other areas. On
this standalone basis, we estimate the maximum loss in capital
that we could incur over a 12-month period as a result of our
risks associated with these operational risk categories at USD 4.0
billion as of 31 December 2020, a reduction of USD 0.3 billion
from 31 December 2019. This estimate is not related to and
does not take into account any provisions recognized for any of
these matters and does not constitute a subjective assessment of
our actual exposure in any of these matters.
into consideration UBS and
takes
› Refer to “Operational risk” in the “Risk management and
control” section of this report for more information
› Refer to “Note 18 Provisions and contingent liabilities” in the
“Consolidated financial statements” section of this report for
more information
152
152
Risk, capital, liquidity and funding, and balance sheet | Capital management
Leverage ratio denominator
Capital and capital ratios of our significant regulated subsidiaries
Our
leverage ratio
is also sensitive to foreign exchange
UBS Group AG is a holding company conducting substantially all
movements as a result of the currency mix of our capital and
operations through UBS AG and subsidiaries thereof. UBS Group
LRD. When adjusting the currency mix in capital, potential
AG and UBS AG have contributed a significant portion of their
effects on the going concern leverage ratio are taken into
respective capital to, and provided substantial liquidity to,
account and the sensitivity of the going concern leverage ratio
subsidiaries. Many of these subsidiaries are subject to regulations
to an appreciation or depreciation of 10% in the value of the
requiring compliance with minimum capital, liquidity and similar
US dollar against other currencies is actively monitored.
requirements. Regulatory capital components and capital ratios
We estimate that a 10% depreciation of the US dollar against
of our significant regulated subsidiaries determined under the
other currencies would have increased our LRD by USD 65 billion
regulatory framework of each subsidiary’s home jurisdiction are
as of 31 December 2020 (31 December 2019: USD 57 billion)
provided in the “Financial and regulatory key figures for our
and decreased our Swiss SRB going concern leverage ratio
significant regulated subsidiaries and sub-groups” section of this
16 basis points
(31 December 2019: 18 basis points).
report. Supervisory authorities generally have discretion to
Conversely, we estimate that a 10% appreciation of the US
impose higher requirements, or to otherwise limit the activities
dollar against other currencies would have decreased our LRD by
of subsidiaries. Supervisory authorities also may require entities
USD 58 billion
(31 December 2019: USD 51 billion) and
to measure capital and leverage ratios on a stressed basis, and
increased our Swiss SRB going concern leverage ratio 16 basis
may limit the ability of the entity to engage in new activities or
points (31 December 2019: 18 basis points).
take capital actions based on the results of those tests.
The aforementioned sensitivities do not consider foreign
currency translation effects related to defined benefit plans
other than those related to the currency translation of the net
› Refer to the 31 December 2020 Pillar 3 report, available under
“Pillar 3 disclosures” at ubs.com/investors, for more capital and
other regulatory information about our significant regulated
equity of foreign operations.
subsidiaries and sub-groups
Estimated effect on capital from litigation, regulatory and similar
Joint liability of UBS AG and UBS Switzerland AG
matters subject to provisions and contingent liabilities
In June 2015, upon the transfer of the Personal & Corporate
We have estimated the loss in capital that we could incur as a
Banking and Global Wealth Management businesses booked in
result of the risks associated with the matters described in
Switzerland from UBS AG to UBS Switzerland AG, UBS AG and
“Note 18 Provisions and contingent
liabilities”
in
the
UBS Switzerland AG assumed joint liability for obligations
“Consolidated financial statements” section of this report. We
transferred to UBS Switzerland AG and existing at UBS AG,
have employed for this purpose the advanced measurement
respectively. Under certain circumstances, the Swiss Banking Act
approach (AMA) methodology that we use when determining
and FINMA’s Banking Insolvency Ordinance authorize FINMA to
the capital requirements associated with operational risks, based
modify, extinguish or convert to common equity liabilities of a
on a 99.9% confidence level over a 12-month horizon. The
bank in connection with a resolution or insolvency of such bank.
methodology
takes
into consideration UBS and
industry
The joint liability amounts have declined as obligations
experience for the AMA operational risk categories to which
matured, terminated or were novated following the transfer
those matters correspond, as well as the external environment
date. As of 31 December 2020, the liability of UBS Switzerland
affecting risks of these types, in isolation from other areas. On
AG amounted to CHF 8.9 billion (the equivalent of USD 10.1
this standalone basis, we estimate the maximum loss in capital
billion), a decrease by CHF 7.9 billion compared with 31
that we could incur over a 12-month period as a result of our
December 2019. The respective liability of UBS AG has been
risks associated with these operational risk categories at USD 4.0
substantially extinguished.
billion as of 31 December 2020, a reduction of USD 0.3 billion
from 31 December 2019. This estimate is not related to and
does not take into account any provisions recognized for any of
these matters and does not constitute a subjective assessment of
our actual exposure in any of these matters.
› Refer to “Operational risk” in the “Risk management and
control” section of this report for more information
› Refer to “Note 18 Provisions and contingent liabilities” in the
“Consolidated financial statements” section of this report for
more information
Risk-weighted assets
RWA development in 2020
During 2020, RWA increased by USD 29.9 billion to USD 289.1
billion, driven by increases of USD 25.1 billion in credit and
counterparty credit risk RWA, including USD 7.7 billion from
currency effects, USD 5.3 billion in market risk RWA, and
Movement in risk-weighted assets by key driver
USD 1.3 billion in non-counterparty-related risk RWA, partly
offset by a reduction of USD 1.8 billion in operational risk RWA.
› Refer to the 31 December 2020 Pillar 3 report, available under
“Pillar 3 disclosures” at ubs.com/investors, for more information
about RWA movements and definitions of RWA movement key
drivers
USD billion
Credit and counterparty credit risk2
Non-counterparty-related risk
Market risk
Operational risk
TToottaall
RWA as of
31.12.19
153.0
Currency
effects
7.7
Methodology
and policy
changes
2.7
Model
updates /
changes
1.4
Regulatory
add-ons
(0.2)
Asset size and
Other 1
13.5
RRWWAA aass ooff
3311..1122..2200
117788..11
22.1
6.6
77.5
225599..22
0.6
0.0
0.0
88..33
0.0
(3.3)
0.0
((00..66))
0.0
1.9
(1.8)
11..55
0.0
(0.9)
0.0
((11..11))
0.7
7.6
0.0
2211..77
2233..44
1111..88
7755..88
228899..11
11 Includes the Pillar 3 categories “Asset size,” “Credit quality of counterparties,” “Acquisitions and disposals” and “Other.” Refer to the 31 December 2020 Pillar 3 report under “Pillar 3 disclosures” at
ubs.com/investors for more information. 22 Includes settlement risk, credit valuation adjustments, equity exposures in the banking book and securitization exposures in the banking book.
Credit and counterparty credit risk
Credit and counterparty credit risk RWA increased by USD 25.1
billion to USD 178.1 billion as of 31 December 2020. This
increase was partly driven by asset size and other movements of
USD 13.5 billion, predominantly reflecting a higher asset size in
the Investment Bank, mainly driven by higher RWA from loans
loan commitments as well as securities
and
financing
transactions, and in Global Wealth Management, mainly due to
increased RWA from loans and loan commitments. Also, 2020
included an increase from currency effects of USD 7.7 billion,
methodology and policy changes of USD 2.7 billion and model
updates of USD 1.4 billion.
Movement in credit and counterparty credit risk RWA by key driver1
USD billion
TToottaall ccrreeddiitt aanndd ccoouunntteerrppaarrttyy ccrreeddiitt rriisskk RRWWAA aass ooff 3311..1122..1199
Asset size
Asset quality
Model updates
Methodology and policy changes
Regulatory add-ons
Acquisitions and disposals
Foreign exchange movements
Other
TToottaall mmoovveemmeenntt
TToottaall ccrreeddiitt aanndd ccoouunntteerrppaarrttyy ccrreeddiitt rriisskk RRWWAA aass ooff 3311..1122..2200
Global Wealth
Management
3355..00
Personal &
Corporate
Banking
5577..33
Asset
Management
11..88
Investment
Bank Group Functions
88..33
5500..66
7.3
1.9
1.4
0.6
0.0
0.0
1.3
(0.8)
1111..77
4466..77
0.8
(0.6)
0.5
0.5
0.1
0.0
4.4
(0.1)
55..55
6622..88
0.4
0.0
0.0
0.7
0.0
0.0
0.1
0.0
11..11
22..99
9.5
(3.8)
(0.5)
0.8
0.0
0.0
1.6
0.3
77..99
5588..55
(1.6)
0.0
0.0
0.1
(0.2)
0.0
0.4
0.3
((11..11))
77..22
GGrroouupp
115533..00
1166..44
((22..55))
11..44
22..77
((00..22))
00..00
77..77
((00..33))
2255..11
117788..11
11 Refer to the 31 December 2020 Pillar 3 report under “Pillar 3 disclosures” at ubs.com/investors for the definitions of credit and counterparty credit risk RWA movement categories.
Model updates
The increase in credit and counterparty credit risk RWA from
model updates of USD 1.4 billion was primarily driven by real
estate portfolios in Global Wealth Management and Personal &
Corporate Banking, partly offset by reductions related to
securities financing transactions (SFTs) and derivatives in the
Investment Bank.
› Refer to “Credit risk models” in the “Risk management and
control” section of this report for more information about model
updates
implementation of
Methodology changes
The increase in credit and counterparty credit risk RWA from
methodology changes of USD 2.7 billion was primarily driven by
the
for
counterparty credit risk (SA-CCR) amounting to USD 1.8 billion,
predominantly in the Investment Bank and Global Wealth
Management, and revised capital requirements for fund
investments amounting to USD 0.6 billion, mainly affecting the
Asset Management business.
standardized approach
the
› Refer to the “Risk management and control” section of this
report and the 31 December 2020 Pillar 3 report, available under
“Pillar 3 disclosures” at ubs.com/investors, for more information
about credit and counterparty credit risk developments
152
153
153
Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Capital management
We expect that further methodology changes and model
updates, as well as regulatory add-ons, will increase credit and
counterparty credit risk RWA by around USD 10 billion in 2021.
The extent and timing of RWA changes may vary as
methodology changes and model updates are completed and
receive regulatory approval.
in the
composition of the relevant portfolios and other market factors
will affect RWA.
In addition, changes
Non-counterparty-related risk
Non-counterparty credit risk RWA increased by USD 1.3 billion
to USD 23.4 billion as of 31 December 2020, primarily driven by
currency effects and increases in deferred tax assets.
Market risk
Market risk RWA increased by USD 5.3 billion to USD 11.8
billion as of 31 December 2020, mainly driven by asset size and
other movements of USD 7.6 billion in the Investment Bank’s
Global Markets business. This increase in turn was driven by
higher average regulatory and stressed VaR (SVaR) levels,
primarily due to unprecedented and sharp market moves across
asset classes observed during the first half of the year as well as
very high credit shocks being applied against the long credit
inventory as the SVaR window included COVID-19-period
shocks. Furthermore, 2020 included an increase from model
updates of USD 1.9 billion, mainly related to the ongoing
parameter update of our VaR model. These increases were partly
offset by a reduction from methodology and policy of USD 3.3
billion, mainly related to the removal of a FINMA-required
temporary market
following our
demonstration of model performance in certain sub-portfolios.
In addition, regulatory add-ons decreased by USD 0.9 billion,
reflecting updates from the monthly risks-not-in-VaR (RniV)
assessment.
risk RWA multiplier
› Refer to the “Risk management and control” section of this
report and the 31 December 2020 Pillar 3 report, available under
“Pillar 3 disclosures” at ubs.com/investors, for more information
about market risk developments
Operational risk
Operational risk RWA decreased by USD 1.8 billion to USD 75.8
billion as of 31 December 2020, driven by the annual
recalibration of the advanced measurement approach (AMA)
model used for the calculation of operational risk capital in the
fourth quarter of 2020.
› Refer to “Advanced measurement approach model” in the “Risk
management and control” section of this report for more
information about the AMA model
Risk-weighted assets by business division and Group Functions
USD billion
Credit and counterparty credit risk1
Non-counterparty-related risk2
Market risk
Operational risk
TToottaall
Credit and counterparty credit risk1
Non-counterparty-related risk2
Market risk
Operational risk
TToottaall
Credit and counterparty credit risk1
Non-counterparty-related risk2
Market risk
Operational risk
TToottaall
GGlloobbaall WWeeaalltthh
MMaannaaggeemmeenntt
PPeerrssoonnaall &&
CCoorrppoorraattee
BBaannkkiinngg
AAsssseett
MMaannaaggee--
mmeenntt
3311..1122..2200
IInnvveessttmmeenntt
BBaannkk
GGrroouupp
FFuunnccttiioonnss
TToottaall
RRWWAA
46.7
6.2
1.4
32.8
8877..22
35.0
6.4
0.8
35.9
7788..11
11.7
(0.2)
0.6
(3.1)
99..00
62.8
2.1
0.0
7.2
7722..11
57.3
2.1
0.0
7.7
6677..11
5.5
0.0
0.0
(0.5)
55..00
2.9
0.7
0.0
3.3
66..99
31.12.19
1.8
0.8
0.0
2.0
44..66
58.5
3.6
9.0
23.2
9944..33
50.6
3.4
4.6
22.5
8811..11
31.12.20 vs 31.12.19
1.1
(0.1)
0.0
1.3
22..44
7.9
0.2
4.4
0.7
1133..22
7.2
10.7
1.4
9.3
2288..77
8.3
9.5
1.1
9.4
2288..33
(1.1)
1.3
0.3
(0.1)
00..44
178.1
23.4
11.8
75.8
228899..11
153.0
22.1
6.6
77.5
225599..22
25.1
1.3
5.3
(1.8)
2299..99
11 Includes settlement risk, credit valuation adjustments, equity exposures in the banking book and securitization exposures in the banking book. 22 Non-counterparty-related risk includes deferred tax assets
recognized for temporary differences (31 December 2020: USD 10.0 billion; 31 December 2019: USD 9.0 billion), as well as property, equipment, software and other items (31 December 2020: USD 13.4 billion;
31 December 2019: USD 13.1 billion).
154
154
Risk, capital, liquidity and funding, and balance sheet | Capital management
We expect that further methodology changes and model
shocks. Furthermore, 2020 included an increase from model
updates, as well as regulatory add-ons, will increase credit and
updates of USD 1.9 billion, mainly related to the ongoing
counterparty credit risk RWA by around USD 10 billion in 2021.
parameter update of our VaR model. These increases were partly
The extent and timing of RWA changes may vary as
offset by a reduction from methodology and policy of USD 3.3
methodology changes and model updates are completed and
billion, mainly related to the removal of a FINMA-required
receive regulatory approval.
In addition, changes
in the
temporary market
risk RWA multiplier
following our
composition of the relevant portfolios and other market factors
demonstration of model performance in certain sub-portfolios.
In addition, regulatory add-ons decreased by USD 0.9 billion,
reflecting updates from the monthly risks-not-in-VaR (RniV)
Non-counterparty-related risk
assessment.
Non-counterparty credit risk RWA increased by USD 1.3 billion
to USD 23.4 billion as of 31 December 2020, primarily driven by
› Refer to the “Risk management and control” section of this
report and the 31 December 2020 Pillar 3 report, available under
currency effects and increases in deferred tax assets.
“Pillar 3 disclosures” at ubs.com/investors, for more information
about market risk developments
will affect RWA.
Market risk
Market risk RWA increased by USD 5.3 billion to USD 11.8
Operational risk
billion as of 31 December 2020, mainly driven by asset size and
Operational risk RWA decreased by USD 1.8 billion to USD 75.8
other movements of USD 7.6 billion in the Investment Bank’s
billion as of 31 December 2020, driven by the annual
Global Markets business. This increase in turn was driven by
recalibration of the advanced measurement approach (AMA)
higher average regulatory and stressed VaR (SVaR) levels,
model used for the calculation of operational risk capital in the
primarily due to unprecedented and sharp market moves across
fourth quarter of 2020.
asset classes observed during the first half of the year as well as
very high credit shocks being applied against the long credit
inventory as the SVaR window included COVID-19-period
› Refer to “Advanced measurement approach model” in the “Risk
management and control” section of this report for more
information about the AMA model
Risk-weighted assets by business division and Group Functions
Credit and counterparty credit risk1
Non-counterparty-related risk2
USD billion
Market risk
Operational risk
TToottaall
Credit and counterparty credit risk1
Non-counterparty-related risk2
Market risk
Operational risk
TToottaall
Credit and counterparty credit risk1
Non-counterparty-related risk2
Market risk
Operational risk
TToottaall
31 December 2019: USD 13.1 billion).
GGlloobbaall WWeeaalltthh
MMaannaaggeemmeenntt
PPeerrssoonnaall &&
CCoorrppoorraattee
BBaannkkiinngg
AAsssseett
MMaannaaggee--
mmeenntt
IInnvveessttmmeenntt
BBaannkk
GGrroouupp
FFuunnccttiioonnss
TToottaall
RRWWAA
46.7
6.2
1.4
32.8
8877..22
35.0
6.4
0.8
35.9
7788..11
11.7
(0.2)
0.6
(3.1)
99..00
3311..1122..2200
31.12.19
2.9
0.7
0.0
3.3
66..99
1.8
0.8
0.0
2.0
44..66
1.1
(0.1)
0.0
1.3
22..44
58.5
3.6
9.0
23.2
9944..33
50.6
3.4
4.6
22.5
8811..11
7.9
0.2
4.4
0.7
1133..22
31.12.20 vs 31.12.19
62.8
2.1
0.0
7.2
7722..11
57.3
2.1
0.0
7.7
6677..11
5.5
0.0
0.0
(0.5)
55..00
7.2
10.7
1.4
9.3
2288..77
8.3
9.5
1.1
9.4
2288..33
(1.1)
1.3
0.3
(0.1)
00..44
178.1
23.4
11.8
75.8
228899..11
153.0
22.1
6.6
77.5
225599..22
25.1
1.3
5.3
(1.8)
2299..99
11 Includes settlement risk, credit valuation adjustments, equity exposures in the banking book and securitization exposures in the banking book. 22 Non-counterparty-related risk includes deferred tax assets
recognized for temporary differences (31 December 2020: USD 10.0 billion; 31 December 2019: USD 9.0 billion), as well as property, equipment, software and other items (31 December 2020: USD 13.4 billion;
Leverage ratio denominator
The LRD increased by USD 126 billion to USD 1,037 billion as of 31 December 2020, primarily driven by asset size and other
movements of USD 82 billion and an increase from currency effects of USD 43 billion.
Movement in leverage ratio denominator by key driver1
USD billion
On-balance sheet exposures (excluding derivative exposures and SFTs)2
Derivative exposures
Securities financing transactions
Off-balance sheet items
Deduction items
LLRRDD aass ooff
3311..1122..119933
690.3
89.0
117.5
27.9
(13.3)
Currency
effects
36.3
Asset size and
other
80.1
3.6
2.3
1.4
(0.1)
4.0
(4.4)
2.0
0.6
LLRRDD aass ooff
3311..1122..2200
880066..66
9966..66
111155..33
3311..33
((1122..88))
TToottaall
11 This table does not reflect the effects of the temporary exemption that has been granted by FINMA in connection with COVID-19. Refer to the “Regulatory and legal developments” section of this report and to
the COVID-19-related information in this section for more information. 22 Excludes positive replacement values, cash collateral receivables on derivative instruments, cash collateral on securities borrowed, reverse
repurchase agreements, margin loans and prime brokerage receivables related to securities financing transactions, which are presented separately under Derivative exposures and Securities financing transactions in
this table. 33 Refer to the “Accounting and financial reporting” and “Consolidated financial statements” sections of this report for information on the restatement of comparative information, where applicable.
11,,003377..11
991111..33
4433..55
8822..33
The LRD movements described below exclude currency effects.
On-balance sheet exposures (excluding derivative exposures
and SFTs) increased by USD 80 billion, mainly driven by an
increase in cash and balances at central banks in Group
Functions, as well as higher lending assets in Global Wealth
Management and Personal & Corporate Banking.
Derivative exposures increased by USD 4 billion, mainly
reflecting market-driven movements on foreign exchange and
equity derivative contracts in the Investment Bank.
SFTs decreased by USD 4 billion, as a result of trade roll-offs
in order to provide funding to the Investment Bank, partly offset
by higher brokerage receivables.
› Refer to “Balance sheet and off-balance sheet” in this section for
more information about balance sheet movements
154
155
155
Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Capital management
Leverage ratio denominator by business division and Group Functions1
USD billion
Total IFRS assets
Difference in scope of consolidation2
Less: derivative exposures and SFTs3
OOnn--bbaallaannccee sshheeeett eexxppoossuurreess
Derivative exposures
Securities financing transactions
Off-balance sheet items
Items deducted from Swiss SRB tier 1 capital
TToottaall
Total IFRS assets
Difference in scope of consolidation2
Less: derivative exposures and SFTs3
OOnn--bbaallaannccee sshheeeett eexxppoossuurreess
Derivative exposures
Securities financing transactions
Off-balance sheet items
Items deducted from Swiss SRB tier 1 capital
TToottaall
GGlloobbaall WWeeaalltthh
MMaannaaggeemmeenntt
PPeerrssoonnaall &&
CCoorrppoorraattee
BBaannkkiinngg
AAsssseett
MMaannaaggeemmeenntt
IInnvveessttmmeenntt
BBaannkk
GGrroouupp
FFuunnccttiioonnss
TToottaall
3311..1122..2200
367.7
(0.1)
(34.0)
333333..66
6.6
30.1
6.1
(5.2)
337711..22
309.8
(0.1)
(34.9)
227744..77
6.4
32.1
4.7
(5.2)
331122..77
231.7
0.0
(16.7)
221155..00
2.0
15.1
16.3
(0.1)
224488..33
209.4
0.0
(20.6)
118888..88
1.4
19.6
14.8
(0.4)
222244..22
28.6
(21.1)
(0.7)
66..77
0.0
0.7
0.0
(1.6)
55..88
31.12.194
34.6
(28.2)
(0.9)
55..55
0.0
0.9
0.0
(1.4)
55..00
369.7
0.0
(191.6)
117788..00
82.7
46.5
8.5
(0.3)
331155..55
315.9
0.0
(141.9)
117733..99
73.2
38.9
7.3
(0.2)
229933..22
31.12.20 vs. 31.12.19
128.1
0.1
(54.9)
7733..33
5.3
22.9
0.4
(5.5)
9966..22
102.6
0.1
(55.3)
4477..44
8.0
26.0
1.0
(6.2)
7766..22
1,125.8
(21.2)
(298.0)
880066..66
96.6
115.3
31.3
(12.8)
11,,003377..11
972.2
(28.3)
(253.6)
669900..33
89.0
117.5
27.9
(13.3)
991111..33
Total IFRS assets
Difference in scope of consolidation2
Less: derivative exposures and SFTs3
OOnn--bbaallaannccee sshheeeett eexxppoossuurreess
Derivative exposures
Securities financing transactions
Off-balance sheet items
Items deducted from Swiss SRB tier 1 capital
TToottaall
11 This table does not reflect the effects of the temporary exemption that has been granted by FINMA in connection with COVID-19. Refer to the “Regulatory and legal developments” section of this report and to the
COVID-19-related information in this section for more information. 22 Represents the difference between the IFRS and the regulatory scope of consolidation, which is the applicable scope for the LRD calculation.
33 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. 44 Refer to the “Accounting and financial reporting” and “Consolidated financial statements” sections of this report for information on the restatement of comparative
information, where applicable.
153.6
7.1
(44.3)
111166..33
7.6
(2.1)
3.4
0.5
112255..88
53.8
0.0
(49.7)
44..11
9.5
7.7
1.2
(0.1)
2222..44
57.9
0.0
0.9
5588..99
0.2
(2.0)
1.4
0.0
5588..55
22.3
0.0
3.9
2266..22
0.6
(4.4)
1.5
0.2
2244..11
25.5
0.0
0.4
2255..99
(2.7)
(3.2)
(0.7)
0.6
2200..00
(6.0)
7.1
0.2
11..33
0.0
(0.2)
0.0
(0.3)
00..99
156
156
Leverage ratio denominator by business division and Group Functions1
Equity attribution and return on attributed equity
Under our equity attribution framework, tangible equity is
attributed based on a weighting of 50% each for average RWA
and average LRD, which both include resource allocations from
Group Functions to the business divisions (the BDs). Average
RWA and LRD are converted to CET1 capital equivalents using
capital ratios of 12.5% and 3.75%, respectively. If the attributed
tangible equity calculated under the weighted-driver approach is
less than the CET1 capital equivalent of risk-based capital (RBC)
for any BD, the CET1 capital equivalent of RBC is used as a floor
for that BD.
In addition to tangible equity, we allocate equity to our BDs
to support goodwill and intangible assets.
Furthermore, we allocate to BDs attributed equity related to
certain CET1 deduction items, such as compensation-related
components and expected losses on advanced internal ratings-
based portfolio less general provisions.
We attribute all remaining Basel III capital deduction items to
Group Functions. These items include deferred tax assets (DTAs)
recognized for tax loss carry-forwards and DTAs on temporary
differences in excess of the threshold, which together constitute
the largest component, dividend accruals and unrealized gains
from cash flow hedges.
Average equity attributed to BDs and Group Functions
increased by USD 3.7 billion to USD 57.8 billion in 2020,
primarily due to an increase in attributed equity for Group
Functions, mainly reflecting higher unrealized gains from cash
flow hedges and the capital reserve for potential share
repurchases.
› Refer to “Balance sheet and off-balance sheet” in this section for
more information about movements in equity attributable to
shareholders
Average attributed equity
Risk, capital, liquidity and funding, and balance sheet | Capital management
USD billion
Total IFRS assets
Difference in scope of consolidation2
Less: derivative exposures and SFTs3
OOnn--bbaallaannccee sshheeeett eexxppoossuurreess
Derivative exposures
Securities financing transactions
Off-balance sheet items
Items deducted from Swiss SRB tier 1 capital
TToottaall
Total IFRS assets
Difference in scope of consolidation2
Less: derivative exposures and SFTs3
OOnn--bbaallaannccee sshheeeett eexxppoossuurreess
Derivative exposures
Securities financing transactions
Off-balance sheet items
Items deducted from Swiss SRB tier 1 capital
TToottaall
Total IFRS assets
Difference in scope of consolidation2
Less: derivative exposures and SFTs3
OOnn--bbaallaannccee sshheeeett eexxppoossuurreess
Derivative exposures
Securities financing transactions
Off-balance sheet items
Items deducted from Swiss SRB tier 1 capital
TToottaall
GGlloobbaall WWeeaalltthh
MMaannaaggeemmeenntt
BBaannkkiinngg
MMaannaaggeemmeenntt
BBaannkk
AAsssseett
IInnvveessttmmeenntt
GGrroouupp
FFuunnccttiioonnss
TToottaall
PPeerrssoonnaall &&
CCoorrppoorraattee
3311..1122..2200
367.7
(0.1)
(34.0)
333333..66
6.6
30.1
6.1
(5.2)
337711..22
309.8
(0.1)
(34.9)
227744..77
6.4
32.1
4.7
(5.2)
331122..77
57.9
0.0
0.9
5588..99
0.2
(2.0)
1.4
0.0
5588..55
231.7
0.0
(16.7)
221155..00
2.0
15.1
16.3
(0.1)
224488..33
209.4
0.0
(20.6)
118888..88
1.4
19.6
14.8
(0.4)
222244..22
22.3
0.0
3.9
2266..22
0.6
(4.4)
1.5
0.2
2244..11
31.12.194
28.6
(21.1)
(0.7)
66..77
0.0
0.7
0.0
(1.6)
55..88
34.6
(28.2)
(0.9)
55..55
0.0
0.9
0.0
(1.4)
55..00
(6.0)
7.1
0.2
11..33
0.0
(0.2)
0.0
(0.3)
00..99
369.7
0.0
(191.6)
117788..00
82.7
46.5
8.5
(0.3)
331155..55
315.9
0.0
(141.9)
117733..99
73.2
38.9
7.3
(0.2)
229933..22
53.8
0.0
(49.7)
44..11
9.5
7.7
1.2
(0.1)
2222..44
31.12.20 vs. 31.12.19
128.1
0.1
(54.9)
7733..33
5.3
22.9
0.4
(5.5)
9966..22
102.6
0.1
(55.3)
4477..44
8.0
26.0
1.0
(6.2)
7766..22
25.5
0.0
0.4
2255..99
(2.7)
(3.2)
(0.7)
0.6
2200..00
1,125.8
(21.2)
(298.0)
880066..66
96.6
115.3
31.3
(12.8)
11,,003377..11
972.2
(28.3)
(253.6)
669900..33
89.0
117.5
27.9
(13.3)
991111..33
153.6
7.1
(44.3)
111166..33
7.6
(2.1)
3.4
0.5
112255..88
11 This table does not reflect the effects of the temporary exemption that has been granted by FINMA in connection with COVID-19. Refer to the “Regulatory and legal developments” section of this report and to the
COVID-19-related information in this section for more information. 22 Represents the difference between the IFRS and the regulatory scope of consolidation, which is the applicable scope for the LRD calculation.
33 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. 44 Refer to the “Accounting and financial reporting” and “Consolidated financial statements” sections of this report for information on the restatement of comparative
information, where applicable.
31.12.18
16.3
8.0
1.8
13.0
13.3
7.1
3.0
3.2
52.4
AAvveerraaggee eeqquuiittyy aattttrriibbuutteedd ttoo bbuussiinneessss ddiivviissiioonnss aanndd GGrroouupp FFuunnccttiioonnss
11 Includes average attributed equity related to the Basel III capital deduction items for deferred tax assets (deferred tax assets recognized for tax loss carry-forwards and deferred tax assets on temporary differences,
excess over threshold), as well as retained RWA and LRD related to deferred tax assets. 22 Excludes average attributed equity related to retained RWA and LRD related to deferred tax assets. 33 The temporary
exemption granted by FINMA until 1 January 2021 is not considered for average attributed equity. Refer to the “Regulatory and legal developments” section of this report for more information about the temporary
exemption granted by FINMA.
For the year ended
31.12.19
16.6
8.4
1.8
12.3
15.1
7.1
2.8
5.1
54.2
USD billion
Global Wealth Management
Personal & Corporate Banking
Asset Management
Investment Bank
Group Functions
of which: deferred tax assets1
of which: related to retained RWA and LRD2,3
of which: accruals for shareholder returns and others
3311..1122..2200
1177..11
88..99
22..00
1122..66
1177..44
66..77
33..44
77..22
5577..88
Return on attributed equity1
In %
Global Wealth Management
Personal & Corporate Banking
Asset Management
Investment Bank
11 Return on attributed equity for Group Functions is not shown, as it is not meaningful.
For the year ended
31.12.19
20.5
17.1
29.7
6.4
3311..1122..2200
2233..66
1144..22
7744..22
1199..77
31.12.18
20.0
22.5
23.5
11.5
156
157
157
Risk, capital, liquidity and funding, and balance sheet
Risk, capital, liquidity and funding, and balance sheet | Liquidity and funding management
Liquidity and funding management
We manage the structural risk of our balance sheet, including
interest rate risk, structural foreign exchange risk and collateral
risk, as well as the risks associated with our liquidity and funding
portfolios. This section provides information about regulatory
requirements, our governance structure, liquidity and funding
management (including our sources of liquidity and funding),
our contingency planning, and stress testing. The balances
disclosed in this section represent year-end positions, unless
indicated otherwise. Intra-period balances fluctuate in the
ordinary course of business and may differ from year-end
positions.
Strategy, objectives and governance
Audited | Our management of balance sheet, liquidity and funding
positions has the overall objective of optimizing our franchise’s
value across a broad range of market conditions while
considering current and future regulatory constraints. We
employ a number of measures to monitor these positions under
normal and stressed conditions. In particular, we use stress
scenarios to apply behavioral adjustments to our balance sheet
and calibrate the results from these internal stress models with
external measures, primarily the liquidity coverage ratio (the LCR)
and the net stable funding ratio (the NSFR). Our liquidity and
funding strategy is proposed by Group Treasury and approved
by the Group Asset and Liability Committee (the Group ALCO),
which is a committee of the Group Executive Board (the GEB)
that is overseen by the Risk Committee of the Board of Directors
(the BoD).
Group Treasury monitors and oversees the implementation
and execution of our liquidity and funding strategy and is
responsible for adherence to policies, limits, triggers and targets.
This enables close control of both our cash and collateral,
including our high-quality liquid assets, and centralizes the
Group’s general access to wholesale cash markets in Group
Treasury. In addition, should a crisis require contingency funding
measures to be invoked, Group Treasury is responsible for
coordinating liquidity generation with representatives of the
relevant business areas. Group Treasury reports on the Group’s
overall liquidity and funding position, including funding status
and concentration risks, at least monthly, to the Group ALCO
and the Risk Committee of the BoD.
Audited | Liquidity and funding limits, triggers and targets are
set at Group and, where appropriate, at legal entity and
business division levels, and are reviewed and reconfirmed at
least once a year by the BoD, the Group ALCO, the Group
Chief Financial Officer, the Group Treasurer and the business
divisions, taking into consideration current and projected
business strategy and risk tolerance. The principles underlying
our limit, trigger and target framework are designed to
maximize and sustain the value of our business franchise and
maintain an appropriate balance in the asset and liability
structure. Structural limits, triggers and targets focus on the
structure and composition of the balance sheet, with
supplementary limits, triggers and targets designed to drive the
utilization, diversification and allocation of funding resources.
To complement and support this framework, Group Treasury
monitors the markets for early warning indicators regarding
the current liquidity situation. These liquidity status indicators
are used at the Group level to assess both the overall global
and regional situations for potential threats. Treasury Risk
Control provides independent oversight over liquidity and
funding risks.
› Refer to the “Corporate governance” section of this report for
more information
› Refer to the “Risk management and control” section of this
report for more information
Liquidity management
Audited | Our liquidity risk management aims to ensure that the
firm has sufficient liquidity or access to funding sources to meet
its liabilities when due, meet prudential requirements and to
survive a severe three-month idiosyncratic and market-wide
liquidity stress event; allowing for discrete management actions
instructed by Group Treasury in addition to monetizing the
bank’s liquidity reserves.
Our liquid assets are managed using limits, triggers and
targets to maintain an appropriate level of diversification (issuer,
tenor and other risk characteristics) in response to any expected
or unexpected volatility in funding availability or requirements
caused by adverse market, operational or other firm-specific
events. The liquid asset portfolio size is managed dynamically, so
as to operate at all times within the risk appetite of the BoD and
relevant Group and subsidiary liquidity requirements. We
experienced the effects of heightened market activity on our
balance sheet in March 2020 due to the COVID-19 pandemic.
The established liquidity risk management framework operated
effectively and we were well positioned in the volatile market
environment.
Stress testing
Audited | We perform stress testing to determine the optimal asset
and liability structure that allows us to maintain an appropriately
balanced liquidity and funding position under various scenarios.
Liquidity crisis scenario analysis and contingency funding
planning support the liquidity management process and aim to
ensure that immediate corrective measures to absorb potential
sudden liquidity shortfalls can be put into effect.
We model our liquidity exposures under two main potential
scenarios: a structural market-wide scenario and a combined
scenario. We continuously refine the assumptions used to
maintain a robust, actionable and tested contingency plan.
› Refer to “Risk measurement” in the “Risk management and
control” section of this report for more information about stress
testing
158
158
Risk, capital, liquidity and funding, and balance sheet | Liquidity and funding management
Liquidity and funding management
We manage the structural risk of our balance sheet, including
structure and composition of the balance sheet, with
interest rate risk, structural foreign exchange risk and collateral
supplementary limits, triggers and targets designed to drive the
risk, as well as the risks associated with our liquidity and funding
utilization, diversification and allocation of funding resources.
portfolios. This section provides information about regulatory
To complement and support this framework, Group Treasury
requirements, our governance structure, liquidity and funding
monitors the markets for early warning indicators regarding
management (including our sources of liquidity and funding),
the current liquidity situation. These liquidity status indicators
our contingency planning, and stress testing. The balances
are used at the Group level to assess both the overall global
disclosed in this section represent year-end positions, unless
and regional situations for potential threats. Treasury Risk
indicated otherwise. Intra-period balances fluctuate in the
Control provides independent oversight over liquidity and
ordinary course of business and may differ from year-end
funding risks.
positions.
Strategy, objectives and governance
› Refer to the “Corporate governance” section of this report for
more information
› Refer to the “Risk management and control” section of this
report for more information
Audited | Our management of balance sheet, liquidity and funding
positions has the overall objective of optimizing our franchise’s
Liquidity management
value across a broad range of market conditions while
considering current and future regulatory constraints. We
Audited | Our liquidity risk management aims to ensure that the
employ a number of measures to monitor these positions under
firm has sufficient liquidity or access to funding sources to meet
normal and stressed conditions. In particular, we use stress
its liabilities when due, meet prudential requirements and to
scenarios to apply behavioral adjustments to our balance sheet
survive a severe three-month idiosyncratic and market-wide
and calibrate the results from these internal stress models with
liquidity stress event; allowing for discrete management actions
external measures, primarily the liquidity coverage ratio (the LCR)
instructed by Group Treasury in addition to monetizing the
and the net stable funding ratio (the NSFR). Our liquidity and
bank’s liquidity reserves.
funding strategy is proposed by Group Treasury and approved
Our liquid assets are managed using limits, triggers and
by the Group Asset and Liability Committee (the Group ALCO),
targets to maintain an appropriate level of diversification (issuer,
which is a committee of the Group Executive Board (the GEB)
tenor and other risk characteristics) in response to any expected
that is overseen by the Risk Committee of the Board of Directors
or unexpected volatility in funding availability or requirements
(the BoD).
caused by adverse market, operational or other firm-specific
Group Treasury monitors and oversees the implementation
events. The liquid asset portfolio size is managed dynamically, so
and execution of our liquidity and funding strategy and is
as to operate at all times within the risk appetite of the BoD and
responsible for adherence to policies, limits, triggers and targets.
relevant Group and subsidiary liquidity requirements. We
This enables close control of both our cash and collateral,
experienced the effects of heightened market activity on our
including our high-quality liquid assets, and centralizes the
balance sheet in March 2020 due to the COVID-19 pandemic.
Group’s general access to wholesale cash markets in Group
The established liquidity risk management framework operated
Treasury. In addition, should a crisis require contingency funding
effectively and we were well positioned in the volatile market
measures to be invoked, Group Treasury is responsible for
environment.
coordinating liquidity generation with representatives of the
relevant business areas. Group Treasury reports on the Group’s
Stress testing
overall liquidity and funding position, including funding status
Audited | We perform stress testing to determine the optimal asset
and concentration risks, at least monthly, to the Group ALCO
and liability structure that allows us to maintain an appropriately
and the Risk Committee of the BoD.
balanced liquidity and funding position under various scenarios.
Audited | Liquidity and funding limits, triggers and targets are
Liquidity crisis scenario analysis and contingency funding
set at Group and, where appropriate, at legal entity and
planning support the liquidity management process and aim to
business division levels, and are reviewed and reconfirmed at
ensure that immediate corrective measures to absorb potential
least once a year by the BoD, the Group ALCO, the Group
sudden liquidity shortfalls can be put into effect.
Chief Financial Officer, the Group Treasurer and the business
We model our liquidity exposures under two main potential
divisions, taking into consideration current and projected
scenarios: a structural market-wide scenario and a combined
business strategy and risk tolerance. The principles underlying
scenario. We continuously refine the assumptions used to
our limit, trigger and target framework are designed to
maintain a robust, actionable and tested contingency plan.
maximize and sustain the value of our business franchise and
maintain an appropriate balance in the asset and liability
› Refer to “Risk measurement” in the “Risk management and
control” section of this report for more information about stress
structure. Structural limits, triggers and targets focus on the
testing
Structural market-wide scenario
As a liquidity crisis could have a myriad of causes, the structural
market-wide scenario encompasses potential stress effects
across all markets, currencies and products, but it is typically not
firm-specific. In addition to the loss of the ability to replace
maturing wholesale funding, it assumes a gradual decline of
otherwise
liquidity outflows
corresponding to a one-notch downgrade in our long-term
credit rating, and a corresponding downgrade in our short-term
rating.
stable client deposits and
We use a cash capital metric that incorporates the structural
market-wide scenario and measures the amount of long-term
funding available to fund franchise and illiquid assets. Franchise
assets consist of lending exposure to clients or assets to support
franchise client activities. The illiquid portion of an asset is the
difference between the carrying amount of the asset and its
effective stressed cash value when monetized within the
scenario horizon. Long-term funding used as cash capital to
support franchise and illiquid assets is composed of unsecured
funding with a remaining time to maturity of at least one year,
deposits that have a behavioral maturity of at least one year and
shareholders’ equity.
Combined scenario
The combined scenario represents an extreme stress event that
combines a firm-specific crisis with market disruption. This
scenario assumes: (i) substantial outflows of otherwise stable
client deposits, mainly due on demand; (ii) inability to renew or
replace maturing unsecured wholesale funding; (iii) unusually
large drawdowns on loan commitments; (iv) reduced capacity to
generate liquidity from trading assets; (v) liquidity outflows
corresponding to a three-notch downgrade in our long-term
credit rating, and a corresponding downgrade in our short-term
rating;
to unwind
to deliver additional collateral;
derivative positions or
adverse
requirements due
collateral
(vii) additional
movements in the market values of derivatives; and (viii) elevated
liquidity requirements in support of continuous payment and
settlement activity. The combined scenario is run daily to project
potential cash outflows under it and is assessed as part of
ongoing risk management activities.
(vi) triggering contractual obligations
to
Contingency Funding Plan
Audited | Our Group Contingency Funding Plan is an integral part
of our global crisis management framework, which covers
various types of crisis events. This Contingency Funding Plan
contains an assessment of contingent funding sources and
liquidity preservation actions in a stressed environment, liquidity
status indicators and metrics, and contingency procedures. Our
funding diversification and global scope help to protect our
liquidity position in the event of a crisis. We regularly assess and
test all material known and expected cash flows, as well as the
level and availability of high-grade collateral that could be used
to raise additional funding if required. Our contingent funding
sources include our high-quality liquid asset (HQLA) portfolios,
available and unutilized liquidity facilities at several major central
banks, contingent reductions of liquid trading portfolio assets,
and other available management actions.
Funding management
Audited | Group Treasury regularly monitors our funding status,
including concentration risks, aiming to ensure that we maintain
a well-balanced and diversified liability structure. Our funding
risk management aims for the optimal asset and liability
structure to finance our businesses reliably and cost-efficiently.
Our funding activities are planned by analyzing the overall
liquidity and funding profile of our balance sheet, taking into
account the amount of stable funding that would be needed to
support ongoing business activities through periods of difficult
market conditions.
targets
The funding strategy of UBS Group AG is set annually in the
Funding Plan and is reviewed on a quarterly basis. The Funding
Plan is developed by Group Treasury and approved by the Group
ALCO. Group Treasury proposes, sets and oversees limits,
triggers and
including
concentration limits, weighted average maturity floors and
volume. Funding diversification is monitored continuously, with
a focus on product type, single-counterparty exposure (as a
percentage of the total), maturity profile, and the overall
contribution of a particular funding source to the liability mix.
› Refer to “Balance sheet liabilities” in this section for more
funding generation,
for
information about the development of our short-term and long-
term debt during 2020
Global Wealth Management and Personal & Corporate
Banking provide significant, cost-efficient and reliable sources of
funding. These include core deposits and Swiss covered bonds,
which use (as a pledge) a portion of our portfolio of Swiss
long-term
residential mortgages as collateral to generate
funding. In addition, we have several short-, medium- and long-
term funding programs under which we issue senior unsecured
debt and structured notes, as well as short-term debt. These
programs enable institutional and private investors who are
active in the markets of Europe, the US and Asia Pacific to
customize their investments in UBS’s debt. Collectively, these
broad product offerings and funding sources, together with the
global scope of our business activities, support our funding
stability.
Internal funding and funds transfer pricing
We use an integrated liquidity and funding framework to govern
the liquidity management of all our branches and subsidiaries,
and our major sources of liquidity are channeled through entities
that are fully consolidated. Group Treasury meets internal
demands for funding by channeling funds from entities
generating surplus cash to those in need of financing, except in
circumstances where transfer restrictions exist.
Funding costs and benefits are allocated to our business
divisions according to our liquidity and funding risk management
framework. Our internal funds transfer pricing system, which is
governed by Group Treasury, is designed to provide the proper
liability structure to support the assets and planned activities of
each business division.
158
159
159
Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Liquidity and funding management
Credit ratings
Credit ratings can affect the cost and availability of funding,
especially funding from wholesale unsecured sources. Our credit
ratings can also influence the performance of some of our
businesses and the levels of client and counterparty confidence.
Rating agencies take into account a range of factors when
assessing creditworthiness and setting credit ratings. These
include the company’s strategy, its business position and
franchise value, stability and quality of earnings, capital
adequacy, risk profile and management, liquidity management,
diversification of funding sources, asset quality, and corporate
governance. Credit ratings reflect the opinions of the rating
agencies and can change at any time.
In evaluating our liquidity and funding requirements, we
consider the potential effect of a reduction in UBS’s long-term
credit ratings and a corresponding reduction in short-term
ratings. If our credit ratings were to be downgraded, rating
trigger clauses could result in an immediate cash settlement or
the need to deliver additional collateral to counterparties from
contractual obligations
(OTC)
derivative positions and other obligations. Based on our credit
ratings as of 31 December 2020, USD 0.0 billion, USD 0.6 billion
and USD 1.2 billion would have been required for such
contractual obligations in the event of a one-notch, two-notch
and
ratings,
in
respectively. Of these, the portion related to additional collateral
is USD 0.0 billion, USD 0.2 billion and USD 0.5 billion,
respectively.
to over-the-counter
long-term credit
three-notch
reduction
related
There was one main rating action with regard to UBS Group
AG’s and UBS AG’s solicited credit ratings in 2020. As part of a
series of rating actions over several weeks across the sector to
reflect the disruption caused by the COVID-19 pandemic, Fitch
Ratings revised the outlooks for issuer ratings of UBS Group AG,
UBS AG and the rated subsidiaries from stable to negative on
31 March 2020. On 2 March 2021, Fitch Ratings revised the
outlooks for the issuer ratings of UBS Group AG, UBS AG and
the rated subsidiaries from negative back to stable.
› Refer to “Liquidity and funding management are critical to UBS’s
ongoing performance” in the “Risk factors” section of this report
for more information
Liquidity coverage ratio
The LCR measures the short-term resilience of a bank’s liquidity
profile by comparing whether sufficient HQLA are available to
survive expected net cash outflows from a significant liquidity
stress scenario, as defined by the relevant regulator.
For UBS, HQLA are low-risk unencumbered assets under the
control of Group Treasury that are easily and immediately
convertible into cash at little or no loss of value, in order to meet
liquidity needs. Our HQLA predominantly consist of assets that
qualify as Level 1 in the LCR framework, including cash, central
bank reserves and government bonds. Group HQLA are held by
UBS AG and its subsidiaries, and may include amounts that are
available to meet funding and collateral needs in certain
jurisdictions, but are not readily available for use by the Group as
a whole. These limitations are typically the result of local
regulatory requirements, including local LCR and large exposure
requirements. Funds that are effectively restricted are excluded
from the calculation of Group HQLA to the extent they exceed
the outflow assumptions for the subsidiary that holds the
relevant HQLA. On this basis, USD 47 billion of assets were
excluded from our daily average Group HQLA for the fourth
quarter of 2020. Amounts held in excess of local liquidity
requirements that are not subject to other restrictions are
generally available for transfer within the Group.
The Basel Committee on Banking Supervision (the BCBS)
standards require an LCR of at least 100%. In a period of
financial stress, the Swiss Financial Market Supervisory Authority
(FINMA) may allow banks to use their HQLA and let their LCR
temporarily fall below the minimum threshold. We monitor the
LCR in all significant currencies in order to manage any currency
mismatches between HQLA and the net expected cash outflows
in times of stress.
Our daily average LCR for the fourth quarter of 2020 was
152%, compared with 134% in the fourth quarter of 2019,
remaining above the prudential requirement communicated by
FINMA.
The average LCR increase was primarily driven by higher
HQLA balances due to debt issuances, lower net funding
consumption by the business divisions and higher customer
deposit balances, partly offset by an increase in excess liquidity
subject to transfer restrictions. Net cash outflows increased, due
to higher outflows from higher customer deposit balances and
derivatives, which were partly offset by an increase in inflows
from higher customer lending balances.
› Refer to the 31 December 2020 Pillar 3 report, available under
“Pillar 3 disclosures” at ubs.com/investors, for more information
about the LCR
› Refer to the “Significant regulated subsidiary and sub-group
information” section of this report for more information about
the LCR of UBS AG and UBS Switzerland AG
Liquidity coverage ratio
USD billion, except where indicated
High-quality liquid assets
Net cash outflows
LLiiqquuiiddiittyy ccoovveerraaggee rraattiioo ((%%))
11 Calculated based on an average of 63 data points in the fourth quarter of 2020 and 64 data points in the fourth quarter of 2019.
AAvveerraaggee 44QQ22001
221144
Average 4Q191
166
114411
115522
124
134
160
160
Credit ratings
For UBS, HQLA are low-risk unencumbered assets under the
Net stable funding ratio
funding,
short-term wholesale
The net stable funding ratio (NSFR) framework is intended to
limit overreliance on
to
encourage a better assessment of funding risk across all on- and
off-balance sheet items and to promote funding stability. The
NSFR has two components: available stable funding (ASF) and
required stable funding (RSF). ASF is the portion of capital and
liabilities expected to be available over the period of one year.
RSF is a measure of the stable funding requirement of an asset
based on its maturity, encumbrance and other characteristics, as
well as the potential for contingent calls on funding liquidity
from off-balance sheet exposures. The BCBS NSFR regulatory
framework requires a ratio of at least 100%.
Pro forma net stable funding ratio
USD billion, except where indicated
Available stable funding
Required stable funding
PPrroo ffoorrmmaa nneett ssttaabbllee ffuunnddiinngg rraattiioo ((%%))
Risk, capital, liquidity and funding, and balance sheet | Liquidity and funding management
Credit ratings can affect the cost and availability of funding,
control of Group Treasury that are easily and immediately
especially funding from wholesale unsecured sources. Our credit
convertible into cash at little or no loss of value, in order to meet
ratings can also influence the performance of some of our
liquidity needs. Our HQLA predominantly consist of assets that
businesses and the levels of client and counterparty confidence.
qualify as Level 1 in the LCR framework, including cash, central
Rating agencies take into account a range of factors when
bank reserves and government bonds. Group HQLA are held by
assessing creditworthiness and setting credit ratings. These
UBS AG and its subsidiaries, and may include amounts that are
include the company’s strategy, its business position and
available to meet funding and collateral needs in certain
franchise value, stability and quality of earnings, capital
jurisdictions, but are not readily available for use by the Group as
adequacy, risk profile and management, liquidity management,
a whole. These limitations are typically the result of local
diversification of funding sources, asset quality, and corporate
regulatory requirements, including local LCR and large exposure
governance. Credit ratings reflect the opinions of the rating
requirements. Funds that are effectively restricted are excluded
agencies and can change at any time.
from the calculation of Group HQLA to the extent they exceed
In evaluating our liquidity and funding requirements, we
the outflow assumptions for the subsidiary that holds the
consider the potential effect of a reduction in UBS’s long-term
relevant HQLA. On this basis, USD 47 billion of assets were
credit ratings and a corresponding reduction in short-term
excluded from our daily average Group HQLA for the fourth
ratings. If our credit ratings were to be downgraded, rating
quarter of 2020. Amounts held in excess of local liquidity
trigger clauses could result in an immediate cash settlement or
requirements that are not subject to other restrictions are
the need to deliver additional collateral to counterparties from
generally available for transfer within the Group.
contractual obligations
related
to over-the-counter
(OTC)
The Basel Committee on Banking Supervision (the BCBS)
derivative positions and other obligations. Based on our credit
standards require an LCR of at least 100%. In a period of
ratings as of 31 December 2020, USD 0.0 billion, USD 0.6 billion
financial stress, the Swiss Financial Market Supervisory Authority
and USD 1.2 billion would have been required for such
(FINMA) may allow banks to use their HQLA and let their LCR
contractual obligations in the event of a one-notch, two-notch
temporarily fall below the minimum threshold. We monitor the
and
three-notch
reduction
in
long-term credit
ratings,
LCR in all significant currencies in order to manage any currency
respectively. Of these, the portion related to additional collateral
mismatches between HQLA and the net expected cash outflows
is USD 0.0 billion, USD 0.2 billion and USD 0.5 billion,
in times of stress.
respectively.
Our daily average LCR for the fourth quarter of 2020 was
There was one main rating action with regard to UBS Group
152%, compared with 134% in the fourth quarter of 2019,
AG’s and UBS AG’s solicited credit ratings in 2020. As part of a
remaining above the prudential requirement communicated by
series of rating actions over several weeks across the sector to
FINMA.
reflect the disruption caused by the COVID-19 pandemic, Fitch
The average LCR increase was primarily driven by higher
Ratings revised the outlooks for issuer ratings of UBS Group AG,
HQLA balances due to debt issuances, lower net funding
UBS AG and the rated subsidiaries from stable to negative on
consumption by the business divisions and higher customer
31 March 2020. On 2 March 2021, Fitch Ratings revised the
deposit balances, partly offset by an increase in excess liquidity
outlooks for the issuer ratings of UBS Group AG, UBS AG and
subject to transfer restrictions. Net cash outflows increased, due
the rated subsidiaries from negative back to stable.
to higher outflows from higher customer deposit balances and
› Refer to “Liquidity and funding management are critical to UBS’s
derivatives, which were partly offset by an increase in inflows
ongoing performance” in the “Risk factors” section of this report
from higher customer lending balances.
The LCR measures the short-term resilience of a bank’s liquidity
profile by comparing whether sufficient HQLA are available to
survive expected net cash outflows from a significant liquidity
stress scenario, as defined by the relevant regulator.
for more information
Liquidity coverage ratio
Liquidity coverage ratio
USD billion, except where indicated
High-quality liquid assets
Net cash outflows
LLiiqquuiiddiittyy ccoovveerraaggee rraattiioo ((%%))
11 Calculated based on an average of 63 data points in the fourth quarter of 2020 and 64 data points in the fourth quarter of 2019.
› Refer to the 31 December 2020 Pillar 3 report, available under
“Pillar 3 disclosures” at ubs.com/investors, for more information
about the LCR
› Refer to the “Significant regulated subsidiary and sub-group
information” section of this report for more information about
the LCR of UBS AG and UBS Switzerland AG
AAvveerraaggee 44QQ22001
Average 4Q191
221144
114411
115522
166
124
134
In September 2020, the Swiss Federal Council adopted an
amendment to the Liquidity Ordinance for the implementation
of the NSFR. The NSFR regulation was finalized in the fourth
quarter of 2020 with the release of the revised FINMA liquidity
circular. We are on schedule to implement the final regulation
by July 2021.
› Refer to the “Regulatory and legal developments” section of this
report for more information about the finalization of the NSFR
regulation
As of 31 December 2020, our estimated pro forma NSFR was
119%, an increase of 8 percentage points compared with
31 December 2019. This reflected a USD 75 billion increase in
available stable funding, mainly driven by higher customer
deposits, capital and debt issuances. This was partly offset by an
increase in required stable funding of USD 31 billion, mainly
driven by an increase in loans and advances to customers, partly
offset by certain alignments with final FINMA rules.
3311..1122..2200
31.12.19
556633
447733
111199
488
442
111
160
161
161
Risk, capital, liquidity and funding, and balance sheet
Risk, capital, liquidity and funding, and balance sheet | Balance sheet and off-balance sheet
Balance sheet and off-balance sheet
Balance sheet
Balance sheet assets
As of 31 December 2020, balance sheet assets totaled
increase of USD 154 billion from
USD 1,126 billion, an
31 December 2019, of which currency effects accounted for
approximately USD 42 billion, driven mainly by increases in
lending assets and cash and balances at central banks, as well as
in derivatives and cash collateral receivables on derivative
instruments, partly offset by decreases in securities financing
transactions at amortized cost.
Lending assets increased by USD 56 billion, of which USD 34
billion was in Global Wealth Management and mainly reflected
increases in Lombard loans and currency effects. In Personal &
Corporate Banking, lending assets increased by USD 18 billion,
mainly driven by currency effects and increases in mortgage
loans, as well as loans related to the Swiss government-backed
COVID-19 lending program.
Cash and balances at central banks increased by USD 51
billion, predominantly in Group Treasury, as the Group increased
its liquidity reserves in a volatile market environment, and also
due to currency effects. The cash inflow was generated mainly
from issuances of money market paper, higher customer
deposits and net proceeds from securities financing transactions.
Derivatives and cash collateral receivables on derivative
in our
increased by USD 47 billion, mainly
instruments
Derivatives & Solutions business in the Investment Bank, largely
Assets
due to market-driven movements from foreign currency
contracts on the back of the volatility in exchange rates and, to a
lesser extent, from equity contracts and interest rate contracts.
Other financial assets measured at amortized cost and fair
value increased by USD 10 billion, largely due to higher volumes
of HQLA securities in the liquidity buffer within Group Treasury.
Brokerage receivables increased by USD 7 billion, mainly in our
Financing Business in the Investment Bank, as clients invested in
the market.
These increases were partly offset by a decrease in securities
financing transactions at amortized cost of USD 10 billion,
mainly in Group Treasury, and a decrease of USD 5 billion in
for unit-linked
non-financial assets and
investment contracts, largely in Asset Management, as a result
of client shifts from unit-linked investments into segregated
mandates. Trading portfolio assets decreased by USD 2 billion,
mainly in the Investment Bank, reflecting lower inventory held to
hedge client positions.
financial assets
› Refer to the “Consolidated financial statements” section of this
report for more information
› Refer to the “Our environment” section of this report for more
information about UBS’s response to the COVID-19 pandemic
and our involvement in the Swiss government-backed lending
program
USD billion
Cash and balances at central banks
Lending1
Securities financing transactions at amortized cost
Trading portfolio2
Derivatives and cash collateral receivables on derivative instruments
Brokerage receivables
Other financial assets measured at amortized cost and fair value3
Non-financial assets and financial assets for unit-linked investment contracts
TToottaall aasssseettss
11 Consists of loans and advances to banks and customers. 22 Consists of financial assets at fair value held for trading. 33 Consists of financial assets at fair value not held for trading, financial assets measured at
fair value through other comprehensive income and other financial assets measured at amortized cost, but excludes financial assets for unit-linked investment contracts.
3311..1122..2200
115588..22
339955..00
7744..22
112255..44
119922..44
2244..77
9955..11
6600..99
11,,112255..88
31.12.19
107.1
339.2
84.2
127.5
145.1
18.0
85.6
65.4
972.2
% change from
31.12.19
48
16
(12)
(2)
33
37
11
(7)
16
As of
162
162
Risk, capital, liquidity and funding, and balance sheet | Balance sheet and off-balance sheet
Balance sheet and off-balance sheet
Balance sheet
Balance sheet assets
due to market-driven movements from foreign currency
contracts on the back of the volatility in exchange rates and, to a
lesser extent, from equity contracts and interest rate contracts.
As of 31 December 2020, balance sheet assets totaled
Other financial assets measured at amortized cost and fair
USD 1,126 billion, an
increase of USD 154 billion from
value increased by USD 10 billion, largely due to higher volumes
31 December 2019, of which currency effects accounted for
of HQLA securities in the liquidity buffer within Group Treasury.
approximately USD 42 billion, driven mainly by increases in
Brokerage receivables increased by USD 7 billion, mainly in our
lending assets and cash and balances at central banks, as well as
Financing Business in the Investment Bank, as clients invested in
in derivatives and cash collateral receivables on derivative
the market.
instruments, partly offset by decreases in securities financing
These increases were partly offset by a decrease in securities
transactions at amortized cost.
financing transactions at amortized cost of USD 10 billion,
Lending assets increased by USD 56 billion, of which USD 34
mainly in Group Treasury, and a decrease of USD 5 billion in
billion was in Global Wealth Management and mainly reflected
non-financial assets and
financial assets
for unit-linked
increases in Lombard loans and currency effects. In Personal &
investment contracts, largely in Asset Management, as a result
Corporate Banking, lending assets increased by USD 18 billion,
of client shifts from unit-linked investments into segregated
mainly driven by currency effects and increases in mortgage
mandates. Trading portfolio assets decreased by USD 2 billion,
loans, as well as loans related to the Swiss government-backed
mainly in the Investment Bank, reflecting lower inventory held to
COVID-19 lending program.
hedge client positions.
Cash and balances at central banks increased by USD 51
› Refer to the “Consolidated financial statements” section of this
billion, predominantly in Group Treasury, as the Group increased
report for more information
its liquidity reserves in a volatile market environment, and also
due to currency effects. The cash inflow was generated mainly
from issuances of money market paper, higher customer
› Refer to the “Our environment” section of this report for more
information about UBS’s response to the COVID-19 pandemic
and our involvement in the Swiss government-backed lending
deposits and net proceeds from securities financing transactions.
program
Derivatives and cash collateral receivables on derivative
instruments
increased by USD 47 billion, mainly
in our
Derivatives & Solutions business in the Investment Bank, largely
Assets
USD billion
Lending1
Trading portfolio2
Brokerage receivables
TToottaall aasssseettss
Cash and balances at central banks
Securities financing transactions at amortized cost
Derivatives and cash collateral receivables on derivative instruments
Other financial assets measured at amortized cost and fair value3
Non-financial assets and financial assets for unit-linked investment contracts
As of
3311..1122..2200
31.12.19
% change from
31.12.19
115588..22
339955..00
7744..22
112255..44
119922..44
2244..77
9955..11
6600..99
11,,112255..88
107.1
339.2
84.2
127.5
145.1
18.0
85.6
65.4
972.2
48
16
(12)
(2)
33
37
11
(7)
16
11 Consists of loans and advances to banks and customers. 22 Consists of financial assets at fair value held for trading. 33 Consists of financial assets at fair value not held for trading, financial assets measured at
fair value through other comprehensive income and other financial assets measured at amortized cost, but excludes financial assets for unit-linked investment contracts.
Asset encumbrance
The table below provides a breakdown of on- and off-balance
sheet assets between encumbered assets, unencumbered assets
and assets that cannot be pledged as collateral.
Assets are presented as Encumbered if they have been
pledged as collateral against an existing liability or are otherwise
not available for securing additional funding. Included within the
latter category are assets protected under client asset
segregation rules, financial assets for unit-linked investment
contracts, assets held in certain jurisdictions to comply with
explicit minimum local asset maintenance requirements and
assets held in consolidated bankruptcy remote entities, such as
certain investment funds and other structured entities.
› Refer to “Note 23 Restricted and transferred financial assets” in
the “Consolidated financial statements” section of this report for
more information
Assets that cannot be pledged as collateral represent assets
that are not encumbered but by their nature are not considered
available to secure funding or meet collateral needs. They mainly
include collateral trading assets, derivative financial assets, cash
collateral receivables on derivative instruments, deferred tax
assets, goodwill and intangible assets and other assets.
All other assets are presented as Unencumbered. Assets that
are considered to be readily available to secure funding on a
Group and / or legal entity level are shown separately and
consist of cash and securities readily realizable in the normal
course of business. These include our HQLA and unencumbered
positions in our trading portfolio. Unencumbered assets that are
considered to be available to secure funding on a legal entity
level may be subject to restrictions that limit the total amount of
assets available to the Group as a whole. Other unencumbered
assets, which are not considered to be readily available to secure
funding on a Group and / or legal entity level, primarily consist
of loans and advances to banks.
Asset encumbrance as of 31 December 2020
Encumbered
Assets
otherwise
restricted and
not available
to secure
funding
Assets
pledged
as collateral
Unencumbered
Cash and
securities
available to
secure funding
on a Group
and / or legal
entity level
Other
realizable
assets
Assets that
cannot be
pledged as
collateral
Total Group
USD billion
BBaallaannccee sshheeeett
Cash and balances at central banks
Loans and advances to banks
Receivables from securities financing transactions
Cash collateral receivables on derivative instruments
Loans and advances to customers
Other financial assets measured at amortized cost
TToottaall ffiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt aammoorrttiizzeedd ccoosstt
Financial assets at fair value held for trading
Derivative financial instruments
Brokerage receivables
Financial assets at fair value not held for trading
TToottaall ffiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt ffaaiirr vvaalluuee tthhrroouugghh pprrooffiitt oorr lloossss
FFiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt ffaaiirr vvaalluuee tthhrroouugghh ootthheerr ccoommpprreehheennssiivvee iinnccoommee
NNoonn--ffiinnaanncciiaall aasssseettss
TToottaall bbaallaannccee sshheeeett aasssseettss aass ooff 3311 DDeecceemmbbeerr 22002200
TToottaall bbaallaannccee sshheeeett aasssseettss aass ooff 3311 DDeecceemmbbeerr 22001199
OOffff--bbaallaannccee sshheeeett
FFaaiirr vvaalluuee ooff sseeccuurriittiieess aacccceepptteedd aass ccoollllaatteerraall aass ooff 3311 DDeecceemmbbeerr 22002200
FFaaiirr vvaalluuee ooff sseeccuurriittiieess aacccceepptteedd aass ccoollllaatteerraall aass ooff 3311 DDeecceemmbbeerr 22001199
3.7
3.8
0.8
0.1
88..44
0.7
23.2
2244..00
00..00
3322..33
37.2
1122..44
7.0
20.4
2.5
2222..99
64.41
2.11
6666..55
00..1111
8899..55
76.2
336677..33
350.5
TToottaall bbaallaannccee sshheeeett aasssseettss aanndd ooffff--bbaallaannccee sshheeeett sseeccuurriittiieess aacccceepptteedd aass ccoollllaatteerraall aass ooff
3311 DDeecceemmbbeerr 22002200
445566..88
4444..77
of which: high-quality liquid assets
TToottaall bbaallaannccee sshheeeett aasssseettss aanndd ooffff--bbaallaannccee sshheeeett sseeccuurriittiieess aacccceepptteedd aass ccoollllaatteerraall aass ooff
3311 DDeecceemmbbeerr 22001199
426.7
44.2
of which: high-quality liquid assets
158.2
16.3
117744..55
57.3
37.8
9955..11
88..11
66..33
228844..00
234.0
111133..44
112.0
339977..33
214.1
346.0
178.6
11.7
354.4
1.4
336677..66
3.0
10.3
1133..33
1144..77
339955..66
343.0
77..77
6.2
74.2
29.0
4.0
6.8
111144..00
159.6
24.7
6.9
119911..11
1199..22
332244..33
281.8
158.2
15.4
74.2
32.7
379.5
27.2
668877..33
125.4
159.6
24.7
80.4
339900..00
88..33
4400..11
11,,112255..88
972.2
550000..77
475.7
440033..33
332244..33
11,,662266..55
349.2
281.8
1,447.9
11 Includes assets pledged as collateral that may be sold or repledged by counterparties. The respective amounts are disclosed in “Note 23 Restricted and transferred financial assets” in the “Consolidated financial
statements” section of this report.
Assets available to secure funding on a Group and / or legal entity level by currency
USD billion
Swiss franc
US dollar
Euro
Other
TToottaall
3311..1122..2200
110099..22
116633..33
4488..11
7766..77
339977..33
31.12.19
79.8
146.6
32.8
86.8
346.0
162
163
163
Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Balance sheet and off-balance sheet
Balance sheet liabilities
Total liabilities as of 31 December 2020 were USD 1,066 billion,
an increase of USD 148 billion from 31 December 2019, of
which currency effects accounted for approximately USD 38 billion,
driven mainly by increases in customer deposits, derivatives and
cash collateral payables on derivative instruments, as well as
short-term borrowings, partly offset by decreases in non-
financial liabilities and financial liabilities related to unit-linked
investment contracts.
ratio of customer deposits
Customer deposits increased by USD 76 billion, of which
USD 50 billion was in Global Wealth Management and USD 26
billion in Personal & Corporate Banking, as a result of clients
holding higher levels of cash, as well as currency effects. As of
to
31 December 2020, our
outstanding loan balances was 138% (31 December 2019:
137%). Derivatives and cash collateral payables on derivatives
instruments increased by USD 46 billion, in line with the
movement on the asset side. Short-term borrowings increased
by USD 29 billion, predominantly as Group Treasury increased
the liquidity available to the Group. Trading portfolio liabilities
increased by USD 3 billion, mainly in the Investment Bank,
reflecting lower netting with equivalent trading portfolio assets
following client-driven disposals on the asset side.
These increases were partly offset by decreases in non-
financial liabilities and financial liabilities related to unit-linked
investment contracts of USD 6 billion, driven by unit-linked
investment contracts, in line with the movement on the asset
side. Long-term debt issued decreased by USD 2 billion, driven
by a USD 6 billion decrease in debt issued designated at fair
value, mainly reflecting net client redemptions, partly offset by a
USD 4 billion increase in long-term debt held at amortized cost.
The increase in long-term debt held at amortized cost was
primarily the result of foreign exchange and hedge accounting
effects, as net issuances of USD 8.0 billion equivalent of euro-,
Australian dollar-, pound sterling-, and Swiss franc-denominated
senior unsecured debt were largely offset by USD 6.5 billion of
net redemptions of mainly US dollar-denominated senior
unsecured debt.
During 2021, USD 2.9 billion equivalent of TLAC-eligible
benchmark instruments will mature. In February 2021, USD 1.5
billion equivalent of loss-absorbing additional tier 1 (AT1) capital
and USD 2.4 billion equivalent of loss-absorbing tier 2 capital
were called. UBS is already compliant with its 2021 going and
gone concern capital requirements and expects to act rationally
and strategically with respect to the refinancing of any callable
capital instruments and any potential incremental issuances.
› Refer to the document titled “UBS Group AG consolidated
Equity
Equity attributable to shareholders increased by USD 4,944
million to USD 59,445 million as of 31 December 2020.
Total comprehensive income attributable to shareholders was
positive USD 8,276 million, reflecting net profit of USD 6,557
million and positive other comprehensive income (OCI) of
USD 1,719 million. OCI mainly included positive foreign currency
translation OCI of USD 1,095 million, positive cash flow hedge
OCI of USD 1,011 million and positive OCI related to financial
assets measured at fair value through OCI of USD 136 million,
partly offset by USD 293 million negative OCI related to own
credit and negative defined benefit plan OCI of USD 218 million.
Distributions to shareholders reduced retained earnings by
USD 1,304 million, reflecting the payment of 50% of the 2019
dividend of USD 0.73 per share. The other 50% was distributed
from the capital contribution reserve within share premium.
Swiss tax law effective 1 January 2020 requires Switzerland-
domiciled companies with shares listed on a stock exchange to
pay no more than 50% of dividends from capital contribution
reserves, with the remainder required to be paid from retained
earnings.
Share premium decreased by USD 1,311 million, mainly due
to the aforementioned dividend distribution of USD 1,304
million to shareholders out of the capital contribution reserve
and a reduction of USD 628 million from the delivery of treasury
shares under share-based compensation plans, partly offset by
an increase of USD 691 million that was primarily due to the
amortization of deferred equity compensation awards in the
income statement. This included approximately USD 110 million
of amortization of certain equity-settled deferred compensation
awards following the modification of the terms of such awards.
Net treasury share activity decreased equity attributable to
shareholders by USD 742 million. This was mainly due to
purchases of USD 925 million to hedge our share delivery
obligations related to employee share-based compensation and
participation plans and share repurchases of USD 364 million
under our 2018–2021 share repurchase program, partly offset
by a net disposal of treasury shares related to employee share-
based compensation awards.
Equity attributable to non-controlling interests increased by
USD 145 million to USD 319 million, mainly reflecting the
establishment of a banking partnership with Banco do Brasil on
30 September 2020.
› Refer to the “Group performance” and “Consolidated financial
statements” sections of this report for more information
› Refer to “Note 1b Changes in accounting policies, comparability
and other adjustments” in the “Consolidated financial
capital instruments and TLAC-eligible senior unsecured debt,”
statements” section of this report for more information about a
available under “Bondholder information” at ubs.com/investors,
restatement of compensation-related liabilities affecting
for more information
› Refer to the “Consolidated financial statements” section of this
report for more information
opening retained earnings, and for more information about the
modification of deferred compensation awards
› Refer to “UBS shares” in this section for more information about
the share repurchase program
› Refer to “Note 29 Changes in organization and acquisitions and
disposals of subsidiaries and businesses” in the “Consolidated
financial statements” section of this report for more information
about the banking partnership with Banco do Brasil
164
164
Risk, capital, liquidity and funding, and balance sheet | Balance sheet and off-balance sheet
Total liabilities as of 31 December 2020 were USD 1,066 billion,
Equity attributable to shareholders increased by USD 4,944
an increase of USD 148 billion from 31 December 2019, of
million to USD 59,445 million as of 31 December 2020.
which currency effects accounted for approximately USD 38 billion,
Total comprehensive income attributable to shareholders was
driven mainly by increases in customer deposits, derivatives and
positive USD 8,276 million, reflecting net profit of USD 6,557
cash collateral payables on derivative instruments, as well as
million and positive other comprehensive income (OCI) of
short-term borrowings, partly offset by decreases in non-
USD 1,719 million. OCI mainly included positive foreign currency
financial liabilities and financial liabilities related to unit-linked
translation OCI of USD 1,095 million, positive cash flow hedge
investment contracts.
OCI of USD 1,011 million and positive OCI related to financial
Customer deposits increased by USD 76 billion, of which
assets measured at fair value through OCI of USD 136 million,
USD 50 billion was in Global Wealth Management and USD 26
partly offset by USD 293 million negative OCI related to own
billion in Personal & Corporate Banking, as a result of clients
credit and negative defined benefit plan OCI of USD 218 million.
holding higher levels of cash, as well as currency effects. As of
Distributions to shareholders reduced retained earnings by
31 December 2020, our
ratio of customer deposits
to
USD 1,304 million, reflecting the payment of 50% of the 2019
outstanding loan balances was 138% (31 December 2019:
dividend of USD 0.73 per share. The other 50% was distributed
137%). Derivatives and cash collateral payables on derivatives
from the capital contribution reserve within share premium.
instruments increased by USD 46 billion, in line with the
Swiss tax law effective 1 January 2020 requires Switzerland-
movement on the asset side. Short-term borrowings increased
domiciled companies with shares listed on a stock exchange to
by USD 29 billion, predominantly as Group Treasury increased
pay no more than 50% of dividends from capital contribution
the liquidity available to the Group. Trading portfolio liabilities
reserves, with the remainder required to be paid from retained
increased by USD 3 billion, mainly in the Investment Bank,
earnings.
reflecting lower netting with equivalent trading portfolio assets
Share premium decreased by USD 1,311 million, mainly due
following client-driven disposals on the asset side.
to the aforementioned dividend distribution of USD 1,304
These increases were partly offset by decreases in non-
million to shareholders out of the capital contribution reserve
financial liabilities and financial liabilities related to unit-linked
and a reduction of USD 628 million from the delivery of treasury
investment contracts of USD 6 billion, driven by unit-linked
shares under share-based compensation plans, partly offset by
investment contracts, in line with the movement on the asset
an increase of USD 691 million that was primarily due to the
side. Long-term debt issued decreased by USD 2 billion, driven
amortization of deferred equity compensation awards in the
by a USD 6 billion decrease in debt issued designated at fair
income statement. This included approximately USD 110 million
value, mainly reflecting net client redemptions, partly offset by a
of amortization of certain equity-settled deferred compensation
USD 4 billion increase in long-term debt held at amortized cost.
awards following the modification of the terms of such awards.
The increase in long-term debt held at amortized cost was
Net treasury share activity decreased equity attributable to
primarily the result of foreign exchange and hedge accounting
shareholders by USD 742 million. This was mainly due to
effects, as net issuances of USD 8.0 billion equivalent of euro-,
purchases of USD 925 million to hedge our share delivery
Australian dollar-, pound sterling-, and Swiss franc-denominated
obligations related to employee share-based compensation and
net redemptions of mainly US dollar-denominated senior
under our 2018–2021 share repurchase program, partly offset
unsecured debt.
by a net disposal of treasury shares related to employee share-
During 2021, USD 2.9 billion equivalent of TLAC-eligible
based compensation awards.
benchmark instruments will mature. In February 2021, USD 1.5
Equity attributable to non-controlling interests increased by
billion equivalent of loss-absorbing additional tier 1 (AT1) capital
USD 145 million to USD 319 million, mainly reflecting the
and USD 2.4 billion equivalent of loss-absorbing tier 2 capital
establishment of a banking partnership with Banco do Brasil on
were called. UBS is already compliant with its 2021 going and
30 September 2020.
gone concern capital requirements and expects to act rationally
and strategically with respect to the refinancing of any callable
capital instruments and any potential incremental issuances.
› Refer to the document titled “UBS Group AG consolidated
› Refer to the “Group performance” and “Consolidated financial
statements” sections of this report for more information
› Refer to “Note 1b Changes in accounting policies, comparability
and other adjustments” in the “Consolidated financial
for more information
› Refer to the “Consolidated financial statements” section of this
report for more information
opening retained earnings, and for more information about the
modification of deferred compensation awards
› Refer to “UBS shares” in this section for more information about
the share repurchase program
› Refer to “Note 29 Changes in organization and acquisitions and
disposals of subsidiaries and businesses” in the “Consolidated
financial statements” section of this report for more information
about the banking partnership with Banco do Brasil
Balance sheet liabilities
Equity
Liabilities and equity
As of
USD billion
Short-term borrowings1
Securities financing transactions at amortized cost
Customer deposits
Long-term debt issued2
Trading portfolio3
Derivatives and cash collateral payables on derivative instruments
Brokerage payables
Other financial liabilities measured at amortized cost and fair value4
Non-financial liabilities and financial liabilities related to unit-linked investment contracts
TToottaall lliiaabbiilliittiieess
Share capital
Share premium
Treasury shares
Retained earnings
Other comprehensive income5
TToottaall eeqquuiittyy aattttrriibbuuttaabbllee ttoo sshhaarreehhoollddeerrss
Equity attributable to non-controlling interests
TToottaall eeqquuiittyy
TToottaall lliiaabbiilliittiieess aanndd eeqquuiittyy
11 Consists of short-term debt issued measured at amortized cost and amounts due to banks. 22 Consists of long-term debt issued measured at amortized cost and debt issued designated at fair value. The
classification of debt issued into short-term and long-term does not consider any early redemption features. Long-term debt issued also includes debt with a remaining time to maturity of less than one year.
33 Consists of financial liabilities at fair value held for trading. 44 Consists of other financial liabilities measured at amortized cost and other financial liabilities designated at fair value, but excludes financial liabilities
related to unit-linked investment contracts. 55 Excludes other comprehensive income related to defined benefit plans and own credit, which is recorded directly in Retained earnings.
3311..1122..2200
5577..77
66..33
552244..66
115533..88
3333..66
119988..44
3388..77
1199..11
3333..77
11,,006666..00
00..33
1166..88
((44..11))
3388..88
77..66
5599..44
00..33
5599..88
11,,112255..88
31.12.19
28.4
7.8
448.3
155.5
30.6
152.3
37.2
17.5
40.0
917.5
0.3
18.1
(3.3)
34.1
5.3
54.5
0.2
54.7
972.2
% change from
31.12.19
103
(19)
17
(1)
10
30
4
9
(16)
16
0
(7)
22
14
44
9
83
9
16
senior unsecured debt were largely offset by USD 6.5 billion of
participation plans and share repurchases of USD 364 million
Trading portfolio
Brokerage receivables
Loans and advances to customers
Asset funding
USD billion, except where indicated
As of 31 December 2020
Cash and balances at central banks
Loans and advances to banks
Securities financing transactions1
174
74
125
25
380
capital instruments and TLAC-eligible senior unsecured debt,”
statements” section of this report for more information about a
Other (including net derivative assets)
187
available under “Bondholder information” at ubs.com/investors,
restatement of compensation-related liabilities affecting
USD 68 billion
collateral surplus
138% coverage
USD 145 billion
surplus
s
t
i
s
o
p
e
d
r
e
m
o
t
s
u
C
²
d
e
u
s
s
i
t
b
e
d
m
r
e
t
-
g
n
o
L
58
6
34
39
525
154
90
60
Short-term borrowings
Securities financing transactions1
Trading portfolio
Brokerage payables
Demand deposits
236
221
Retail savings / deposits
40
27
61
93
Time deposits
Fiduciary deposits
Debt issued designated at fair value
Debt issued measured at amortized cost
Other
Total equity
1 Comprised of securities financing transactions at amortized cost. 2 Long-term debt issued also includes debt with a remaining time to maturity of less than one year.
Assets
Liabilities and equity
164
165
165
1000
750
500
250
1000
1000
750750
500500
1000
250250
750
500
250
0
00
0
Risk, capital, liquidity and funding, and balance sheet
Risk, capital, liquidity and funding, and balance sheet | Balance sheet and off-balance sheet
Liabilities by product and currency
UUSSDD bbiilllliioonn
AAllll ccuurrrreenncciieess
3311..1122..2200 31.12.19
28.4
6.6
21.8
5577..77
1111..00
4466..77
AAllll ccuurrrreenncciieess
3311..1122..2200 31.12.19
3.1
0.7
2.4
55..44
11..00
44..44
7.8
66..33
552244..66
448.3
223366..44 176.0
222200..99 168.6
4400..33
62.3
2277..00
41.4
155.5
115533..88
3333..66
30.6
119988..44
3388..77
152.3
37.2
00..66
4499..22
2222..22
2200..77
33..88
22..55
1144..44
33..22
1188..66
33..66
0.8
48.9
19.2
18.4
6.8
4.5
16.9
3.3
16.6
4.1
UUSSDD
3311..1122..2200 31.12.19
1.6
0.2
1.4
33..00
00..33
22..77
AAss aa ppeerrcceennttaaggee ooff ttoottaall lliiaabbiilliittiieess
CCHHFF
3311..1122..2200 31.12.19
0.3
0.3
0.0
00..66
00..55
00..00
EEUURR
3311..1122..2200 31.12.19
0.6
0.1
0.5
11..00
00..11
00..99
00..55
1199..77
77..44
88..33
22..88
11..22
77..66
11..33
1155..22
22..77
0.8
17.0
4.4
6.0
4.8
1.7
10.0
1.1
13.7
3.0
00..00
2200..11
77..22
1111..88
00..22
00..99
11..66
00..11
00..22
00..00
00..22
0.0
21.4
7.6
11.8
0.3
1.8
1.6
0.1
0.2
0.1
0.2
00..00
55..22
44..33
00..55
00..11
00..33
33..77
00..55
22..00
00..22
00..22
0.0
5.8
4.4
0.5
0.0
0.8
3.4
0.5
1.8
0.3
0.2
OOtthheerr
3311..1122..2200 31.12.19
0.7
0.2
0.5
00..99
00..11
00..88
00..11
44..22
33..44
00..00
00..77
00..11
11..55
11..22
11..11
00..77
00..33
0.0
4.6
2.7
0.0
1.7
0.2
1.9
1.7
0.9
0.6
0.3
1199..11
17.5
11..88
1.9
11..11
1.2
Short-term borrowings
of which: due to banks
of which: short-term debt issued1
Securities financing transactions at
amortized cost
Customer deposits
of which: demand deposits
of which: retail savings / deposits
of which: time deposits
of which: fiduciary deposits
Long-term debt issued2
Trading portfolio
Derivatives and cash collateral
payables on derivative instruments
Brokerage payables
Other financial liabilities measured at
amortized cost and fair value3
Non-financial liabilities and financial
liabilities related to unit-linked
investment contracts
TToottaall lliiaabbiilliittiieess
3333..77
11,,006666..00
40.0
917.5
33..22
110000..00
4.4
100.0
00..66
5511..66
0.6
49.0
00..22
2233..00
0.2
24.1
00..22
1133..11
0.1
12.7
22..22
1122..33
3.4
14.2
11 Short-term debt issued consists of certificates of deposit, commercial paper, acceptances and promissory notes, and other money market paper. 22 Consists of long-term debt issued measured at amortized cost
and debt issued designated at fair value. The classification of debt issued into short-term and long-term does not consider any early redemption features. Long-term debt issued also includes debt with a remaining
time to maturity of less than one year. 33 Consists of other financial liabilities measured at amortized cost and other financial liabilities designated at fair value, but excludes financial liabilities related to unit-linked
investment contracts.
166
166
Risk, capital, liquidity and funding, and balance sheet | Balance sheet and off-balance sheet
Liabilities by product and currency
3311..1122..2200 31.12.19
3311..1122..2200 31.12.19
3311..1122..2200 31.12.19
3311..1122..2200 31.12.19
3311..1122..2200 31.12.19
3311..1122..2200 31.12.19
AAllll ccuurrrreenncciieess
UUSSDD
CCHHFF
EEUURR
OOtthheerr
AAss aa ppeerrcceennttaaggee ooff ttoottaall lliiaabbiilliittiieess
UUSSDD bbiilllliioonn
AAllll ccuurrrreenncciieess
5577..77
1111..00
4466..77
28.4
6.6
21.8
66..33
552244..66
7.8
448.3
223366..44 176.0
222200..99 168.6
4400..33
2277..00
115533..88
3333..66
119988..44
3388..77
62.3
41.4
155.5
30.6
152.3
37.2
55..44
11..00
44..44
00..66
4499..22
2222..22
2200..77
33..88
22..55
1144..44
33..22
1188..66
33..66
3.1
0.7
2.4
0.8
48.9
19.2
18.4
6.8
4.5
16.9
3.3
16.6
4.1
33..00
00..33
22..77
00..55
1199..77
77..44
88..33
22..88
11..22
77..66
11..33
1155..22
22..77
1.6
0.2
1.4
0.8
17.0
4.4
6.0
4.8
1.7
10.0
1.1
13.7
3.0
00..66
00..55
00..00
00..00
2200..11
77..22
1111..88
00..22
00..99
11..66
00..11
00..22
00..00
00..22
0.3
0.3
0.0
0.0
21.4
7.6
11.8
0.3
1.8
1.6
0.1
0.2
0.1
0.2
11..00
00..11
00..99
00..00
55..22
44..33
00..55
00..11
00..33
33..77
00..55
22..00
00..22
00..22
0.6
0.1
0.5
0.0
5.8
4.4
0.5
0.0
0.8
3.4
0.5
1.8
0.3
0.2
00..99
00..11
00..88
00..11
44..22
33..44
00..00
00..77
00..11
11..55
11..22
11..11
00..77
00..33
0.7
0.2
0.5
0.0
4.6
2.7
0.0
1.7
0.2
1.9
1.7
0.9
0.6
0.3
1199..11
17.5
11..88
1.9
11..11
1.2
Short-term borrowings
of which: due to banks
of which: short-term debt issued1
Securities financing transactions at
amortized cost
Customer deposits
of which: demand deposits
of which: retail savings / deposits
of which: time deposits
of which: fiduciary deposits
Long-term debt issued2
Trading portfolio
Derivatives and cash collateral
payables on derivative instruments
Brokerage payables
Other financial liabilities measured at
amortized cost and fair value3
Non-financial liabilities and financial
liabilities related to unit-linked
investment contracts
TToottaall lliiaabbiilliittiieess
investment contracts.
Maturity analysis of assets and liabilities
The table below provides an analysis of on- and off-balance
sheet assets and liabilities by residual contractual maturity as of
the balance sheet date. The contractual maturity of assets is
based on carrying amounts and includes the effect of callable
features. The contractual maturity of liabilities is based on
carrying amounts and the earliest date on which we could be
required to pay. The presentation of liabilities at carrying amount
in this table differs from “Note 24 Maturity analysis of financial
liabilities” in the “Consolidated financial statements” section of
liabilities are presented on an
this report, where such
undiscounted basis, as required by
International Financial
Reporting Standards (IFRS).
Derivative financial instruments and financial assets and
liabilities at fair value held for trading are assigned to the Due
within 1 month column, although one should note that the
respective contractual maturities may extend over significantly
longer periods.
Assets held to hedge unit-linked
investment contracts
(presented within Financial assets at fair value not held for
trading) are assigned to the Due within 1 month column,
consistent with the maturity assigned to the related amounts
due under unit-linked investment contracts (presented within
Other financial liabilities designated at fair value).
Other financial assets and liabilities with no contractual
maturity, such as equity securities, are included in the Perpetual /
Not applicable time bucket. Undated or perpetual instruments
are classified based on the contractual notice period that the
counterparty of the instrument is entitled to give. Where there is
no contractual notice period, undated or perpetual contracts are
included in the Perpetual / Not applicable time bucket.
Non-financial assets and
liabilities with no contractual
maturity are generally included in the Perpetual / Not applicable
time bucket.
Loan commitments are classified on the basis of the earliest
date they can be drawn down.
Maturity analysis of assets and liabilities
3333..77
11,,006666..00
40.0
917.5
33..22
4.4
110000..00
100.0
00..66
5511..66
0.6
49.0
00..22
2233..00
0.2
24.1
00..22
1133..11
0.1
12.7
22..22
1122..33
3.4
14.2
11 Short-term debt issued consists of certificates of deposit, commercial paper, acceptances and promissory notes, and other money market paper. 22 Consists of long-term debt issued measured at amortized cost
and debt issued designated at fair value. The classification of debt issued into short-term and long-term does not consider any early redemption features. Long-term debt issued also includes debt with a remaining
time to maturity of less than one year. 33 Consists of other financial liabilities measured at amortized cost and other financial liabilities designated at fair value, but excludes financial liabilities related to unit-linked
USD billion
Due
within
1 month
Due
between
1 and 3
months
Due
between
3 and 6
months
Due
between
6 and 9
months
Due
between
9 and 12
months
Due
between
1 and 2
years
Due
between
2 and 5
years
Due over
5 years
Perpetual /
Not
applicable
Total
Assets
Total financial assets measured at amortized cost
Loans and advances to customers
Total financial assets measured at fair value through profit or
loss
Financial assets at fair value not held for trading
Financial assets measured at fair value through other
comprehensive income
Total non-financial assets
TToottaall aasssseettss aass ooff 3311 DDeecceemmbbeerr 22002200
TToottaall aasssseettss aass ooff 3311 DDeecceemmbbeerr 22001199
Liabilities
Total financial liabilities measured at amortized cost
Customer deposits
Debt issued measured at amortized cost
Total financial liabilities measured at fair value through
profit or loss
Debt issued designated at fair value
Total non-financial liabilities
TToottaall lliiaabbiilliittiieess aass ooff 3311 DDeecceemmbbeerr 22002200
TToottaall lliiaabbiilliittiieess aass ooff 3311 DDeecceemmbbeerr 22001199
400.3
137.3
339.4
29.7
0.1
8.3
774488..11
633.4
576.4
512.8
8.8
281.6
20.3
7.1
886655..11
727.1
54.8
42.0
9.3
9.3
0.0
0.0
6644..22
59.8
17.1
6.6
7.6
17.3
16.7
2.9
3377..33
41.2
22.9
15.6
9.6
9.6
0.2
0.0
3322..77
24.4
20.5
2.0
17.6
3.7
3.6
0.0
2244..11
22.7
11.7
9.6
6.8
6.8
0.1
0.0
1188..66
16.2
12.8
0.5
11.7
4.3
3.8
0.0
1177..11
14.3
13.4
12.1
4.2
4.2
0.2
0.0
1177..88
15.7
13.4
0.8
11.3
0.9
0.9
0.0
1144..44
10.7
45.5
41.5
7.4
7.4
0.1
0.0
5533..00
45.3
18.2
0.7
16.5
9.0
8.9
0.0
2277..22
22.0
69.4
59.5
8.7
8.7
0.4
1.4
7799..99
79.6
32.5
0.9
30.3
0.7
0.1
0.0
3333..22
33.3
69.3
62.0
3.1
3.1
7.1
0.0
7799..66
66.6
22.9
0.2
21.1
7.6
6.9
0.0
3300..55
29.4
687.3
379.5
1.5
1.5
390.0
80.4
0.0
30.4
3311..88
31.2
8.3
40.1
11,,112255..88
972.2
14.4
728.3
524.6
14.4 139.2
325.1
61.2
12.7
11,,006666..00
917.5
2.7
1177..11
16.8
Guarantees, loan commitments and forward starting transactions11
GGuuaarraanntteeeess,, llooaann ccoommmmiittmmeennttss aanndd ffoorrwwaarrdd ssttaarrttiinngg
ttrraannssaaccttiioonnss aass ooff 3311 DDeecceemmbbeerr 22002200
Guarantees, loan commitments and forward starting
transactions as of 31 December 2019
48.3
11 Starting with the fourth quarter of 2020, the notional amounts associated with derivative loan commitments, as well as forward starting repurchase and reverse repurchase agreements, measured at fair value
through profit or loss are presented together with notional amounts related to derivative instruments and have been excluded from the table above. Prior periods in the table above have been amended to ensure
comparability. Refer to “Note 10 Derivative instruments” in the “Consolidated financial statements” section of this report for information about the notional amounts of these instruments.
47.5
6611..33
6622..22
00..00
00..00
00..00
00..55
00..00
00..11
00..33
0.0
0.0
0.5
0.0
0.0
0.0
0.2
0.1
00..00
166
167
167
Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Balance sheet and off-balance sheet
Off-balance sheet
In the normal course of business, we enter into transactions
where, pursuant to IFRS, the maximum contractual exposure
may not be recognized in whole or in part on our balance sheet.
These transactions include derivative instruments, guarantees
and similar arrangements, as well as some purchased and
retained interests in non-consolidated structured entities, which
are transacted for a number of reasons, including hedging and
market-making activities, to meet specific needs of our clients or
to offer investment opportunities to clients through entities that
are not controlled by us.
When we incur an obligation or become entitled to an asset
through these arrangements, we recognize them on the balance
sheet. It should be noted that in certain instances the amount
recognized on the balance sheet does not represent the full gain
or loss potential inherent in such arrangements.
› Refer to “Note 1a Significant accounting policies,” items 1, 2a
and 2e, and “Note 28 Interests in subsidiaries and other entities”
in the “Consolidated financial statements” section of this report
for more information
The following paragraphs provide more information about
certain off-balance sheet arrangements. Additional off-balance
sheet information is primarily provided in Notes 9, 10, 18, 20,
21i, 23 and 28 in the “Consolidated financial statements”
section of this report, and in the 31 December 2020 Pillar 3
report,
at
ubs.com/investors.
disclosures”
available
“Pillar
under
3
transactions, note issuance facilities and revolving underwriting
facilities. With the exception of related premiums, generally
these guarantees and similar obligations are kept as off-balance
sheet items, unless a provision to cover probable losses or
expected credit losses is required.
Guarantees represent irrevocable assurances that, subject to
the satisfying of certain conditions, we will make payments if
our clients fail to fulfill their obligations to third parties. As of
31 December 2020, the net exposure (i.e., gross values less sub-
participations) from guarantees and similar instruments was
USD 15.0 billion, compared with USD 16.5 billion as of
31 December 2019. Fee income from issuing guarantees was
not significant to total revenues in 2020 and 2019.
We also enter into commitments to extend credit in the form
of credit lines available to secure the liquidity needs of clients.
The majority of loan commitments range in maturity from one
month to one year. Committed unconditionally revocable credit
lines are generally open-ended.
During 2020, loan commitments increased by USD 13.8
billion, mainly in Personal & Corporate Banking, driven by
additional liquidity facilities made available to large Swiss
corporate clients and the Swiss government-backed lending
program. Committed unconditionally revocable credit lines
increased by USD 5.0 billion, mainly driven by higher Lombard
facilities in Global Wealth Management, as well as higher credit
lines, mainly for corporate clients in Personal & Corporate
Banking.
Forward starting repurchase agreements remained broadly
repurchase agreements
reverse
stable. Forward
increased by USD 1.6 billion, predominantly in Group Treasury.
starting
Guarantees, loan commitments and similar arrangements
In the normal course of business, we issue various forms of
guarantees, commitments to extend credit, standby and other
letters of credit to support our clients, forward starting
Off-balance sheet1
% change from
31.12.19
USD billion
Guarantees2
(9)
Loan commitments2,3
50
Committed unconditionally revocable credit lines
14
Forward starting reverse repurchase agreements3
96
Forward starting repurchase agreements3
(8)
11 Starting with the fourth quarter of 2020, the notional amounts associated with derivative loan commitments, as well as forward starting repurchase and reverse repurchase agreements, measured at fair value
through profit or loss are presented together with notional amounts related to derivative instruments. The presentation of prior periods has been aligned to ensure comparability. The fair values of these instruments
continue to be presented within derivative instruments. 22 Guarantees and Loan commitments are shown net of sub-participations. 33 Refer to “Note 10 Derivative instruments” in the “Consolidated financial
statements” section of this report for information about loan commitments, forward starting repurchase and reverse repurchase agreements measured at fair value through profit or loss.
31.12.19
16.5
27.5
35.1
1.7
0.4
3311..1122..2200
1155..00
4411..44
4400..11
33..22
00..44
As of
If customers fail to meet their obligations, our maximum
exposure to credit risk is the contractual amount of these
instruments. The risk is similar to the risk involved in extending
loan facilities and is subject to the same risk management and
control framework. In 2020, we recognized net credit loss
expenses of USD 138 million related to loan commitments,
guarantees and other credit facilities in the scope of expected
credit loss measurement, compared with net credit loss expenses
of USD 6 million in 2019. Provisions recognized for guarantees,
loan commitments and other credit facilities in the scope of
expected credit loss measurement were USD 257 million as of
31 December 2020, compared with USD 114 million as of
31 December 2019.
› Refer to “Note 9 Financial assets at amortized cost and other
positions in scope of expected credit loss measurement” and
“Note 20 Expected credit loss measurement” in the “Consolidated
financial statements” section of this report for more information
about expected credit loss provisions
168
168
Risk, capital, liquidity and funding, and balance sheet | Balance sheet and off-balance sheet
Off-balance sheet
transactions, note issuance facilities and revolving underwriting
facilities. With the exception of related premiums, generally
In the normal course of business, we enter into transactions
these guarantees and similar obligations are kept as off-balance
where, pursuant to IFRS, the maximum contractual exposure
sheet items, unless a provision to cover probable losses or
may not be recognized in whole or in part on our balance sheet.
expected credit losses is required.
These transactions include derivative instruments, guarantees
Guarantees represent irrevocable assurances that, subject to
and similar arrangements, as well as some purchased and
the satisfying of certain conditions, we will make payments if
retained interests in non-consolidated structured entities, which
our clients fail to fulfill their obligations to third parties. As of
are transacted for a number of reasons, including hedging and
31 December 2020, the net exposure (i.e., gross values less sub-
market-making activities, to meet specific needs of our clients or
participations) from guarantees and similar instruments was
When we incur an obligation or become entitled to an asset
not significant to total revenues in 2020 and 2019.
through these arrangements, we recognize them on the balance
We also enter into commitments to extend credit in the form
sheet. It should be noted that in certain instances the amount
of credit lines available to secure the liquidity needs of clients.
recognized on the balance sheet does not represent the full gain
The majority of loan commitments range in maturity from one
or loss potential inherent in such arrangements.
month to one year. Committed unconditionally revocable credit
› Refer to “Note 1a Significant accounting policies,” items 1, 2a
lines are generally open-ended.
and 2e, and “Note 28 Interests in subsidiaries and other entities”
During 2020, loan commitments increased by USD 13.8
in the “Consolidated financial statements” section of this report
billion, mainly in Personal & Corporate Banking, driven by
for more information
additional liquidity facilities made available to large Swiss
corporate clients and the Swiss government-backed lending
The following paragraphs provide more information about
program. Committed unconditionally revocable credit lines
certain off-balance sheet arrangements. Additional off-balance
increased by USD 5.0 billion, mainly driven by higher Lombard
sheet information is primarily provided in Notes 9, 10, 18, 20,
facilities in Global Wealth Management, as well as higher credit
21i, 23 and 28 in the “Consolidated financial statements”
lines, mainly for corporate clients in Personal & Corporate
section of this report, and in the 31 December 2020 Pillar 3
Banking.
report,
available
under
“Pillar
3
disclosures”
at
Forward starting repurchase agreements remained broadly
ubs.com/investors.
stable. Forward
starting
reverse
repurchase agreements
increased by USD 1.6 billion, predominantly in Group Treasury.
Guarantees, loan commitments and similar arrangements
In the normal course of business, we issue various forms of
guarantees, commitments to extend credit, standby and other
letters of credit to support our clients, forward starting
Off-balance sheet1
USD billion
Guarantees2
Loan commitments2,3
Committed unconditionally revocable credit lines
Forward starting reverse repurchase agreements3
Forward starting repurchase agreements3
As of
% change from
3311..1122..2200
31.12.19
31.12.19
1155..00
4411..44
4400..11
33..22
00..44
16.5
27.5
35.1
1.7
0.4
(9)
50
14
96
(8)
11 Starting with the fourth quarter of 2020, the notional amounts associated with derivative loan commitments, as well as forward starting repurchase and reverse repurchase agreements, measured at fair value
through profit or loss are presented together with notional amounts related to derivative instruments. The presentation of prior periods has been aligned to ensure comparability. The fair values of these instruments
continue to be presented within derivative instruments. 22 Guarantees and Loan commitments are shown net of sub-participations. 33 Refer to “Note 10 Derivative instruments” in the “Consolidated financial
statements” section of this report for information about loan commitments, forward starting repurchase and reverse repurchase agreements measured at fair value through profit or loss.
If customers fail to meet their obligations, our maximum
loan commitments and other credit facilities in the scope of
exposure to credit risk is the contractual amount of these
expected credit loss measurement were USD 257 million as of
instruments. The risk is similar to the risk involved in extending
31 December 2020, compared with USD 114 million as of
loan facilities and is subject to the same risk management and
31 December 2019.
control framework. In 2020, we recognized net credit loss
expenses of USD 138 million related to loan commitments,
guarantees and other credit facilities in the scope of expected
credit loss measurement, compared with net credit loss expenses
› Refer to “Note 9 Financial assets at amortized cost and other
positions in scope of expected credit loss measurement” and
“Note 20 Expected credit loss measurement” in the “Consolidated
financial statements” section of this report for more information
of USD 6 million in 2019. Provisions recognized for guarantees,
about expected credit loss provisions
risks
various
from guarantees and
For certain obligations we enter into partial sub-participations
to mitigate
loan
commitments. A sub-participation is an agreement by another
party to take a share of the loss in the event that the obligation
is not fulfilled by the obligor and, where applicable, to fund a
part of the credit facility. We retain the contractual relationship
with the obligor, and the sub-participant has only an indirect
relationship. We only enter into sub-participation agreements
with banks to which we ascribe a credit rating equal to or better
than that of the obligor.
to offer investment opportunities to clients through entities that
USD 15.0 billion, compared with USD 16.5 billion as of
We also provide to third parties representations, warranties
are not controlled by us.
31 December 2019. Fee income from issuing guarantees was
and indemnifications in the normal course of business.
Support provided to non-consolidated investment funds
In 2020, the Group did not provide material support, financial or
otherwise, to unconsolidated investment funds when the Group
was not contractually obligated to do so, nor does the Group
have an intention to do so.
Clearing house and exchange memberships
We are a member of numerous securities and derivative
exchanges and clearing houses. In connection with some of such
memberships, we may be required to pay a share of the financial
obligations of another member who defaults, or we may be
Contractual obligations
USD million
Long-term debt obligations
Lease obligations
Purchase obligations
TToottaall aass ooff 3311 DDeecceemmbbeerr 22002200
otherwise exposed to additional financial obligations. While the
membership rules vary, obligations generally would arise only if
the exchange or clearing house had exhausted its resources. We
consider the probability of a material loss due to such
obligations to be remote.
Deposit insurance
Swiss banking law and the deposit insurance system require
Swiss banks and securities dealers to jointly guarantee an
amount of up to CHF 6 billion for privileged client deposits in
the event that a Swiss bank or securities dealer becomes
insolvent. FINMA estimates our share in the deposit insurance
system to be CHF 0.9 billion.
As a member of the Deposit Protection Fund of the
Association of German Banks, we are required to provide an
indemnity related to coverage of certain non-institutional
deposits (for amounts above EUR 100,000 and below EUR 565
million per depositor) in the event UBS Europe SE becomes
unable to meet its obligations.
The
aforementioned deposit
requirements
represent a contingent payment obligation and expose us to
additional risk. As of 31 December 2020, we considered the
probability of a material loss from our obligations to be remote.
insurance
Payment due by period
Within 1 year
58,529
654
712
5599,,889955
1–3 years
41,792
1,161
607
4433,,556600
3–5 years
Over 5 years
20,930
869
247
45,100
1,808
99
Total
166,350
4,492
1,665
2222,,004455
4477,,000077
117722,,550088
Contractual obligations
The table above summarizes payments due by period under
contractual obligations as of 31 December 2020.
All contractual obligations included in this table, with the
exception of purchase obligations, are recognized as liabilities on
our balance sheet. Purchase obligations represent commitments
to purchase goods or services in the future, with expenses only
recognized as goods are transferred or services rendered in the
future. Amounts in the table above are presented on an
undiscounted basis.
Long-term debt obligations as of 31 December 2020 were
USD 166 billion. They consisted of debt issued designated at fair
value (USD 64 billion) and long-term debt issued measured at
amortized cost (USD 102 billion) and represent estimated future
interest and principal payments on an undiscounted basis.
› Refer to “Note 24 Maturity analysis of financial liabilities” in the
“Consolidated financial statements” section of this report for
more information
More than half of total long-term debt obligations had a fixed
rate of interest. Amounts due on interest rate swaps used to
hedge interest rate risk inherent in fixed-rate debt issued, and
designated in fair value hedge accounting relationships, are not
included in the table above. The notional amount of these
interest rate swaps was USD 67 billion as of 31 December 2020.
Debt issued designated at fair value mainly consists of structured
notes and is generally economically hedged, but it would not be
practicable to estimate the amount and / or timing of the
payments on interest swaps used to hedge these instruments as
interest rate risk inherent in respective liabilities is generally risk-
managed on a portfolio level.
Our liabilities recognized on the balance sheet as Amounts
due to banks, Payables from securities financing transactions,
Cash collateral payables on derivative instruments, Customer
deposits, Other financial liabilities measured at amortized cost,
Financial liabilities at fair value held for trading, Derivative
financial instruments, Brokerage payables designated at fair
value, Other financial
liabilities designated at fair value,
Provisions and Other non-financial liabilities are excluded from
the table above.
› Refer to the respective Notes, including “Note 25 Hedge
accounting,” in the “Consolidated financial statements” section
of this report for more information
168
169
169
Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Balance sheet and off-balance sheet
Cash flows
As a global financial institution, our cash flows are complex and
often may bear little relation to our net earnings and net assets.
Consequently, we believe that a traditional cash flow analysis is
less meaningful when evaluating our liquidity position than the
liquidity, funding and capital management frameworks and
measures described elsewhere in this section.
Cash and cash equivalents
As of 31 December 2020, cash and cash equivalents totaled
USD 173.5 billion, an
increase of USD 53.7 billion from
31 December 2019, driven by net cash inflows from operating
and financing activities, as well as the effects of exchange rate
differences on cash and cash equivalents, mainly reflecting an
appreciation of the Swiss franc against the US dollar in 2020.
These effects were partly offset by net cash outflows from
investing activities.
Operating activities
Net cash inflows from operating activities were USD 37 billion in
2020. Net operating cash flow, before changes in operating
assets and liabilities and income taxes paid, was an inflow of
USD 4.1 billion. Changes in operating assets and liabilities
resulted in net cash inflows of USD 32.8 billion, mainly driven by
net inflows of USD 51.8 billion related to customer deposits and
USD 11.3 billion from financial assets and liabilities at fair value
held for trading and derivative financial instruments and a
USD 9.6 billion inflow from securities financing transactions.
These inflows were partly offset by a net outflow from lending
balances to customers of USD 33.7 billion and a net outflow
from brokerage receivables and payables of USD 5.2 billion.
In 2019, net cash inflows from operating activities were
USD 19.7 billion. Net operating cash flow, before changes in
operating assets and liabilities and income taxes paid, was an
inflow of USD 14.3 billion. Changes in operating assets and
liabilities resulted in net cash inflows of USD 5.4 billion, mainly
driven by a USD 23.2 billion net inflow related to customer
deposits and an USD 8.7 billion inflow from securities financing
transactions. These inflows were partly offset by a net outflow
from financial assets and liabilities at fair value held for trading
and derivative financial instruments of USD 18.8 billion and net
outflows from loans and advances to banks of USD 4.3 billion
and from lending balances to customers of USD 3.1 billion.
Investing activities
Investing activities resulted in a net cash outflow of USD 6.8
billion in 2020, primarily related to a cash outflow of USD 6.3
billion from the purchase of financial assets measured at fair
value through other comprehensive income and a net outflow of
USD 4.2 billion from purchase and redemption of debt securities
measured at amortized cost. These outflows were partly offset
by an inflow from the disposal and redemption of financial
assets measured at fair value through other comprehensive
income of USD 4.5 billion.
In 2019, investing activities resulted in a net cash outflow of
USD 1.6 billion.
Financing activities
Financing activities resulted in a net cash inflow of USD 12.4
billion in 2020, mainly due to net issuance proceeds of USD 23.9
billion from short-term debt. This inflow was partly offset by the
net repayment of USD 6.8 billion of long-term debt, which
includes debt
issued designated at fair value, a dividend
distribution to shareholders of USD 2.6 billion and net cash used
to acquire treasury shares of USD 1.4 billion.
In 2019, financing activities resulted in a net cash outflow of
USD 25.6 billion, mainly due to the net repayment of USD 17.1
billion of short-term debt and the net repayment of USD 3.8
billion of long-term debt, which includes debt issued designated
at fair value. In addition, a dividend distribution to shareholders
of USD 2.5 billion and net cash used to acquire treasury shares of
USD 1.6 billion contributed to the net cash outflow.
› Refer to “Primary financial statements” in the “Consolidated
financial statements” section of this report for more information
about cash flows
Statement of cash flows (condensed)
USD billion
Net cash flow from / (used in) operating activities
Net cash flow from / (used in) investing activities
Net cash flow from / (used in) financing activities
Effects of exchange rate differences on cash and cash equivalents
NNeett iinnccrreeaassee // ((ddeeccrreeaassee)) iinn ccaasshh aanndd ccaasshh eeqquuiivvaalleennttss
CCaasshh aanndd ccaasshh eeqquuiivvaalleennttss aatt tthhee eenndd ooff tthhee yyeeaarr
For the year ended
3311..1122..2200
31.12.19
3377
((77))
1122
1111
5544
117744
20
(2)
(26)
1
(6)
120
170
170
Cash flows
deposits and an USD 8.7 billion inflow from securities financing
transactions. These inflows were partly offset by a net outflow
Currency management
Strategy, objectives and governance
Group Treasury focuses on three main areas of currency risk
management: (i) currency-matched funding and investment of
non-US dollar assets and liabilities; (ii) sell-down of non-US dollar
profits and losses; and (iii) selective hedging of anticipated non-
US dollar profits and losses to further mitigate the effect of
structural imbalances in the balance sheet. Non-trading foreign
exchange risks arising from transactions denominated in a
currency other than the reporting entity’s functional currency are
managed under market risk limits. Group Treasury also manages
structural currency composition at the consolidated Group level.
Currency-matched funding and investment of non-US dollar
assets and liabilities
For monetary balance sheet items and other investments, as far
as is practical and efficient, we follow the principle of matching
the currencies of our assets and liabilities for funding purposes.
This avoids profits and losses arising from the translation of non-
US dollar assets and liabilities.
Net investment hedge accounting is applied to non-US dollar
core investments to balance the effect of foreign exchange
movements on both CET1 capital and the CET1 capital ratio.
› Refer to “Note 1a Significant accounting policies” and “Note 25
Hedge accounting” in the “Consolidated financial statements”
section of this report for more information
Sell-down of non-US dollar reported profits and losses
Income statement items of foreign subsidiaries and branches of
UBS AG with a functional currency other than the US dollar are
translated into US dollars at average rates. To reduce earnings
volatility on the translation of previously recognized earnings in
foreign currencies, Group Treasury centralizes the profits and
losses (under IFRS) arising in UBS AG and its branches and sells
or buys the profit or loss for US dollars on a monthly basis. Our
foreign subsidiaries follow a similar monthly sell-down process
into their own functional currencies. Retained earnings in
foreign subsidiaries with a functional currency other than the US
dollar are integrated and managed as part of our net investment
hedge accounting program.
Hedging of anticipated non-US dollar profits and losses
The Group ALCO may at any time instruct Group Treasury to
execute hedges to protect anticipated future profits and losses in
foreign currencies against possible adverse trends of foreign
exchange rates. Although intended to hedge future earnings,
these transactions are accounted for as open currency positions
and subject to internal market risk limits for value-at-risk and
stress loss limits.
› Refer to “Capital management” in this section for more
information about our active management of sensitivity to
currency movements and the effect thereof on our key ratios
Dividend distribution
UBS Group AG declares dividends in US dollars. Shareholders
holding shares through SIX (ISIN: CH0244767585) will receive
dividends in Swiss francs, based on a published exchange rate
calculated up to five decimal places, on the day prior to the ex-
dividend date. Shareholders holding shares through DTC
(ISIN: CH0244767585; CUSIP: H42097107) will be paid
dividends in US dollars.
› Refer to the “Standalone financial statements” section of this
report for more information about the proposed dividend
distribution of UBS Group AG
Risk, capital, liquidity and funding, and balance sheet | Balance sheet and off-balance sheet
As a global financial institution, our cash flows are complex and
from financial assets and liabilities at fair value held for trading
often may bear little relation to our net earnings and net assets.
and derivative financial instruments of USD 18.8 billion and net
Consequently, we believe that a traditional cash flow analysis is
outflows from loans and advances to banks of USD 4.3 billion
less meaningful when evaluating our liquidity position than the
and from lending balances to customers of USD 3.1 billion.
liquidity, funding and capital management frameworks and
measures described elsewhere in this section.
Investing activities
Cash and cash equivalents
Investing activities resulted in a net cash outflow of USD 6.8
billion in 2020, primarily related to a cash outflow of USD 6.3
As of 31 December 2020, cash and cash equivalents totaled
billion from the purchase of financial assets measured at fair
USD 173.5 billion, an
increase of USD 53.7 billion from
value through other comprehensive income and a net outflow of
31 December 2019, driven by net cash inflows from operating
USD 4.2 billion from purchase and redemption of debt securities
and financing activities, as well as the effects of exchange rate
measured at amortized cost. These outflows were partly offset
differences on cash and cash equivalents, mainly reflecting an
by an inflow from the disposal and redemption of financial
appreciation of the Swiss franc against the US dollar in 2020.
assets measured at fair value through other comprehensive
These effects were partly offset by net cash outflows from
income of USD 4.5 billion.
In 2019, investing activities resulted in a net cash outflow of
USD 1.6 billion.
investing activities.
Operating activities
Net cash inflows from operating activities were USD 37 billion in
Financing activities
2020. Net operating cash flow, before changes in operating
Financing activities resulted in a net cash inflow of USD 12.4
assets and liabilities and income taxes paid, was an inflow of
billion in 2020, mainly due to net issuance proceeds of USD 23.9
USD 4.1 billion. Changes in operating assets and liabilities
billion from short-term debt. This inflow was partly offset by the
resulted in net cash inflows of USD 32.8 billion, mainly driven by
net repayment of USD 6.8 billion of long-term debt, which
net inflows of USD 51.8 billion related to customer deposits and
includes debt
issued designated at fair value, a dividend
USD 11.3 billion from financial assets and liabilities at fair value
distribution to shareholders of USD 2.6 billion and net cash used
held for trading and derivative financial instruments and a
to acquire treasury shares of USD 1.4 billion.
USD 9.6 billion inflow from securities financing transactions.
In 2019, financing activities resulted in a net cash outflow of
These inflows were partly offset by a net outflow from lending
USD 25.6 billion, mainly due to the net repayment of USD 17.1
balances to customers of USD 33.7 billion and a net outflow
billion of short-term debt and the net repayment of USD 3.8
from brokerage receivables and payables of USD 5.2 billion.
billion of long-term debt, which includes debt issued designated
In 2019, net cash inflows from operating activities were
at fair value. In addition, a dividend distribution to shareholders
USD 19.7 billion. Net operating cash flow, before changes in
of USD 2.5 billion and net cash used to acquire treasury shares of
operating assets and liabilities and income taxes paid, was an
USD 1.6 billion contributed to the net cash outflow.
inflow of USD 14.3 billion. Changes in operating assets and
liabilities resulted in net cash inflows of USD 5.4 billion, mainly
› Refer to “Primary financial statements” in the “Consolidated
financial statements” section of this report for more information
driven by a USD 23.2 billion net inflow related to customer
about cash flows
Statement of cash flows (condensed)
USD billion
Net cash flow from / (used in) operating activities
Net cash flow from / (used in) investing activities
Net cash flow from / (used in) financing activities
Effects of exchange rate differences on cash and cash equivalents
NNeett iinnccrreeaassee // ((ddeeccrreeaassee)) iinn ccaasshh aanndd ccaasshh eeqquuiivvaalleennttss
CCaasshh aanndd ccaasshh eeqquuiivvaalleennttss aatt tthhee eenndd ooff tthhee yyeeaarr
For the year ended
3311..1122..2200
31.12.19
3377
((77))
1122
1111
5544
117744
20
(2)
(26)
1
(6)
120
170
171
171
Risk, capital, liquidity and funding, and balance sheet
Risk, capital, liquidity and funding, and balance sheet | UBS shares
UBS shares
UBS Group AG shares
Audited | As of 31 December 2020, IFRS equity attributable to
shareholders amounted to USD 59,445 million, represented by
3,859,055,395 shares issued. Shares issued did not change in
2020.
UBS Group share information
Shares issued
Treasury shares
of which: related to share repurchase program
Shares outstanding
Basic earnings per share (USD)1
Diluted earnings per share (USD)1
Basic earnings per share (CHF)2
Diluted earnings per share (CHF)2
Equity attributable to shareholders (USD million)
Less: goodwill and intangible assets (USD million)
Tangible equity attributable to shareholders (USD million)
Ordinary cash dividends declared per share (USD)3,4
Total book value per share (USD)
Tangible book value per share (USD)
Share price (USD)5
Market capitalization (USD million)
Each share has a nominal value of CHF 0.10, carries one vote
if entered into the share register as having the right to vote, and
also entitles the holder to a proportionate share of distributed
dividends. All shares are fully paid up. As the articles of
association of UBS Group AG indicate, there are no other classes
of shares and no preferential rights for shareholders.
› Refer to the “Corporate governance” section of this report for
more information about UBS shares
As of or for the year ended
3311..1122..2200
31.12.19
33,,885599,,005555,,339955
3,859,055,395
330077,,447777,,000022
114488,,997755,,880000
243,021,296
117,706,540
33,,555511,,557788,,339933
3,616,034,099
11..8833
11..7777
11..7711
11..6655
5599,,444455
66,,448800
5522,,996655
00..3377
1166..7744
1144..9911
1144..0088
5500,,001133
1.17
1.14
1.17
1.14
54,501
6,469
48,032
0.73
15.07
13.28
12.63
45,661
% change from
31.12.19
0
27
27
(2)
56
55
46
45
9
0
10
(49)
11
12
12
10
11 Refer to “Share information and earnings per share” in the “Consolidated financial statements” section of this report for more information. 22 Basic and diluted earnings per share in Swiss francs are calculated
based on a translation of net profit / (loss) under our US dollar presentation currency. 33 Dividends and / or distributions out of the capital contribution reserve are normally approved and paid in the year
subsequent to the reporting period. 44 Refer to “Statement of proposed appropriation of total profit and dividend distribution out of total profit and capital contribution reserve” in the “Standalone financial
statements” section of this report for more information. 55 Represents the share price as listed on the SIX Swiss Exchange, translated to US dollars using the closing exchange rate as of the respective date.
172
172
Each share has a nominal value of CHF 0.10, carries one vote
if entered into the share register as having the right to vote, and
Audited | As of 31 December 2020, IFRS equity attributable to
also entitles the holder to a proportionate share of distributed
shareholders amounted to USD 59,445 million, represented by
dividends. All shares are fully paid up. As the articles of
3,859,055,395 shares issued. Shares issued did not change in
association of UBS Group AG indicate, there are no other classes
2020.
of shares and no preferential rights for shareholders.
› Refer to the “Corporate governance” section of this report for
more information about UBS shares
Risk, capital, liquidity and funding, and balance sheet | UBS shares
UBS shares
UBS Group AG shares
UBS Group share information
Shares issued
Treasury shares
of which: related to share repurchase program
Shares outstanding
Basic earnings per share (USD)1
Diluted earnings per share (USD)1
Basic earnings per share (CHF)2
Diluted earnings per share (CHF)2
Equity attributable to shareholders (USD million)
Less: goodwill and intangible assets (USD million)
Tangible equity attributable to shareholders (USD million)
Ordinary cash dividends declared per share (USD)3,4
Total book value per share (USD)
Tangible book value per share (USD)
Share price (USD)5
Market capitalization (USD million)
As of or for the year ended
3311..1122..2200
31.12.19
33,,885599,,005555,,339955
3,859,055,395
330077,,447777,,000022
114488,,997755,,880000
243,021,296
117,706,540
33,,555511,,557788,,339933
3,616,034,099
% change from
31.12.19
11..8833
11..7777
11..7711
11..6655
5599,,444455
66,,448800
5522,,996655
00..3377
1166..7744
1144..9911
1144..0088
5500,,001133
1.17
1.14
1.17
1.14
54,501
6,469
48,032
0.73
15.07
13.28
12.63
45,661
0
27
27
(2)
56
55
46
45
9
0
11
12
12
10
10
(49)
11 Refer to “Share information and earnings per share” in the “Consolidated financial statements” section of this report for more information. 22 Basic and diluted earnings per share in Swiss francs are calculated
based on a translation of net profit / (loss) under our US dollar presentation currency. 33 Dividends and / or distributions out of the capital contribution reserve are normally approved and paid in the year
subsequent to the reporting period. 44 Refer to “Statement of proposed appropriation of total profit and dividend distribution out of total profit and capital contribution reserve” in the “Standalone financial
statements” section of this report for more information. 55 Represents the share price as listed on the SIX Swiss Exchange, translated to US dollars using the closing exchange rate as of the respective date.
Holding of UBS Group AG shares
Group Treasury holds UBS Group AG shares to hedge future
share delivery obligations related to employee share-based
compensation awards, and also holds shares purchased under
the share repurchase program. As of 31 December 2020, we
held a total of 307,744,002 treasury shares (31 December 2019:
243,021,296), or 8.0% (31 December 2019: 6.3%) of shares
issued.
Shares acquired under our 2018–2021 share repurchase
program totaled 149.0 million as of 31 December 2020
(31 December 2019: 117.7 million) for a total consideration of
CHF 1,900 million
(USD 1,931 million). This program was
completed on 2 February 2021 with the purchase of an
additional 7.7 million shares in January and February 2021 for a
total consideration of CHF 100 million (USD 112 million). The
shares repurchased under this program are expected to be
canceled by means of a capital reduction, to be proposed for
shareholder approval at the 2021 Annual General Meeting. On
8 February 2021, we commenced a new three-year share
repurchase program of up to CHF 4 billion, of which we expect
to execute up to USD 1 billion by the end of the first quarter of
2021.
Treasury share purchases
Treasury shares held to hedge our share delivery obligations
related to employee share-based compensation awards totaled
157.1 million shares as of 31 December 2020 (31 December
2019: 125.2 million). Share delivery obligations related to
employee share-based compensation awards totaled 172 million
shares as of 31 December 2020 (31 December 2019: 156
million) and are calculated on the basis of undistributed notional
share awards, taking into account applicable performance
conditions. Treasury shares held are delivered to employees at
exercise or vesting. As of 31 December 2020, up to 122 million
UBS Group AG shares (31 December 2019: 122 million) could
have been issued out of conditional capital to satisfy share
delivery obligations of any future employee share option
programs or similar awards.
The Investment Bank also holds a limited number of
UBS Group AG shares, primarily in its capacity as a market-
maker with regard to UBS Group AG shares and related
issued structured debt
derivatives, and to hedge certain
instruments.
The
table below outlines
the market purchases of
UBS Group AG shares by Group Treasury. It does not include the
activities of the Investment Bank.
Month of purchase3
January 2020
February 2020
March 2020
April 2020
May 2020
June 2020
July 2020
August 2020
September 2020
October 2020
November 2020
December 2020
Share repurchase program1
Other treasury shares purchased2
Number of shares
8,124,500
Average price in CHF
12.31
7,928,760
15,216,000
12.61
9.86
Remaining volume of
share repurchase
program in CHF million
at month-end
350
250
100
100
100
100
100
100
100
100
100
1004
Number of shares
5,250,000
Average price in USD
12.54
26,250,000
3,000,000
12.67
8.21
7,500,000
30,000,000
11.92
13.75
11 In March 2018, UBS initiated a share repurchase program of up to CHF 2 billion over a three-year period and this program was completed on 2 February 2021. As noted above, on 8 February 2021, a new three-
year program of up to CHF 4 billion commenced. The share repurchase information in this table is disclosed in Swiss francs as the share buybacks were transacted in Swiss francs on a separate trading line on the SIX
Swiss Exchange. 22 This table excludes purchases for the purpose of hedging derivatives linked to UBS Group AG shares and for market-making in UBS Group AG shares. The table also excludes UBS Group AG
shares purchased by post-employment benefit funds for UBS employees, which are managed by a board of UBS management and employee representatives in accordance with Swiss law. UBS’s post-employment
benefit funds purchased 1,757,855 UBS Group AG shares during the year and held 14,853,861 UBS Group AG shares as of 31 December 2020. 33 Based on the transaction date of the respective treasury share
purchases. 44 The remaining volume of the share repurchase program as of 31 December 2020 was USD 113 million. This was calculated based on the remaining volume of CHF 100 million as of 31 December
2020 and the respective closing exchange rate as of this date. The share repurchase program was completed on 2 February 2021.
Trading volumes
1,000 shares
SIX Swiss Exchange total
SIX Swiss Exchange daily average
New York Stock Exchange total
New York Stock Exchange daily average
Source: Reuters
For the year ended
3311..1122..2200
55,,009955,,990088
2200,,222222
226600,,668811
11,,003300
31.12.19
4,161,555
16,713
203,967
809
31.12.18
3,277,995
13,165
166,728
664
172
173
173
Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | UBS shares
Listing of UBS Group AG shares
UBS Group AG shares are listed on the SIX Swiss Exchange (SIX).
They are also listed on the New York Stock Exchange (the NYSE)
as global registered shares. As such, they can be traded and
transferred across applicable borders, without the need for
conversion, with identical shares traded on different stock
exchanges in different currencies.
During 2020,
the average daily
trading volume of
UBS Group AG shares was 20.2 million shares on SIX and 1.0
million shares on the NYSE. SIX is expected to remain the main
venue for determining the movement in our share price, because
of the high volume traded on this exchange.
During the hours in which both SIX and the NYSE are
simultaneously open for trading (generally 3:30 p.m. to 5:30
p.m. Central European Time), price differences between these
exchanges are likely to be arbitraged away by professional
market-makers. Accordingly, the share price will typically be
similar between the two exchanges when considering the
prevailing US dollar / Swiss franc exchange rate. When SIX is
closed for trading, globally traded volumes will typically be
lower. However, the specialist firm making a market in UBS
Group AG shares on the NYSE is required to facilitate sufficient
liquidity and maintain an orderly market in UBS Group AG
shares throughout normal NYSE trading hours.
Ticker symbols UBS Group AG
Security identification codes
TTrraaddiinngg eexxcchhaannggee
SIX Swiss Exchange
New York Stock Exchange
SSIIXX//NNYYSSEE
UBSG
UBS
BBlloooommbbeerrgg
UBSG SW
UBS UN
RReeuutteerrss
UBSG.S
UBS.N
ISIN
Valoren
CUSIP
CCHH00224444776677558855
2244 447766 775588
CCIINNSS HH4422009977 1100 77
174
174
Corporate
governance and
compensation
Management report
4
Audited information according to the Swiss law and applicable regulatory
requirements and guidance
Disclosures provided are in line with the requirements of Art. 663c para. 1 and 3 of the Swiss Code of Obligations (supplementary
disclosures for companies whose shares are listed on a stock exchange: shareholdings) and the Ordinance against Excessive
Compensation in Listed Stock Corporations (tables containing such information are marked as “Audited” throughout this section),
as well as other applicable regulations and guidance.
Corporate governance and compensation | Corporate governance
Corporate governance
UBS Group AG is subject to, and complies with, all relevant
Swiss legal and regulatory requirements regarding corporate
governance, including the SIX Swiss Exchange’s Directive on
Information relating to Corporate Governance (the SIX Swiss
Exchange Corporate Governance Directive), and the standards
established in the Swiss Code of Best Practice for Corporate
Governance, including the appendix on executive compensation.
As a foreign company with shares listed on the New York
Stock Exchange (the NYSE), UBS Group AG also complies with
all relevant corporate governance standards applicable to foreign
private issuers.
The Organization Regulations of UBS Group AG, adopted by
the Board of Directors (the BoD) based on Art. 716b of the Swiss
Code of Obligations and articles 25 and 27 of the Articles of
Association of UBS Group AG, constitute our primary corporate
governance guidelines.
To the extent practicable, the governance structures of UBS
Group AG and UBS AG are aligned. UBS AG complies with all
relevant Swiss
legal and regulatory corporate governance
requirements. As a foreign private issuer with debt securities
listed on the NYSE, UBS AG also complies with the relevant
NYSE corporate governance standards. The discussion in this
section refers to both UBS Group AG and UBS AG, unless
specifically noted otherwise or unless the information discussed
is relevant only to listed companies and therefore only applicable
to UBS Group AG. This approach is in line with US Securities and
Exchange Commission regulations and NYSE listing standards.
› Refer to the Articles of Association of UBS Group AG and of
UBS AG, and to the Organization Regulations of UBS Group AG,
available at ubs.com/governance and ubs.com/
ubs-ag-governance, for more information
› The SIX Swiss Exchange Corporate Governance Directive is
available at ser-ag.com/dam/downloads/regulation/listing/
directives/DCG-en.pdf, the Swiss Code of Best Practice for
Corporate Governance at economiesuisse.ch/en/publications/
swiss-code-best-practice-corporate-governance and the NYSE
rules at nyse.com/publicdocs/nyse/listing/
NYSE_Corporate_Governance_Guide.pdf
Differences from corporate governance standards relevant
to US-listed companies
The NYSE listing standards on corporate governance require
foreign private issuers to disclose any significant ways in which
their corporate governance practices differ from those that have
to be followed by domestic companies. Such differences are
discussed below.
Responsibility of the Audit Committee regarding independent
auditors
Our Audit Committee is responsible for the compensation,
retention and oversight of independent auditors. It assesses the
performance and qualifications of external auditors and submits
proposals for appointment, reappointment or removal of
independent auditors to the BoD. As required by the Swiss Code
176
176
of Obligations, the BoD submits its proposals for shareholder
vote at the Annual General Meeting (the AGM). Under NYSE
standards audit committees are responsible for appointing
independent auditors.
Discussion of risk assessment and risk management policies by
the Risk Committee
As per the Organization Regulations of UBS Group AG and UBS
AG, the Risk Committee, instead of the Audit Committee, as per
NYSE standards, oversees our risk principles and risk capacity on
behalf of the BoD. The Risk Committee is responsible for
monitoring our adherence
risk principles and
to
monitoring whether business divisions and control units
maintain appropriate systems of risk management and control.
those
Supervision of the internal audit function
Although under NYSE standards only audit committees supervise
(the
internal audit functions, the Chairman of the BoD
Chairman) and the Audit Committee share the supervisory
responsibility and authority with respect to the internal audit
function.
Responsibility of the Compensation Committee for performance
evaluations of senior management of UBS Group AG
In line with Swiss law, our Compensation Committee, together
with the BoD, proposes for shareholder approval at the AGM
the maximum aggregate amount of compensation for the BoD,
the maximum aggregate amount of fixed compensation for the
Group Executive Board (the GEB) and the aggregate amount of
variable compensation for the GEB. The members of the
Compensation Committee are elected by the AGM. Under NYSE
standards it is the responsibility of compensation committees to
evaluate senior management’s performance and to determine
and approve, as a committee or together with the other
independent directors, the compensation thereof.
Proxy statement reports of the Audit Committee and the
Compensation Committee
NYSE standards require the aforementioned committees to
submit their reports directly to shareholders. However, under
Swiss law all reports to shareholders, including those from the
aforementioned committees, are provided to and approved by
the BoD, which has ultimate responsibility to the shareholders.
Shareholder votes on equity compensation plans
NYSE standards require shareholder approval for the establishing
of and material revisions to all equity compensation plans.
However, as per Swiss law, the BoD approves compensation
plans. Shareholder approval is only mandatory if equity-based
compensation plans
in capital. No
shareholder approval is required if shares for such plans are
purchased in the market.
require an
increase
› Refer to “Board of Directors” in this section for more
information about the BoD’s committees
› Refer to “Share capital structure” in this section for more
information about UBS Group AG’s capital
Corporate governance and compensation | Corporate governance
Corporate governance
UBS Group AG is subject to, and complies with, all relevant
of Obligations, the BoD submits its proposals for shareholder
Swiss legal and regulatory requirements regarding corporate
vote at the Annual General Meeting (the AGM). Under NYSE
governance, including the SIX Swiss Exchange’s Directive on
standards audit committees are responsible for appointing
Information relating to Corporate Governance (the SIX Swiss
independent auditors.
Exchange Corporate Governance Directive), and the standards
established in the Swiss Code of Best Practice for Corporate
Discussion of risk assessment and risk management policies by
Governance, including the appendix on executive compensation.
the Risk Committee
As a foreign company with shares listed on the New York
As per the Organization Regulations of UBS Group AG and UBS
Stock Exchange (the NYSE), UBS Group AG also complies with
AG, the Risk Committee, instead of the Audit Committee, as per
all relevant corporate governance standards applicable to foreign
NYSE standards, oversees our risk principles and risk capacity on
private issuers.
behalf of the BoD. The Risk Committee is responsible for
The Organization Regulations of UBS Group AG, adopted by
monitoring our adherence
to
those
risk principles and
the Board of Directors (the BoD) based on Art. 716b of the Swiss
monitoring whether business divisions and control units
Code of Obligations and articles 25 and 27 of the Articles of
maintain appropriate systems of risk management and control.
Association of UBS Group AG, constitute our primary corporate
governance guidelines.
Supervision of the internal audit function
To the extent practicable, the governance structures of UBS
Although under NYSE standards only audit committees supervise
Group AG and UBS AG are aligned. UBS AG complies with all
internal audit functions, the Chairman of the BoD
(the
relevant Swiss
legal and regulatory corporate governance
Chairman) and the Audit Committee share the supervisory
requirements. As a foreign private issuer with debt securities
responsibility and authority with respect to the internal audit
listed on the NYSE, UBS AG also complies with the relevant
function.
NYSE corporate governance standards. The discussion in this
section refers to both UBS Group AG and UBS AG, unless
Responsibility of the Compensation Committee for performance
specifically noted otherwise or unless the information discussed
evaluations of senior management of UBS Group AG
is relevant only to listed companies and therefore only applicable
In line with Swiss law, our Compensation Committee, together
to UBS Group AG. This approach is in line with US Securities and
with the BoD, proposes for shareholder approval at the AGM
Exchange Commission regulations and NYSE listing standards.
the maximum aggregate amount of compensation for the BoD,
› Refer to the Articles of Association of UBS Group AG and of
UBS AG, and to the Organization Regulations of UBS Group AG,
available at ubs.com/governance and ubs.com/
ubs-ag-governance, for more information
› The SIX Swiss Exchange Corporate Governance Directive is
available at ser-ag.com/dam/downloads/regulation/listing/
directives/DCG-en.pdf, the Swiss Code of Best Practice for
Corporate Governance at economiesuisse.ch/en/publications/
swiss-code-best-practice-corporate-governance and the NYSE
rules at nyse.com/publicdocs/nyse/listing/
NYSE_Corporate_Governance_Guide.pdf
the maximum aggregate amount of fixed compensation for the
Group Executive Board (the GEB) and the aggregate amount of
variable compensation for the GEB. The members of the
Compensation Committee are elected by the AGM. Under NYSE
standards it is the responsibility of compensation committees to
evaluate senior management’s performance and to determine
and approve, as a committee or together with the other
independent directors, the compensation thereof.
Proxy statement reports of the Audit Committee and the
Compensation Committee
NYSE standards require the aforementioned committees to
Swiss law all reports to shareholders, including those from the
aforementioned committees, are provided to and approved by
Differences from corporate governance standards relevant
submit their reports directly to shareholders. However, under
to US-listed companies
discussed below.
auditors
The NYSE listing standards on corporate governance require
the BoD, which has ultimate responsibility to the shareholders.
foreign private issuers to disclose any significant ways in which
their corporate governance practices differ from those that have
Shareholder votes on equity compensation plans
to be followed by domestic companies. Such differences are
NYSE standards require shareholder approval for the establishing
of and material revisions to all equity compensation plans.
However, as per Swiss law, the BoD approves compensation
Responsibility of the Audit Committee regarding independent
plans. Shareholder approval is only mandatory if equity-based
compensation plans
require an
increase
in capital. No
Our Audit Committee is responsible for the compensation,
shareholder approval is required if shares for such plans are
retention and oversight of independent auditors. It assesses the
purchased in the market.
performance and qualifications of external auditors and submits
› Refer to “Board of Directors” in this section for more
proposals for appointment, reappointment or removal of
information about the BoD’s committees
independent auditors to the BoD. As required by the Swiss Code
› Refer to “Share capital structure” in this section for more
information about UBS Group AG’s capital
Group structure and shareholders
Operational Group structure
As of 31 December 2020, the operational structure of the Group
is composed of the Global Wealth Management, Personal &
Corporate Banking, Asset Management and Investment Bank
business divisions, as well as Group Functions.
› Refer to the “Our businesses” section on page 19 of this report
for more information about our business divisions and Group
Functions
› Refer to “Financial and operating performance” on page 67 and
to “Note 2 Segment reporting” in the “Consolidated financial
statements” section on page 306 of this report for more
information
› Refer to the “Our evolution” section on page 14 of this report
for more information
Listed and non-listed companies belonging to the Group
The Group includes a number of consolidated entities, of which
only UBS Group AG shares are listed.
UBS Group AG’s registered office is at Bahnhofstrasse 45,
CH-8001 Zurich, Switzerland. UBS Group AG shares are listed on
the SIX Swiss Exchange (ISIN: CH0244767585) and on the NYSE
(CUSIP: H42097107).
› Refer to “UBS shares” in the “Capital, liquidity and funding, and
balance sheet” section on page 172 of this report for
information about UBS Group AG’s market capitalization and
shares held by Group entities
› Refer to “Note 28 Interests in subsidiaries and other entities” in
the “Consolidated financial statements” section on page 390 of
this report for more information about the significant
subsidiaries of the Group
Significant shareholders
General rules
Under the Swiss Federal Act on Financial Market Infrastructures
and Market Conduct in Securities and Derivatives Trading of
19 June 2015 (the FMIA), anyone directly or indirectly, or acting
in concert with third parties, holding shares in a company listed
in Switzerland or holding derivative rights related to shares in
such a company must notify the company and the SIX Swiss
Exchange (SIX) if the holding reaches, falls below or exceeds one
of the following percentage thresholds: 3, 5, 10, 15, 20, 25,
331⁄3, 50 or 662⁄3% of voting rights, regardless of whether or not
such rights may be exercised. Nominee companies that cannot
autonomously decide how voting rights are exercised are not
required to notify the company and SIX if they reach, exceed or
fall below the above-mentioned thresholds.
Pursuant to the Swiss Code of Obligations, we disclose in
“Note 23 Significant shareholders” to the UBS Group AG
standalone financial statements the identity of any shareholder
with a holding of more than 5% of the total share capital of
UBS Group AG.
Shareholders subject to FMIA disclosure notifications
According to the mandatory FMIA disclosure notifications filed
with UBS Group AG and SIX, as of 31 December 2020, the
following entities held more than 3% of the total share capital
of UBS Group AG: Artisan Partners Limited Partnership,
Milwaukee, which disclosed a holding of 3.15% on 18
November 2020; BlackRock Inc., New York, which disclosed a
holding of 4.70% on 26 May 2020; and Norges Bank, Oslo,
which disclosed a holding of 3.01% on 24 July 2019. As
registration in the UBS share register is optional, shareholders
crossing
SIX
notification under the FMIA do not necessarily appear in the
table below.
aforementioned
thresholds
requiring
the
No new disclosures of significant shareholdings have been
made since 31 December 2020.
In accordance with the FMIA, the aforementioned holdings
are calculated in relation to the total share capital of UBS Group
AG reflected in the Articles of Association at the time of the
respective disclosure notification.
Information on disclosures under the FMIA is available at ser-
ag.com/en/resources/notifications-market-participants/
significant-shareholders.html.
Shareholders registered in the UBS share register with 3% or
more of the share capital of UBS Group AG
As a supplement to the mandatory disclosure requirements
according to the SIX Swiss Exchange Corporate Governance
Directive, we disclose in the table below the shareholders (acting
in their own name or in their capacity as nominees for other
investors or beneficial owners) who were registered in the UBS
share register with 3% or more of the total share capital of UBS
Group AG as of 31 December 2020.
› Refer to “Shareholders’ participation rights” on page 183 of this
section for more information about voting rights, restrictions
and representation
Cross-shareholdings
UBS Group AG has no cross-shareholdings where reciprocal
ownership would be in excess of 5% of capital or voting rights
with any other company.
Audited |
Shareholders registered in the UBS share register with 3% or more of the total share capital1
% of share capital
Chase Nominees Ltd., London2
Nortrust Nominees Ltd., London2
3311..1122..2200
31.12.19
31.12.18
1100..3399
55..1155
10.94
4.90
12.08
4.14
DTC (Cede & Co.), New York2,3
11 As registration in the UBS share register is optional, shareholders crossing the threshold percentages requiring SIX notification under the FMIA do not necessarily appear in this table. 22 Nominee companies and
securities clearing organizations cannot autonomously decide how voting rights are exercised and are therefore not obligated to notify UBS and SIX if they reach, exceed or fall below the threshold percentages
requiring disclosure notification under the FMIA. Consequently, they do not appear in the “Shareholders subject to FMIA disclosure notifications” section above. 33 DTC (Cede & Co.), New York, “The Depository
Trust Company,” is a US securities clearing organization.
44..9999
7.57
7.23
176
177
177
Corporate governance and compensation
Corporate governance and compensation | Corporate governance
Share capital structure
Ordinary share capital
At year-end 2020, UBS Group AG had 3,859,055,395 issued
shares with a nominal value of CHF 0.10 each, leading to a
share capital of CHF 385,905,539.50.
Under Swiss company law, shareholders must approve in a
general meeting of shareholders an ordinary share capital
increase or reduction, or the creation of conditional or
authorized share capital. In 2020, our shareholders were not
asked to approve an ordinary share capital increase or the
creation of conditional or authorized share capital.
The share capital remained unchanged during 2020. No
shares were issued out of existing conditional capital, as there
were no employee options and stock appreciation rights
outstanding.
Issued share capital of UBS Group AG
AAss ooff 3311 DDeecceemmbbeerr 22001199
Issue of shares out of conditional capital due to employee options exercised in 2020
AAss ooff 3311 DDeecceemmbbeerr 22002200
SShhaarree ccaappiittaall iinn CCHHFF
NNuummbbeerr ooff sshhaarreess
Nominal value in CHF
338855,,990055,,554400
33,,885599,,005555,,339955
0
0
338855,,990055,,554400
33,,885599,,005555,,339955
00..1100
0.10
00..1100
Distribution of UBS shares
AAss ooff 3311 DDeecceemmbbeerr 22002200
Number of shares registered
1–100
101–1,000
1,001–10,000
10,001–100,000
100,001–1,000,000
1,000,001–5,000,000
5,000,001–38,590,553 (1%)
1–2%
2–3%
3–4%
4–5%
Over 5%
Total registered
Unregistered3
TToottaall
SShhaarreehhoollddeerrss rreeggiisstteerreedd
SShhaarreess rreeggiisstteerreedd
Number
% of shares issued
Number
23,150
107,277
74,047
7,825
588
93
25
3
0
0
0
31
%
10.9
50.4
34.8
3.7
0.3
0.0
0.0
0.0
0.0
0.0
0.0
0.0
1,281,654
51,471,722
220,129,283
187,065,356
174,930,523
194,523,407
303,908,409
142,323,637
0
0
0
792,409,734
213,011
100.0
2,068,043,7252
221133,,001111
110000..00
1,791,011,670
33,,885599,,005555,,339955
0.0
1.3
5.7
4.8
4.5
5.0
7.9
3.7
0.0
0.0
0.0
20.5
53.6
46.4
110000..00
11 On 31 December 2020, Chase Nominees Ltd., London, entered as a nominee, was registered with 10.39% of all UBS shares issued. However, according to the provisions of UBS Group AG, voting rights of
nominees are limited to a maximum of 5% of all UBS shares issued. The US securities clearing organization DTC (Cede & Co.), New York, was registered with 4.99% of all UBS shares issued and is not subject to
this 5% voting limit as a securities clearing organization. 22 Of the total shares registered, 385,022,965 shares did not carry voting rights. 33 Shares not entered in the UBS share register as of 31 December 2020.
178
178
Corporate governance and compensation | Corporate governance
Share capital structure
Ordinary share capital
authorized share capital. In 2020, our shareholders were not
asked to approve an ordinary share capital increase or the
At year-end 2020, UBS Group AG had 3,859,055,395 issued
creation of conditional or authorized share capital.
shares with a nominal value of CHF 0.10 each, leading to a
The share capital remained unchanged during 2020. No
share capital of CHF 385,905,539.50.
shares were issued out of existing conditional capital, as there
Under Swiss company law, shareholders must approve in a
were no employee options and stock appreciation rights
general meeting of shareholders an ordinary share capital
outstanding.
increase or reduction, or the creation of conditional or
Issued share capital of UBS Group AG
Issue of shares out of conditional capital due to employee options exercised in 2020
AAss ooff 3311 DDeecceemmbbeerr 22001199
AAss ooff 3311 DDeecceemmbbeerr 22002200
338855,,990055,,554400
33,,885599,,005555,,339955
0
0
338855,,990055,,554400
33,,885599,,005555,,339955
SShhaarree ccaappiittaall iinn CCHHFF
NNuummbbeerr ooff sshhaarreess
Nominal value in CHF
Distribution of UBS shares
AAss ooff 3311 DDeecceemmbbeerr 22002200
Number of shares registered
1–100
101–1,000
1,001–10,000
10,001–100,000
100,001–1,000,000
1,000,001–5,000,000
5,000,001–38,590,553 (1%)
1–2%
2–3%
3–4%
4–5%
Over 5%
Total registered
Unregistered3
TToottaall
00..1100
0.10
00..1100
0.0
1.3
5.7
4.8
4.5
5.0
7.9
3.7
0.0
0.0
0.0
20.5
53.6
46.4
110000..00
SShhaarreehhoollddeerrss rreeggiisstteerreedd
SShhaarreess rreeggiisstteerreedd
Number
% of shares issued
Number
23,150
107,277
74,047
7,825
588
93
25
3
0
0
0
31
%
10.9
50.4
34.8
3.7
0.3
0.0
0.0
0.0
0.0
0.0
0.0
0.0
1,281,654
51,471,722
220,129,283
187,065,356
174,930,523
194,523,407
303,908,409
142,323,637
0
0
0
792,409,734
1,791,011,670
33,,885599,,005555,,339955
213,011
100.0
2,068,043,7252
221133,,001111
110000..00
11 On 31 December 2020, Chase Nominees Ltd., London, entered as a nominee, was registered with 10.39% of all UBS shares issued. However, according to the provisions of UBS Group AG, voting rights of
nominees are limited to a maximum of 5% of all UBS shares issued. The US securities clearing organization DTC (Cede & Co.), New York, was registered with 4.99% of all UBS shares issued and is not subject to
this 5% voting limit as a securities clearing organization. 22 Of the total shares registered, 385,022,965 shares did not carry voting rights. 33 Shares not entered in the UBS share register as of 31 December 2020.
Conditional share capital
At year-end 2020, the following conditional share capital was
available to UBS Group AG’s BoD:
– A maximum of CHF 38,000,000 represented by up to
380,000,000 fully paid registered shares with a nominal value
of CHF 0.10 each, to be issued through the voluntary or
mandatory exercise of conversion rights and / or warrants
granted in connection with the issuance of bonds or similar
financial instruments on national or international capital
markets. This conditional capital allowance was approved at
the Extraordinary General Meeting
(EGM) held on
26 November 2014, originally approved at the AGM of UBS
AG on 14 April 2010. The BoD has not made use of such
allowance.
– A maximum of CHF 12,170,583 represented by 121,705,830
fully paid registered shares with a nominal value of CHF 0.10
each, to be issued upon exercise of employee options and
stock appreciation rights issued to employees and members
of the management and of the BoD of UBS Group AG and its
subsidiaries. This conditional capital allowance was approved
by the shareholders at the same EGM in 2014.
› Refer to article 4a of the Articles of Association of UBS Group AG
for more information about the terms and conditions of the
issue of shares out of existing conditional capital. The Articles of
Association are available at ubs.com/governance
Conditional capital of UBS Group AG
AAss ooff 3311 DDeecceemmbbeerr 22002200
Employee equity participation plans
Conversion rights / warrants granted in connection with bonds
TToottaall
MMaaxxiimmuumm nnuummbbeerr ooff sshhaarreess ttoo
bbee iissssuueedd
121,705,830
Year approved by Extraor-
dinary General Meeting
2014
380,000,000
550011,,770055,,883300
2014
%% ooff sshhaarreess iissssuueedd
3.15
9.85
1133..0000
Authorized share capital
Ownership
UBS Group AG had no authorized capital available to issue on
31 December 2020.
Changes in capital
In accordance with International Financial Reporting Standards
(IFRS), Group equity attributable to shareholders was USD 59.4
billion as of 31 December 2020 (2019: USD 54.5 billion; and
2018: USD 52.9 billion). UBS Group AG shareholders’ equity was
represented by 3,859,055,395 issued shares as of 31 December
2020 (2019: 3,859,055,395 shares; and 2018: 3,855,634,749
shares).
› Refer to “Statement of changes in equity” in the “Consolidated
financial statements” section on page 280 of this report for more
information about changes in shareholders’ equity over the last
three years
Ownership of UBS Group AG shares is widely spread. The tables
in this section provide information about the distribution of UBS
Group AG shareholders by category and geographic location.
This information relates only to shareholders registered in the
UBS share register and cannot be assumed to be representative
of UBS Group AG’s entire investor base or the actual beneficial
ownership. Only shareholders registered in the share register as
“shareholders with voting rights” are entitled to exercise voting
rights.
› Refer to “Shareholders’ participation rights” in this section for
more information
As of 31 December 2020, 1,683,020,760 UBS Group AG
shares were registered in the share register and carried voting
rights, 385,022,965 shares were registered in the share register
without voting rights, and 1,791,011,670 shares were not
registered in the UBS share register. All shares were fully paid up
and eligible for dividends. There are no preferential rights for
shareholders, and no other classes of shares have been issued by
UBS Group AG.
178
179
179
Corporate governance and compensation Corporate governance and compensation | Corporate governance
Shareholders, legal entities and nominees: type and geographical distribution
AAss ooff 3311 DDeecceemmbbeerr 22002200
Individual shareholders
Legal entities
Nominees, fiduciaries
Total registered shares
Unregistered shares
TToottaall
AAmmeerriiccaass
of which: USA
AAssiiaa PPaacciiffiicc
EEuurrooppee,, MMiiddddllee EEaasstt aanndd AAffrriiccaa
of which: Germany
of which: UK
of which: rest of Europe
of which: Middle East and Africa
SSwwiittzzeerrllaanndd
Total registered shares
Unregistered shares
TToottaall
SShhaarreehhoollddeerrss rreeggiisstteerreedd
Number
208,606
4,216
189
%
97.9
2.0
0.1
221133,,001111
110000..00
IInnddiivviidduuaall sshhaarreehhoollddeerrss
LLeeggaall eennttiittiieess
NNoommiinneeeess
TToottaall
Number
11,,885599
1,319
55,,117777
1122,,335533
3,901
4,680
3,494
278
118899,,221177
%
00..99
0.6
22..44
55..88
1.8
2.2
1.6
0.1
8888..88
Number
111133
60
110033
224411
25
8
203
5
33,,775599
%
00..11
0.0
00..00
00..11
0.0
0.0
0.0
0.0
11..88
Number
8844
81
2244
4477
3
7
36
1
3344
%
00..00
0.0
00..00
00..00
0.0
0.0
0.0
0.0
00..00
Number
22,,005566
1,460
55,,330044
1122,,664411
3,929
4,695
3,733
284
119933,,001100
%
11..00
0.7
22..55
55..99
1.8
2.2
1.8
0.1
9900..66
220088,,660066
9977..99
44,,221166
22..00
118899
00..11
221133,,001111
110000..00
At year-end 2020, UBS owned 307,477,002 UBS Group AG
registered shares, which corresponded to 7.97% of the total
share capital of UBS Group AG. At the same time, UBS had
acquisition and disposal positions relating to 338,597,130 and
189,374,964 voting rights of UBS Group AG, corresponding to
8.77% and 4.91% of the total voting rights of UBS Group AG,
respectively. Of the disposal positions, 4.46% consisted of
voting rights on shares deliverable in respect of employee
awards. The calculation methodology for the acquisition and
disposal positions is based on the Ordinance of the Swiss
Financial Market Supervisory Authority on Financial Market
Infrastructures and Market Conduct in Securities and Derivatives
Trading, which sets forth that all future potential share delivery
obligations, irrespective of the contingent nature of the delivery,
must be taken into account.
Employee share ownership
Employee share ownership is encouraged and made possible in a
variety of ways. One example is our Equity Plus Plan. This is a
voluntary plan that provides eligible employees with the
opportunity to purchase UBS Group AG shares at market value
and receive, at no additional cost, one notional UBS Group AG
share for every three shares purchased. If the shares purchased
are held for a period of up to three years and the employee
remains in employment, the notional shares vest. Another
example is the Equity Ownership Plan (EOP), which is a
mandatory deferral plan for all employees excluding GEB
members, Group Managing Directors (GMDs) and Group or
Divisional Vice Chair role holders, with total compensation
greater than USD / CHF 300,000. These employees receive 60%
of their deferred performance award under the EOP in notional
shares (variations apply for Asset Management). Effective for the
performance year 2019, our most senior leaders (i.e., Group
Executive Board (GEB) members, GMDs and Group or Divisional
Vice Chair role holders) received the equity-based Long-Term
Incentive Plan (the LTIP) instead of the EOP. Both the EOP and
LTIP include provisions that allow the firm to reduce or fully
forfeit the unvested deferred portion of the granted EOP and
LTIP award if an employee commits certain harmful acts, and in
most cases trigger forfeiture where employment has been
terminated. To encourage our employees to develop and
manage the business in a way that delivers sustainable returns,
EOP awards granted to certain senior employees and all LTIP
awards will only vest if Group and, where applicable, business
division performance conditions are met or any other
predetermined performance conditions (e.g., rTSR performance
against G-SIBs Index) are met.
(including approximately 4%
As of 31 December 2020, UBS employees held at least 7% of
UBS shares outstanding
in
unvested notional shares from our compensation programs).
These figures are based on known shareholding information
from employee participation plans, personal holdings with UBS
and selected individual retirement plans. At the end of 2020, at
least 30% of all employees held UBS shares through the firm’s
employee share participation plans.
› Refer to the “Compensation” section on page 214 of this report
for more information
Shares and participation certificates
UBS Group AG has a single class of shares, which are registered
shares in the form of uncertificated securities (in the sense of the
Swiss Code of Obligations) and intermediary-held securities (in
the sense of the Swiss Federal Act on Intermediated Securities).
Each registered share has a nominal value of CHF 0.10 and
carries one vote, subject to the restrictions set out under
“Transferability, voting rights and nominee registration” below.
We have no participation certificates outstanding.
180
180
Corporate governance and compensation | Corporate governance
Shareholders, legal entities and nominees: type and geographical distribution
AAss ooff 3311 DDeecceemmbbeerr 22002200
Individual shareholders
Legal entities
Nominees, fiduciaries
Total registered shares
Unregistered shares
TToottaall
AAmmeerriiccaass
of which: USA
AAssiiaa PPaacciiffiicc
EEuurrooppee,, MMiiddddllee EEaasstt aanndd AAffrriiccaa
of which: Germany
of which: UK
of which: rest of Europe
of which: Middle East and Africa
SSwwiittzzeerrllaanndd
Total registered shares
Unregistered shares
TToottaall
SShhaarreehhoollddeerrss rreeggiisstteerreedd
Number
208,606
4,216
189
221133,,001111
110000..00
%
97.9
2.0
0.1
%
11..00
0.7
22..55
55..99
1.8
2.2
1.8
0.1
IInnddiivviidduuaall sshhaarreehhoollddeerrss
LLeeggaall eennttiittiieess
Number
NNoommiinneeeess
Number
Number
11,,885599
1,319
55,,117777
1122,,335533
3,901
4,680
3,494
278
%
00..99
0.6
22..44
55..88
1.8
2.2
1.6
0.1
111133
60
110033
224411
25
8
203
5
%
00..11
0.0
00..00
00..11
0.0
0.0
0.0
0.0
11..88
8844
81
2244
4477
3
7
36
1
3344
%
00..00
0.0
00..00
00..00
0.0
0.0
0.0
0.0
00..00
TToottaall
Number
22,,005566
1,460
55,,330044
1122,,664411
3,929
4,695
3,733
284
118899,,221177
8888..88
33,,775599
119933,,001100
9900..66
220088,,660066
9977..99
44,,221166
22..00
118899
00..11
221133,,001111
110000..00
IInnddiivviidduuaall sshhaarreehhoollddeerrss
LLeeggaall eennttiittiieess
NNoommiinneeeess
Number of shares
22,,558888,,557722
1,136,719
2233,,331177,,771166
4466,,774400,,779944
12,880,664
20,942,930
11,488,402
1,428,798
440044,,889911,,777744
477,538,856
0
447777,,553388,,885566
%
00..11
0.0
00..66
11..22
0.3
0.5
0.3
0.0
1100..55
12.4
1122..44
Number of shares
2233,,009933,,771188
17,679,015
1166,,111188,,990022
6677,,113399,,115522
489,097
295,414
27,509,691
38,844,950
443366,,885544,,770044
543,206,476
0
554433,,220066,,447766
%
00..66
0.5
00..44
11..77
0.0
0.0
0.7
1.0
1111..33
14.1
1144..11
Number of shares
229977,,112222,,660077
296,874,735
88,,668855,,444411
771188,,557799,,445566
12,856,049
664,437,108
41,241,773
44,526
2222,,991100,,888899
1,047,298,393
0
11,,004477,,229988,,339933
%
77..77
7.7
00..22
1188..66
0.3
17.2
1.1
0.0
00..66
27.1
2277..11
SShhaarreess rreeggiisstteerreedd
Number
477,538,856
543,206,476
1,047,298,393
2,068,043,725
1,791,011,670
33,,885599,,005555,,339955
TToottaall
Number of shares
332222,,880044,,889977
315,690,469
4488,,112222,,005599
883322,,445599,,440022
26,225,810
685,675,452
80,239,866
40,318,274
886644,,665577,,336677
2,068,043,725
1,791,011,670
33,,885599,,005555,,339955
%
12.4
14.1
27.1
53.6
46.4
110000..00
%
88..44
8.2
11..22
2211..66
0.7
17.8
2.1
1.0
2222..44
53.6
46.4
110000..00
At year-end 2020, UBS owned 307,477,002 UBS Group AG
Vice Chair role holders) received the equity-based Long-Term
registered shares, which corresponded to 7.97% of the total
Incentive Plan (the LTIP) instead of the EOP. Both the EOP and
share capital of UBS Group AG. At the same time, UBS had
LTIP include provisions that allow the firm to reduce or fully
acquisition and disposal positions relating to 338,597,130 and
forfeit the unvested deferred portion of the granted EOP and
189,374,964 voting rights of UBS Group AG, corresponding to
LTIP award if an employee commits certain harmful acts, and in
8.77% and 4.91% of the total voting rights of UBS Group AG,
most cases trigger forfeiture where employment has been
Our shares are listed on the NYSE as global registered shares.
As such, they can be traded and transferred across applicable
borders, without the need for conversion, with identical shares
traded on different stock exchanges in different currencies.
› Refer to “UBS shares” in the “Capital, liquidity and funding, and
balance sheet” section on page 172 of this report for more
respectively. Of the disposal positions, 4.46% consisted of
terminated. To encourage our employees to develop and
information
voting rights on shares deliverable in respect of employee
manage the business in a way that delivers sustainable returns,
awards. The calculation methodology for the acquisition and
EOP awards granted to certain senior employees and all LTIP
disposal positions is based on the Ordinance of the Swiss
awards will only vest if Group and, where applicable, business
Financial Market Supervisory Authority on Financial Market
division performance conditions are met or any other
Infrastructures and Market Conduct in Securities and Derivatives
predetermined performance conditions (e.g., rTSR performance
Trading, which sets forth that all future potential share delivery
against G-SIBs Index) are met.
obligations, irrespective of the contingent nature of the delivery,
As of 31 December 2020, UBS employees held at least 7% of
must be taken into account.
Employee share ownership
UBS shares outstanding
(including approximately 4%
in
unvested notional shares from our compensation programs).
These figures are based on known shareholding information
from employee participation plans, personal holdings with UBS
Employee share ownership is encouraged and made possible in a
and selected individual retirement plans. At the end of 2020, at
variety of ways. One example is our Equity Plus Plan. This is a
least 30% of all employees held UBS shares through the firm’s
voluntary plan that provides eligible employees with the
employee share participation plans.
opportunity to purchase UBS Group AG shares at market value
› Refer to the “Compensation” section on page 214 of this report
and receive, at no additional cost, one notional UBS Group AG
for more information
share for every three shares purchased. If the shares purchased
are held for a period of up to three years and the employee
Shares and participation certificates
remains in employment, the notional shares vest. Another
example is the Equity Ownership Plan (EOP), which is a
UBS Group AG has a single class of shares, which are registered
mandatory deferral plan for all employees excluding GEB
shares in the form of uncertificated securities (in the sense of the
members, Group Managing Directors (GMDs) and Group or
Swiss Code of Obligations) and intermediary-held securities (in
Divisional Vice Chair role holders, with total compensation
the sense of the Swiss Federal Act on Intermediated Securities).
greater than USD / CHF 300,000. These employees receive 60%
Each registered share has a nominal value of CHF 0.10 and
of their deferred performance award under the EOP in notional
carries one vote, subject to the restrictions set out under
shares (variations apply for Asset Management). Effective for the
“Transferability, voting rights and nominee registration” below.
performance year 2019, our most senior leaders (i.e., Group
We have no participation certificates outstanding.
Executive Board (GEB) members, GMDs and Group or Divisional
Distributions to shareholders
The decision to pay a dividend and the amount of any dividend
depend on a variety of factors, including our profits, cash flow
generation and capital ratios.
Following a request from FINMA in April 2020, the BoD
proposed to split the dividend for the 2019 financial year. At the
2020 AGM, the shareholders approved a dividend distribution of
USD 0.365 per share and a special dividend reserve of
USD 0.365 per share. At an extraordinary general meeting on
19 November 2020, the shareholders approved the second
tranche of the 2019 dividend, of USD 0.365 per share, paid out
of the special dividend reserve established at the 2020 AGM.
At the 2021 AGM, the BoD
intends to propose to
shareholders for approval a dividend of USD 0.37 per share for
the 2020 financial year. Shareholders whose shares are held
through SIX SIS AG will receive dividends in Swiss francs, based
on a public exchange rate on the day prior to the ex-dividend
date. Shareholders holding shares through The Depository Trust
Company in New York and Computershare will be paid
dividends in US dollars.
In compliance with Swiss tax law, 50% of the dividend will be
paid out of retained earnings and the balance will be paid out of
the capital contribution reserve. Dividends paid out of capital
contribution reserves are not subject to Swiss withholding tax.
The portion of the dividend paid out of retained earnings will be
subject to a 35% Swiss withholding tax. For US federal income
tax purposes, we expect that the dividend will be paid out of
current or accumulated earnings and profits.
Provided that the proposed dividend distribution out of
retained earnings and out of the capital contribution reserve will
be approved at the AGM on 8 April 2021, the payment of
USD 0.37 per share will be made on 15 April 2021 to holders of
shares on the record date 14 April 2021. The shares will be
traded ex-dividend as of 13 April 2021 and, accordingly, the last
day on which the shares may be traded with entitlement to
receive the dividend will be 12 April 2021.
In March 2018, UBS initiated a share repurchase program of
up to CHF 2 billion over a three-year period. This program was
completed on 2 February 2021 and the UBS shares repurchased
under the program are expected to be canceled by means of a
capital reduction, to be proposed for shareholder approval at the
2021 AGM. Under the program, UBS repurchased shares
totaling USD 2.0 billion (CHF 2 billion) during 2018, 2019 and
2020, as well as in January and February 2021. In February
2021, we commenced a new three-year program of up to CHF 4
billion, of which we expect to execute up to USD 1 billion by the
end of the first quarter of 2021.
› Refer to “UBS shares” in the “Capital, liquidity and funding, and
balance sheet” section on page 172 of this report for more
information about the share repurchase program
180
181
181
Corporate governance and compensation Corporate governance and compensation | Corporate governance
Transferability, voting rights and nominee registration
Convertible bonds and options
We do not apply any restrictions or
limitations on the
transferability of shares. Voting rights may be exercised without
any restrictions by shareholders entered into the share register if
they expressly render a declaration of beneficial ownership
according to the provisions of the Articles of Association.
As of 31 December 2020, there were no contingent capital
securities or convertible bonds outstanding requiring the
issuance of new shares.
› Refer to the “Capital, liquidity and funding, and balance sheet”
section on page 143 of this report for more information about
We have special provisions for the registration of nominees.
Nominees are entered in the share register with voting rights up
to a total of 5% of all issued UBS Group AG shares if they agree
to disclose, upon our request, beneficial owners holding 0.3%
or more of all issued UBS Group AG shares. An exception to the
5% voting
in place for securities clearing
organizations, such as The Depository Trust Company in New
York.
limit rule
is
› Refer to “Shareholders’ participation rights” in this section for
our outstanding capital instruments
As of 31 December 2020, there were no employee options
and stock appreciation
rights outstanding. Option-based
compensation plans are sourced by issuing new shares out of
conditional capital. As of 31 December 2020, 121,705,830
unissued UBS Group AG shares in conditional share capital were
available for the issuance of new shares for this purpose.
› Refer to “Conditional share capital” in this section for more
more information
information
› Refer to “Note 27 Employee benefits: variable compensation” in
the “Consolidated financial statements” section on page 385 of
this report for more information about outstanding options and
stock appreciation rights
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Corporate governance and compensation | Corporate governance
We do not apply any restrictions or
limitations on the
As of 31 December 2020, there were no contingent capital
transferability of shares. Voting rights may be exercised without
securities or convertible bonds outstanding requiring the
any restrictions by shareholders entered into the share register if
issuance of new shares.
they expressly render a declaration of beneficial ownership
according to the provisions of the Articles of Association.
› Refer to the “Capital, liquidity and funding, and balance sheet”
section on page 143 of this report for more information about
We have special provisions for the registration of nominees.
our outstanding capital instruments
Nominees are entered in the share register with voting rights up
to a total of 5% of all issued UBS Group AG shares if they agree
As of 31 December 2020, there were no employee options
to disclose, upon our request, beneficial owners holding 0.3%
and stock appreciation
rights outstanding. Option-based
or more of all issued UBS Group AG shares. An exception to the
compensation plans are sourced by issuing new shares out of
5% voting
limit rule
is
in place for securities clearing
conditional capital. As of 31 December 2020, 121,705,830
organizations, such as The Depository Trust Company in New
unissued UBS Group AG shares in conditional share capital were
York.
› Refer to “Shareholders’ participation rights” in this section for
more information
information
available for the issuance of new shares for this purpose.
› Refer to “Conditional share capital” in this section for more
› Refer to “Note 27 Employee benefits: variable compensation” in
the “Consolidated financial statements” section on page 385 of
this report for more information about outstanding options and
stock appreciation rights
Transferability, voting rights and nominee registration
Convertible bonds and options
Shareholders’ participation rights
We are committed to shareholder participation in decision-
making processes. Our online voting platform offers registered
shareholders a convenient log-in and online voting process.
Registered shareholders are sent personal invitations to the
general meetings. Together with the invitation materials, they
receive a personal one-time password and a QR code to easily
log in to the online voting platform, where they can enter their
voting instructions or order an admission card for the general
meeting.
Shareholders who choose not to receive the comprehensive
invitation materials are informed of upcoming general meetings
by a short letter containing a personal one-time password, a QR
code for online voting and a reference to ubs.com/agm, where
all information for the upcoming meeting is available.
General meetings offer shareholders the opportunity to raise
another registered shareholder of their choice to vote on their
behalf. Alternatively, registered shareholders may issue their
voting instructions to the independent proxy electronically
through our online voting platform. Nominee companies
normally submit the proxy material to the beneficial owners and
forward the collected votes to the independent proxy.
In 2020, physical attendance at our general meetings was not
possible, due to COVID-19-related restrictions, and voting rights
could only be exercised through the independent proxy. The
same set-up is planned for our AGM on 8 April 2021.
› Refer to article 14 of the Articles of Association of UBS Group
AG, available at ubs.com/governance, for more information
about the issuing of instructions to independent voting right
representatives
questions for the BoD, GEB and internal and external auditors.
Statutory quorums
Voting rights, restrictions and representation
We place no restrictions on share ownership and voting rights.
However, pursuant to general principles formulated by the BoD,
nominee companies, which normally represent a large number
of individual shareholders and may hold an unlimited number of
shares, have voting rights limited to a maximum of 5% of all
issued UBS Group AG shares. This is to avoid large shareholders
being entered in UBS’s share register via nominee companies so
as to exercise influence without directly registering their shares
with UBS. Securities clearing organizations, such as The
Depository Trust Company in New York, are not subject to this
5% voting limit.
Shareholders can exercise voting rights conferred by shares
only if they are registered in our share register with voting rights.
To register, shareholders must confirm that they have acquired
UBS Group AG shares in their own name and for their own
account. Nominee companies are required to sign an agreement
confirming their willingness to disclose, upon our request,
individual beneficial owners holding more than 0.3% of all
issued UBS Group AG shares.
All shareholders registered with voting rights are entitled to
participate in general meetings. If they do not wish to attend in
person, they may issue instructions to support, reject or abstain
for each individual item on the meeting agenda, either by giving
instructions to an independent proxy in accordance with article
14 of the Articles of Association (the AoA) or by appointing
Motions, including those regarding the election and re-election
of BoD members and the election of the auditors, are decided at
a general meeting by an absolute majority of the votes cast,
excluding blank and invalid ballots. For the approval of certain
specific issues, the Swiss Code of Obligations requires a positive
vote from a two-thirds majority of the votes represented at the
given general meeting, and from an absolute majority of the
nominal value of shares represented thereat. Such issues include
creating shares with privileged voting rights,
introducing
restrictions on the transferability of registered shares, conditional
and authorized capital increases and restricting or excluding
shareholders’ preemptive rights.
The AoA also require a two-thirds majority of votes
represented for approval of any change to their provisions
regarding the number of BoD members, any decision to remove
one-quarter or more of the BoD members and any modification
to the provision establishing this qualified quorum.
Votes and elections are generally conducted electronically to
ascertain the exact number of votes cast. Voting by a show of
hands is possible if a clear majority is predictable. Shareholders
representing at least 3% of the votes represented may request
that a vote or election be carried out electronically or by written
ballot. In order to allow shareholders to clearly express their
views on all individual topics, each agenda item is separately put
to a vote and BoD members are elected on a person-by-person
basis.
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Corporate governance and compensation
Corporate governance and compensation | Corporate governance
Convocation of general meetings of shareholders
Registrations in the share register
The AGM must be held within six months of the close of the
financial year (i.e., 31 December). In 2021, the AGM will take
place on 8 April.
Around 220,000 shareholders are directly registered in the UBS
share register and some 186,000 US shareholders are registered
via nominee companies.
Extraordinary General Meetings (EGMs) may be convened
whenever the BoD or the auditors consider it necessary.
Shareholders individually or jointly representing at least 10% of
the share capital may at any time, including during an AGM,
require, by way of a written statement, that an EGM be
convened to address a specific issue they put forward.
A personal invitation, including a detailed agenda, is made
available to every registered shareholder at least 20 days ahead
of each scheduled general meeting. The items on the agenda
are also published in the Swiss Official Gazette of Commerce, as
well as at ubs.com/agm.
Placing of items on the agenda
Pursuant to our AoA, shareholders
jointly
representing shares with an aggregate minimum nominal value
of CHF 62,500 may submit proposals for matters to be placed
on the agenda for consideration at the next general meeting of
shareholders.
individually or
At the beginning of January, the invitation to submit such
proposals is published in the Swiss Official Gazette of Commerce
and at ubs.com/agm. Requests for items to be placed on the
agenda must include the actual motions to be put forward,
together with a short explanation. Such requests must be
submitted to the BoD 50 days prior to the general meeting of
shareholders, including a statement from the depository bank
confirming the number of shares held by the requesting
shareholder(s) and that these shares are blocked from sale until
the end of the general meeting of shareholders. The BoD
formulates opinions on the proposals, which are published
together with the motions.
The share register of UBS Group AG is an internal, non-public
register subject to statutory confidentiality, secrecy, privacy and
data protection regulations protecting registered shareholders.
In general, third parties and shareholders have no inspection
rights with regard to data related to other shareholders.
Disclosure of such data is permitted only in specific and limited
instances. In line with the Swiss Federal Act on Data Protection,
the disclosure of personal data as defined thereunder is only
allowed with the consent of the registered shareholder and in
cases where there is an overriding private or public interest or if
explicitly provided for by Swiss law. The Swiss Federal Act on
Financial Market
in
Securities and Derivatives Trading contains specific reporting
duties, such as in relation to significant shareholders (refer to
“Significant shareholders” in this section for more information).
Disclosure may also be required or requested by a court of a
competent jurisdiction, by any regulatory body that regulates the
conduct of UBS Group AG or by other statutory provisions.
Infrastructures and Market Conduct
The general rules for entry into our Swiss share register with
voting rights as described in article 5 of our AoA also apply
before general meetings of shareholders. The same rules apply
to our US transfer agent that operates the US share register for
all UBS Group AG shares in a custodian account in the US. In
order to determine the voting rights of each shareholder, our
share register generally closes two business days prior to a
general meeting. Our independent proxy agent processes voting
instructions from shareholders as long as technically possible,
generally also until two business days before a general meeting.
Such technical closure of our share register facilitates the
determination of the actual voting rights of every shareholder
that issued a voting instruction. Irrespective of this technical
closure, shares that are registered in our share register are never
immobilized and are freely tradable at any time, irrespective of
any issued voting instructions.
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Corporate governance and compensation | Corporate governance
The AGM must be held within six months of the close of the
Around 220,000 shareholders are directly registered in the UBS
financial year (i.e., 31 December). In 2021, the AGM will take
share register and some 186,000 US shareholders are registered
place on 8 April.
via nominee companies.
Extraordinary General Meetings (EGMs) may be convened
The share register of UBS Group AG is an internal, non-public
whenever the BoD or the auditors consider it necessary.
register subject to statutory confidentiality, secrecy, privacy and
Shareholders individually or jointly representing at least 10% of
data protection regulations protecting registered shareholders.
the share capital may at any time, including during an AGM,
In general, third parties and shareholders have no inspection
require, by way of a written statement, that an EGM be
rights with regard to data related to other shareholders.
convened to address a specific issue they put forward.
Disclosure of such data is permitted only in specific and limited
A personal invitation, including a detailed agenda, is made
instances. In line with the Swiss Federal Act on Data Protection,
available to every registered shareholder at least 20 days ahead
the disclosure of personal data as defined thereunder is only
of each scheduled general meeting. The items on the agenda
allowed with the consent of the registered shareholder and in
are also published in the Swiss Official Gazette of Commerce, as
cases where there is an overriding private or public interest or if
well as at ubs.com/agm.
Placing of items on the agenda
explicitly provided for by Swiss law. The Swiss Federal Act on
Financial Market
Infrastructures and Market Conduct
in
Securities and Derivatives Trading contains specific reporting
duties, such as in relation to significant shareholders (refer to
Pursuant to our AoA, shareholders
individually or
jointly
“Significant shareholders” in this section for more information).
representing shares with an aggregate minimum nominal value
Disclosure may also be required or requested by a court of a
of CHF 62,500 may submit proposals for matters to be placed
competent jurisdiction, by any regulatory body that regulates the
on the agenda for consideration at the next general meeting of
conduct of UBS Group AG or by other statutory provisions.
shareholders.
The general rules for entry into our Swiss share register with
At the beginning of January, the invitation to submit such
voting rights as described in article 5 of our AoA also apply
proposals is published in the Swiss Official Gazette of Commerce
before general meetings of shareholders. The same rules apply
and at ubs.com/agm. Requests for items to be placed on the
to our US transfer agent that operates the US share register for
agenda must include the actual motions to be put forward,
all UBS Group AG shares in a custodian account in the US. In
together with a short explanation. Such requests must be
order to determine the voting rights of each shareholder, our
submitted to the BoD 50 days prior to the general meeting of
share register generally closes two business days prior to a
shareholders, including a statement from the depository bank
general meeting. Our independent proxy agent processes voting
confirming the number of shares held by the requesting
instructions from shareholders as long as technically possible,
shareholder(s) and that these shares are blocked from sale until
generally also until two business days before a general meeting.
the end of the general meeting of shareholders. The BoD
Such technical closure of our share register facilitates the
formulates opinions on the proposals, which are published
determination of the actual voting rights of every shareholder
together with the motions.
that issued a voting instruction. Irrespective of this technical
closure, shares that are registered in our share register are never
immobilized and are freely tradable at any time, irrespective of
any issued voting instructions.
Convocation of general meetings of shareholders
Registrations in the share register
Board of Directors
The BoD of UBS Group AG, led by the Chairman, consists of
between 6 and 12 members, as per our AoA.
The BoD decides on the strategy of the Group, upon
recommendation by the Group Chief Executive Officer (the
Group CEO), and is responsible for the overall direction,
supervision and control of the Group and its management. It is
also responsible for supervising compliance with applicable laws,
rules and regulations. The BoD exercises oversight over UBS
Group AG and its subsidiaries, and is responsible for establishing
a clear Group governance framework to provide effective
steering and supervision of the Group, taking into account the
material risks to which UBS Group AG and its subsidiaries are
exposed. The BoD has ultimate responsibility for the success of
the Group and for delivering sustainable shareholder value
within a framework of prudent and effective controls. It
approves all financial statements and appoints and removes all
GEB members.
The BoD of UBS AG, led by the Chairman, decides on the
strategy of UBS AG upon recommendation by the President of
its Executive Board and exercises the ultimate supervision of
management. Its ultimate responsibility for the success of
UBS AG is exercised subject to the parameters set by the Group.
Members of the Board of Directors
At the AGM on 29 April 2020, Jeremy Anderson, William
Dudley, Reto Francioni, Fred Hu, Julie Richardson, Beatrice
Weder di Mauro, Dieter Wemmer and Jeanette Wong were re-
elected as members of the BoD. David Sidwell, Isabelle Romy
and Robert Scully did not stand for re-election; the biographies
of David Sidwell, Isabelle Romy and Robert Scully can be found
on pages 215 and 218 of the UBS Group AG Annual Report
2019, available under “Annual reporting” at ubs.com/investors.
Mark Hughes and Nathalie Rachou were elected for their first
term. At that same AGM, Axel Weber was re-elected Chairman,
and Julie Richardson, Reto Francioni, Dieter Wemmer and
Jeanette Wong were elected as members of the Compensation
Committee. ADB Altorfer Duss & Beilstein AG was elected as
independent proxy agent. Following his re-election, the BoD
appointed Jeremy Anderson as Vice Chairman and Senior
Independent Director of UBS Group AG.
On 15 January 2021, the BoD announced that Beatrice
Weder di Mauro would not stand for re-election at the
forthcoming AGM, after serving on the BoD of UBS Group AG
and UBS AG for nine years, and that Claudia Böckstiegel and
Patrick Firmenich would be nominated for election to the BoD of
UBS Group AG and UBS AG at the forthcoming annual general
meetings. Claudia Böckstiegel is the General Counsel of Roche
Holding AG and Patrick Firmenich is the Chairman of the Board
of Firmenich International SA, the world’s largest privately
owned fragrances and flavorings company.
Article 31 of our AoA limits the number of mandates that
members of the BoD may hold outside the UBS Group to four
mandates in listed companies and five additional mandates in
that are
non-listed companies. Mandates
controlled by us or that control us are not subject to this
limitation. In addition, members of the BoD may hold no more
than 10 mandates at UBS’s request and 10 mandates in
associations, charitable organizations, foundations, trusts, and
employee welfare foundations. On 31 December 2020, no
member of the BoD reached the thresholds described in article
31 of our AoA.
in companies
The following biographies provide information about the BoD
members who were in office in 2020 and the Group Company
Secretary.
information on mandates, the
biographies include information on memberships or other
activities or functions, as required by the SIX Swiss Exchange
Corporate Governance Directive.
In addition to
No member of the BoD currently carries out or has carried out
over the past three years operational management tasks within
the Group; therefore, all members of the Board are non-
executive members.
All members of UBS Group AG’s BoD are also members of
UBS AG’s BoD, and committee membership is the same for both
entities. The Senior Independent Director function relates only to
UBS Group AG.
In 2020, UBS AG’s BoD had three permanent committees: the
Audit Committee, the Compensation Committee and the Risk
Committee. In addition to those permanent committees, UBS
Group AG also had the Corporate Culture and Responsibility
Committee and the Governance and Nominating Committee.
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Corporate governance and compensation
Corporate governance and compensation | Corporate governance
Axel A. Weber
Jeremy Anderson
Chairman, non-executive member of the Board
Vice Chairman and Senior Independent Director, non-executive member
of the Board
Year of initial election
UBS: 2012 (UBS Group AG: 2014, UBS AG: 2012)
Year of birth | Nationality
1957 | German
Year of initial election
UBS: 2018
Year of birth | Nationality
1958 | British
Professional history and education
Jeremy Anderson was elected to the BoD of UBS AG and UBS Group AG
at the 2018 AGM. He is Vice Chairman and Senior Independent Director
and has chaired the Audit Committee since 2018 and has been a
member of the Governance and Nominating Committee since 2019. He
was Chairman of Global Financial Services at KPMG International from
2010 to 2017. He has spent over 30 years working with the banking and
insurance industry in an advisory capacity, covering a broad range of
topics, including strategy, audit and risk management, technology-
enabled transformation, mergers and bank restructuring. Mr. Anderson
was the founding sponsor of KPMG’s Global Fintech Network in 2014
and is a regular participant at fintech events across Europe, the US and
Asia. He joined KPMG International in 2004 and was Head of Financial
Services KPMG Europe from 2006 to 2011 as well as Head of Clients and
Markets KPMG Europe from 2008 to 2011. From 2004 to 2008 he was
in charge of its UK Financial Services Practice. Prior to that, he served as
a member of the Group Management Board of Atos Origin and as Head
of its UK operations after Atos acquired KPMG Consulting UK in 2002.
In this capacity he managed Atos’s consulting, systems integration and IT
outsourcing services in the UK. Mr. Anderson joined KPMG’s UK
consulting business in 1985 and led the firm as CEO from 2000 to 2002,
having previously been a Partner in its financial services business. He
started his career as a software developer with Triad Computing Systems
in 1980. Mr. Anderson holds a bachelor’s degree in economics from
University College London.
Listed company boards
– Member of the Board of Prudential plc
Other activities and functions
– Trustee of the UK’s Productivity Leadership Group
– Trustee of Kingham Hill Trust
– Trustee of St. Helen’s Bishopsgate
Key competencies
– Banking (wealth management, asset management, personal and
corporate banking; insurance)
– Finance, audit, accounting
– Risk management, compliance and legal
– Technology, cybersecurity
Leadership experience
– Executive board leadership
Professional history and education
Axel A. Weber was elected to the BoD of UBS AG at the 2012 AGM and
of UBS Group AG in 2014. He is Chairman of the BoD of both UBS AG
and UBS Group AG. He has chaired the Governance and Nominating
Committee since 2012 and became Chairperson of the Corporate
Culture and Responsibility Committee in 2013. Mr. Weber was President
of the German Bundesbank between 2004 and 2011, during which time
he also served as a member of the Governing Council of the European
Central Bank, as a member of the Board of Directors of the Bank for
International Settlements, as German governor of the International
Monetary Fund, and as a member of the G7 and G20 Ministers and
Governors. He was a member of the steering committees of the
European Systemic Risk Board in 2011 and the Financial Stability Board
from 2010 to 2011. From 2002 to 2004, Mr. Weber served as a member
of the German Council of Economic Experts. His academic career
encompasses professorships
international economics, monetary
economics and economic theory at the universities of Cologne, Frankfurt
am Main, Bonn and Chicago. Mr. Weber holds a master’s degree in
economics from the University of Constance and a PhD in economics
from the University of Siegen, where he also received his habilitation. He
holds honorary doctorates from the universities of Duisburg-Essen and
Constance.
in
Other activities and functions
– Member of the Board of the Swiss Bankers Association
– Member of the Board of Trustees of Avenir Suisse
– Member of the Board of the Swiss Finance Council
– Chairman of the Board of the Institute of International Finance
– Member of the European Financial Services Round Table
– Member of the European Banking Group
– Member of the International Advisory Councils of the China Banking
and Insurance Regulatory Commission and China Securities Regulatory
Commission
– Member of the International Advisory Panel, Monetary Authority of
Singapore
– Member of the Group of Thirty, Washington, DC
– Chairman of the Board of Trustees of DIW Berlin
– Member of the Advisory Board of the Department of Economics,
University of Zurich
– Member of the Trilateral Commission
Key competencies
– Finance, audit, accounting
– Risk management, compliance and legal
– Regulatory authority, central bank
– ESG (environmental, social and governance)
Leadership experience
– CEO, Chairman
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186
Corporate governance and compensation | Corporate governance
Year of initial election
UBS: 2012 (UBS Group AG: 2014, UBS AG: 2012)
Year of birth | Nationality
1957 | German
Jeremy Anderson
of the Board
Year of initial election
UBS: 2018
Year of birth | Nationality
1958 | British
Professional history and education
Professional history and education
Axel A. Weber was elected to the BoD of UBS AG at the 2012 AGM and
of UBS Group AG in 2014. He is Chairman of the BoD of both UBS AG
and UBS Group AG. He has chaired the Governance and Nominating
Committee since 2012 and became Chairperson of the Corporate
Culture and Responsibility Committee in 2013. Mr. Weber was President
of the German Bundesbank between 2004 and 2011, during which time
he also served as a member of the Governing Council of the European
Central Bank, as a member of the Board of Directors of the Bank for
International Settlements, as German governor of the International
Monetary Fund, and as a member of the G7 and G20 Ministers and
Governors. He was a member of the steering committees of the
European Systemic Risk Board in 2011 and the Financial Stability Board
from 2010 to 2011. From 2002 to 2004, Mr. Weber served as a member
of the German Council of Economic Experts. His academic career
encompasses professorships
in
international economics, monetary
economics and economic theory at the universities of Cologne, Frankfurt
am Main, Bonn and Chicago. Mr. Weber holds a master’s degree in
economics from the University of Constance and a PhD in economics
from the University of Siegen, where he also received his habilitation. He
holds honorary doctorates from the universities of Duisburg-Essen and
Constance.
Other activities and functions
– Member of the Board of the Swiss Bankers Association
– Member of the Board of Trustees of Avenir Suisse
– Member of the Board of the Swiss Finance Council
– Chairman of the Board of the Institute of International Finance
– Member of the European Financial Services Round Table
Jeremy Anderson was elected to the BoD of UBS AG and UBS Group AG
at the 2018 AGM. He is Vice Chairman and Senior Independent Director
and has chaired the Audit Committee since 2018 and has been a
member of the Governance and Nominating Committee since 2019. He
was Chairman of Global Financial Services at KPMG International from
2010 to 2017. He has spent over 30 years working with the banking and
insurance industry in an advisory capacity, covering a broad range of
topics, including strategy, audit and risk management, technology-
enabled transformation, mergers and bank restructuring. Mr. Anderson
was the founding sponsor of KPMG’s Global Fintech Network in 2014
and is a regular participant at fintech events across Europe, the US and
Asia. He joined KPMG International in 2004 and was Head of Financial
Services KPMG Europe from 2006 to 2011 as well as Head of Clients and
Markets KPMG Europe from 2008 to 2011. From 2004 to 2008 he was
in charge of its UK Financial Services Practice. Prior to that, he served as
a member of the Group Management Board of Atos Origin and as Head
of its UK operations after Atos acquired KPMG Consulting UK in 2002.
In this capacity he managed Atos’s consulting, systems integration and IT
outsourcing services in the UK. Mr. Anderson joined KPMG’s UK
consulting business in 1985 and led the firm as CEO from 2000 to 2002,
having previously been a Partner in its financial services business. He
started his career as a software developer with Triad Computing Systems
in 1980. Mr. Anderson holds a bachelor’s degree in economics from
University College London.
Listed company boards
– Member of the Board of Prudential plc
– Member of the European Banking Group
Other activities and functions
– Member of the International Advisory Councils of the China Banking
– Trustee of the UK’s Productivity Leadership Group
and Insurance Regulatory Commission and China Securities Regulatory
– Trustee of Kingham Hill Trust
Commission
Singapore
– Member of the International Advisory Panel, Monetary Authority of
– Member of the Group of Thirty, Washington, DC
– Chairman of the Board of Trustees of DIW Berlin
– Member of the Advisory Board of the Department of Economics,
University of Zurich
– Member of the Trilateral Commission
– Trustee of St. Helen’s Bishopsgate
Key competencies
– Banking (wealth management, asset management, personal and
corporate banking; insurance)
– Finance, audit, accounting
– Risk management, compliance and legal
– Technology, cybersecurity
Leadership experience
– Executive board leadership
Key competencies
– Finance, audit, accounting
– Risk management, compliance and legal
– Regulatory authority, central bank
– ESG (environmental, social and governance)
Leadership experience
– CEO, Chairman
186
Axel A. Weber
William C. Dudley
Reto Francioni
Chairman, non-executive member of the Board
Vice Chairman and Senior Independent Director, non-executive member
Non-executive member of the Board
Non-executive member of the Board
Year of initial election
UBS: 2019
Year of birth | Nationality
1953 | American (US)
Professional history and education
William C. Dudley was elected to the BoD of UBS AG and UBS Group AG
at the 2019 AGM. He has been a member of the Corporate Culture and
Responsibility Committee and of the Risk Committee since 2019 and
became a member of the Governance and Nominating Committee in
2020. Currently, Mr. Dudley is a Senior Research Scholar at the Griswold
Center for Economic Policy Studies at Princeton University. He became
CEO of the Federal Reserve Bank of New York (the NY Fed) in 2009 and
held that position until 2018. During this time, his focus areas included
cultural behavior and social and governance topics in the financial world.
As CEO, he served as the Vice Chairman and a permanent member of
the Federal Open Market Committee. Previously, Mr. Dudley served as
Executive Vice President of the Markets Group at the NY Fed and Head
of the Markets Group from 2007 to 2009. Prior to his time with the NY
Fed, Mr. Dudley joined Goldman Sachs in 1986 and held several senior
management positions. He was a Partner and Managing Director and for
a decade the Chief US Economist. In 2012, Mr. Dudley was appointed
Chairman of the Committee on the Global Financial System of the Bank
for International Settlements (BIS). Prior to that, he served as Chairman
of the former Committee on Payment and Settlement Systems of the BIS
from 2009 to 2012. He was a member of the Board of Directors of the
BIS from 2009 to 2018. Mr. Dudley holds a bachelor’s degree from New
College of Florida and received his doctorate in economics from the
University of California, Berkeley in 1982.
Non-listed company boards
– Member of the Board of Treliant LLC
Other activities and functions
– Member of the Group of Thirty
– Member of the Council on Foreign Relations
– Chair of the Bretton Woods Committee Board of Directors
– Member of the Board of the Council for Economic Education
Key competencies
– Investment banking, capital markets
– Risk management, compliance and legal
– Regulatory authority, central bank
– ESG (environmental, social and governance)
Leadership experience
– CEO, Chairman
Year of initial election
UBS: 2013 (UBS Group AG: 2014, UBS AG: 2013)
Year of birth | Nationality
1955 | Swiss
Professional history and education
Reto Francioni was elected to the BoD of UBS AG at the 2013 AGM and
of UBS Group AG in 2014. He has been a member of the Risk
Committee since 2015 and of the Compensation Committee since 2019.
He was CEO of Deutsche Börse AG from 2005 to 2015. Since 2006, he
has been a professor of Financial Market Research at the University of
Basel. From 2002 to 2005, Mr. Francioni was Chairman of the
Supervisory Board and President of the SWX Group, Zurich, placing him
at the heart of digitalization within the industry. Mr. Francioni was Co-
CEO and Spokesman for the Board of Directors of Consors AG,
Nuremberg, from 2000 to 2002. Between 1993 and 2000, he held
various management positions at Deutsche Börse AG, including that of
Deputy CEO from 1999 to 2000. There he drove a fundamental
transformation to shape it as a world leader in technology. From 1992 to
1993, he served in the corporate finance division of Hoffmann-La Roche,
Basel. Prior to that, he was on the Executive Board of Association
Tripartite Bourses for several years. From 1985 to 1988, he worked for
Credit Suisse, holding positions
legal
departments. He started his professional career in 1981 in the commerce
division of Union Bank of Switzerland. Mr. Francioni completed his law
degree at the University of Zurich in 1981 and earned his PhD from that
same university in 1987.
in the equity sales and
Listed company boards
– Member of the Board of Coca-Cola HBC AG (Senior Independent
Non-Executive Director, chair of the nomination committee)
Non-listed company boards
– Chairman of the Board of Swiss International Air Lines AG
– Member of the Board of MTIP AG
– Executive Director and member of myTAMAR GmbH
Key competencies
– Investment banking, capital markets
– Risk management, compliance and legal
– Human resources management, including compensation
– Technology, cybersecurity
Leadership experience
– CEO, Chairman
187
187
Corporate governance and compensation Corporate governance and compensation | Corporate governance
Fred Hu
Mark Hughes
Non-executive member of the Board
Non-executive member of the Board
Year of initial election
UBS: 2018
Year of birth | Nationality
1963 | Chinese
Year of initial election
UBS: 2020
Year of birth | Nationality
1958 | Canadian, British and American (US)
Professional history and education
Mark Hughes was elected to the BoD of UBS AG and UBS Group AG at
the 2020 AGM. He has been a member of the Corporate Culture and
Responsibility Committee and chaired the Risk Committee since 2020.
Mr. Hughes was Group Chief Risk Officer of Royal Bank of Canada (RBC)
from 2014 to 2018. He joined RBC in 1981 and spent his entire career
working for that bank in Canada, the US and the UK. He held various
senior leadership positions, such as Chief Operating Officer Capital
Markets (2008 to 2013) and Head of Global Credit (2001 to 2008). Mr.
Hughes served on boards of RBC’s subsidiaries for more than 20 years.
Mr. Hughes holds a Bachelor of Laws degree from the University of
Leeds and an MBA in finance from Manchester Business School.
Other activities and functions
Chair of the Board of Directors of the Global Risk Institute
Visiting lecturer at the University of Leeds
Senior advisor to McKinsey & Company
Key competencies
– Banking (wealth management, asset management, personal and
corporate banking; insurance)
– Investment banking, capital markets
– Risk management, compliance and legal
– Technology, cybersecurity
Leadership experience
Executive board leadership
in
the areas of mobile
Professional history and education
Fred Hu was elected to the BoD of UBS AG and UBS Group AG at the
2018 AGM. He has been a member of the Governance and Nominating
Committee and the Risk Committee since 2020. Mr. Hu has been
Chairman of Primavera Capital Group, a China-based global investment
firm, since 2010. Through his numerous investments in leading
technology companies over the years, he has obtained profound
knowledge
internet, digitalization and
cybersecurity. Prior to founding Primavera, Mr. Hu held various senior
positions at Goldman Sachs from 1997 to 2010. He was a Partner and
Chairman of Greater China from 2008 to 2010 and a Partner and Co-
Head of Investment Banking China from 2004 to 2008. Before that, he
held the position of Goldman Sachs’s Chief China Economist. From 1991
to 1996, he served as an economist at the International Monetary Fund
in Washington, DC, and after that was Co-Director of the National
Center for Economic Research and a professor at Tsinghua University.
Mr. Hu holds a master’s in engineering science from Tsinghua University,
and a master’s and a PhD in economics from Harvard University.
Listed company boards
– Non-executive Chairman of the Board of Yum China Holdings
(chair of the nomination and governance committee)
– Member of the Board of ICBC
– Member of the Board of Hong Kong Exchanges and Clearing Ltd.
Non-listed company boards
– Chairman of Primavera Capital Ltd
– Member of the Board of Ant Group
– Member of the Board of Minsheng Financial Leasing Co.
Other activities and functions
– Trustee of the China Medical Board
– Governor of the Chinese International School in Hong Kong
– Co-Chairman of the Nature Conservancy Asia Pacific Council
Key competencies
– Investment banking, capital markets
– Risk management, compliance and legal
– Technology, cybersecurity
– Regulatory authority, central bank
Leadership experience
– CEO, Chairman
188
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Corporate governance and compensation | Corporate governance
Fred Hu
Mark Hughes
Nathalie Rachou
Julie G. Richardson
Non-executive member of the Board
Non-executive member of the Board
Non-executive member of the Board
Non-executive member of the Board
Year of initial election
UBS: 2018
Year of birth | Nationality
1963 | Chinese
Year of initial election
UBS: 2020
Year of birth | Nationality
1958 | Canadian, British and American (US)
Year of initial election
UBS: 2020
Year of birth | Nationality
1957 | French
Year of initial election
UBS: 2017
Year of birth | Nationality
1963 | American (US)
Professional history and education
Professional history and education
Fred Hu was elected to the BoD of UBS AG and UBS Group AG at the
Mark Hughes was elected to the BoD of UBS AG and UBS Group AG at
2018 AGM. He has been a member of the Governance and Nominating
the 2020 AGM. He has been a member of the Corporate Culture and
Committee and the Risk Committee since 2020. Mr. Hu has been
Responsibility Committee and chaired the Risk Committee since 2020.
Chairman of Primavera Capital Group, a China-based global investment
Mr. Hughes was Group Chief Risk Officer of Royal Bank of Canada (RBC)
firm, since 2010. Through his numerous investments in leading
from 2014 to 2018. He joined RBC in 1981 and spent his entire career
technology companies over the years, he has obtained profound
working for that bank in Canada, the US and the UK. He held various
knowledge
in
the areas of mobile
internet, digitalization and
senior leadership positions, such as Chief Operating Officer Capital
cybersecurity. Prior to founding Primavera, Mr. Hu held various senior
Markets (2008 to 2013) and Head of Global Credit (2001 to 2008). Mr.
positions at Goldman Sachs from 1997 to 2010. He was a Partner and
Hughes served on boards of RBC’s subsidiaries for more than 20 years.
Chairman of Greater China from 2008 to 2010 and a Partner and Co-
Mr. Hughes holds a Bachelor of Laws degree from the University of
Head of Investment Banking China from 2004 to 2008. Before that, he
Leeds and an MBA in finance from Manchester Business School.
held the position of Goldman Sachs’s Chief China Economist. From 1991
to 1996, he served as an economist at the International Monetary Fund
Other activities and functions
in Washington, DC, and after that was Co-Director of the National
Chair of the Board of Directors of the Global Risk Institute
Center for Economic Research and a professor at Tsinghua University.
Visiting lecturer at the University of Leeds
Mr. Hu holds a master’s in engineering science from Tsinghua University,
Senior advisor to McKinsey & Company
and a master’s and a PhD in economics from Harvard University.
Listed company boards
– Banking (wealth management, asset management, personal and
– Non-executive Chairman of the Board of Yum China Holdings
corporate banking; insurance)
(chair of the nomination and governance committee)
– Member of the Board of ICBC
– Investment banking, capital markets
– Risk management, compliance and legal
– Member of the Board of Hong Kong Exchanges and Clearing Ltd.
– Technology, cybersecurity
Key competencies
Leadership experience
Executive board leadership
Non-listed company boards
– Chairman of Primavera Capital Ltd
– Member of the Board of Ant Group
– Member of the Board of Minsheng Financial Leasing Co.
Other activities and functions
– Trustee of the China Medical Board
– Governor of the Chinese International School in Hong Kong
– Co-Chairman of the Nature Conservancy Asia Pacific Council
Key competencies
– Investment banking, capital markets
– Risk management, compliance and legal
– Technology, cybersecurity
– Regulatory authority, central bank
Leadership experience
– CEO, Chairman
Professional history and education
Nathalie Rachou was elected to the BoD of UBS AG and UBS Group AG
at the 2020 AGM. She has been a member of the Risk Committee since
2020. Ms. Rachou was a senior advisor for Clartan Associés (formerly
Rouvier Associés) from 2015 to April 2020. In 1999, she founded
Topiary Finance Ltd, an asset management company based in London, of
which she was CEO until its merger with Rouvier Associés in 2014. From
1978 to 1999, Ms. Rachou held a number of positions within Banque
Indosuez and Crédit Agricole Indosuez, including roles in capital markets
and as Chief Operating Officer of the brokerage subsidiary of Banque
Indosuez. Ms. Rachou holds a master’s degree in management from HEC
in Paris and an executive MBA from INSEAD.
Listed company boards
Member of the Board of Euronext N.V.
Member of the Board of Veolia Environnement SA
Key competencies
Banking (wealth management, asset management, personal and
corporate banking; insurance)
Investment banking, capital markets
Risk management, compliance and legal
Finance, audit, accounting
investments
Professional history and education
Julie G. Richardson was elected to the BoD of UBS AG and UBS Group
AG at the 2017 AGM. She has been a member of the Compensation
Committee since 2018 and its Chairperson since 2019. She also has
been a member of the Risk Committee since 2017 and of the
Governance and Nominating Committee since 2019. From 2003 to
2012, Ms. Richardson was a Partner and Head of the New York Office of
Providence Equity Partners, a global private equity firm specializing in
in media, communications, education and
equity
information companies. She acted as a senior advisor to the partnership
until 2014. From 1998 to 2003, Ms. Richardson served as Vice Chairman
of the Investment Banking division of JPMorgan Chase & Co. and Head
of its Global Telecommunications, Media and Technology group.
Throughout her career, she has spent significant time with both
incumbent and new technology companies, including being a board
member, since 2015, of a digital knowledge management company and,
since 2019, of a leading cloud monitoring company. She began her
career in 1986 with Merrill Lynch, where she worked until 1998, in her
last position as Managing Director Media and Communications
Investment Banking. Ms. Richardson graduated from the University of
Wisconsin–Madison with a bachelor’s degree in business administration.
Listed company boards
– Member of the Board of Yext (chair of the audit committee)
– Member of the Board of Vereit, Inc. (chair of the compensation
committee)
– Member of the Board of Datadog (chair of the audit committee)
Key competencies
– Investment banking, capital markets
– Risk management, compliance and legal
– Human resources management, including compensation
– Technology, cybersecurity
188
189
189
Corporate governance and compensation Corporate governance and compensation | Corporate governance
Beatrice Weder di Mauro
Dieter Wemmer
Non-executive member of the Board
Non-executive member of the Board
Year of initial election
UBS: 2012 (UBS Group AG: 2014, UBS AG: 2012)
Year of birth | Nationality
1965 | Swiss and Italian
Year of initial election
UBS: 2016
Year of birth | Nationality
1957 | Swiss and German
Professional history and education
Beatrice Weder di Mauro was elected to the BoD of UBS AG at the 2012
AGM and of UBS Group AG in 2014. She has been a member of the
Audit Committee since 2012 and became a member of the Corporate
Culture and Responsibility Committee in 2017. She was a member of the
Risk Committee from 2013 to 2017. Since 2019, Ms. Weder di Mauro
has been a professor of international economics at the Graduate
Institute Geneva (IHEID) and since 2018 has been President of the Centre
for Economic Policy Research in London. Since 2016, she has been a
research professor and distinguished fellow at the Emerging Markets
Institute at INSEAD in Singapore. From 2001 to 2018, she held the Chair
of International Macroeconomics at the Johannes Gutenberg University
of Mainz and was a member of the German Council of Economic Experts
from 2004 to 2012. She held visiting positions at the International
Monetary Fund (IMF) in Washington, DC, at the National Bureau of
Economic Research in Cambridge, MA, and at the United Nations
University in Tokyo. Prior to that, she worked as an economist at the IMF
and the World Bank in Washington, DC. She received a PhD and a
habilitation in economics from the University of Basel. Since 2005, Ms.
Weder di Mauro has served as an independent director on the boards of
globally leading companies in development finance, pharmaceuticals,
technology and insurance.
Professional history and education
Dieter Wemmer was elected to the BoD of UBS AG and UBS Group AG
at the 2016 AGM. He has been a member of the Compensation
Committee since 2018. In 2019, he became a member of the Audit
Committee and in 2020, a member of the Governance and Nominating
Committee. Mr. Wemmer was Chief Financial Officer (CFO) of Allianz SE
from 2013 to 2017. He joined Allianz SE in 2012 as a member of the
Board of Management, responsible for the insurance business in France,
Benelux, Italy, Greece and Turkey and for the “Global Property &
Casualty” Center of Competence. He was CFO of Zurich Insurance
Group from 2007 to 2011. From 2010 to 2011, he was Zurich’s
Regional Chairman of Europe. Prior to that, Mr. Wemmer was CEO of
the Europe General Insurance business and member of Zurich’s Group
Executive Committee from 2004 to 2007. He held various other
management positions in the Zurich Group, such as Chief Operating
Officer of the Europe General Insurance business from 2003 to 2004,
Head of Mergers and Acquisitions from 1999 to 2003 and Head of
Financial Controlling from 1997 to 1999. Mr. Wemmer began his career
in the insurance industry within the Zurich Group in 1986 in Cologne,
after graduating from the University of Cologne with a master’s degree
and acquiring his doctorate in mathematics in 1985.
Non-listed company boards
– Member of the Supervisory Board of Robert Bosch GmbH
Listed company boards
– Member of the Board of Ørsted A/S (chair of the audit and risk
committee)
Other activities and functions
– Member of the Swiss National COVID-19 Science Task Force, Bern
– Member of the French Commission sur l’avenir des finances publiques
– Member of the Foundation Board of the International Center for
Monetary and Banking Studies (ICMB)
– Member of the Franco-German Council of Economic Experts
– President of the Centre for Economic Policy Research
– Commissioner on Pan-European Commission on Health and
Non-listed company boards
– Chairman of Marco Capital Holdings Limited, Malta
Other activities and functions
– Member of the Berlin Center of Corporate Governance
Key competencies
– Banking (wealth management, asset management, personal and
Sustainable Development, the World Health Organization, Geneva
corporate banking; insurance)
– Advisor to the Board of Unigestion
Key competencies
– Finance, audit, accounting
– Risk management, compliance and legal
– Regulatory authority, central bank
– ESG (environmental, social and governance)
– Investment banking, capital markets
– Finance, audit, accounting
– Risk management, compliance and legal
Leadership experience
– Executive board leadership
190
190
Corporate governance and compensation | Corporate governance
Year of initial election
UBS: 2012 (UBS Group AG: 2014, UBS AG: 2012)
Year of birth | Nationality
1965 | Swiss and Italian
Year of initial election
UBS: 2016
Year of birth | Nationality
1957 | Swiss and German
Professional history and education
Professional history and education
Beatrice Weder di Mauro was elected to the BoD of UBS AG at the 2012
Dieter Wemmer was elected to the BoD of UBS AG and UBS Group AG
AGM and of UBS Group AG in 2014. She has been a member of the
at the 2016 AGM. He has been a member of the Compensation
Audit Committee since 2012 and became a member of the Corporate
Committee since 2018. In 2019, he became a member of the Audit
Culture and Responsibility Committee in 2017. She was a member of the
Committee and in 2020, a member of the Governance and Nominating
Risk Committee from 2013 to 2017. Since 2019, Ms. Weder di Mauro
Committee. Mr. Wemmer was Chief Financial Officer (CFO) of Allianz SE
has been a professor of international economics at the Graduate
from 2013 to 2017. He joined Allianz SE in 2012 as a member of the
Institute Geneva (IHEID) and since 2018 has been President of the Centre
Board of Management, responsible for the insurance business in France,
for Economic Policy Research in London. Since 2016, she has been a
Benelux, Italy, Greece and Turkey and for the “Global Property &
research professor and distinguished fellow at the Emerging Markets
Casualty” Center of Competence. He was CFO of Zurich Insurance
Institute at INSEAD in Singapore. From 2001 to 2018, she held the Chair
Group from 2007 to 2011. From 2010 to 2011, he was Zurich’s
of International Macroeconomics at the Johannes Gutenberg University
Regional Chairman of Europe. Prior to that, Mr. Wemmer was CEO of
of Mainz and was a member of the German Council of Economic Experts
the Europe General Insurance business and member of Zurich’s Group
from 2004 to 2012. She held visiting positions at the International
Executive Committee from 2004 to 2007. He held various other
Monetary Fund (IMF) in Washington, DC, at the National Bureau of
management positions in the Zurich Group, such as Chief Operating
Economic Research in Cambridge, MA, and at the United Nations
Officer of the Europe General Insurance business from 2003 to 2004,
University in Tokyo. Prior to that, she worked as an economist at the IMF
Head of Mergers and Acquisitions from 1999 to 2003 and Head of
and the World Bank in Washington, DC. She received a PhD and a
Financial Controlling from 1997 to 1999. Mr. Wemmer began his career
habilitation in economics from the University of Basel. Since 2005, Ms.
in the insurance industry within the Zurich Group in 1986 in Cologne,
Weder di Mauro has served as an independent director on the boards of
after graduating from the University of Cologne with a master’s degree
technology and insurance.
Non-listed company boards
– Member of the Board of Ørsted A/S (chair of the audit and risk
– Member of the Supervisory Board of Robert Bosch GmbH
committee)
Listed company boards
Other activities and functions
Non-listed company boards
– Member of the Swiss National COVID-19 Science Task Force, Bern
– Chairman of Marco Capital Holdings Limited, Malta
– Member of the French Commission sur l’avenir des finances publiques
– Member of the Foundation Board of the International Center for
Other activities and functions
Beatrice Weder di Mauro
Dieter Wemmer
Jeanette Wong
Non-executive member of the Board
Non-executive member of the Board
Non-executive member of the Board
Markus Baumann
Group Company Secretary
Year of initial election
UBS: 2019
Year of birth | Nationality
1960 | Singaporean
Professional history and education
Jeanette Wong was elected to the BoD of UBS AG and UBS Group AG at
the 2019 AGM. She has been a member of the Audit Committee since
2019. In 2020, she became a member of the Compensation Committee
and a member of the Corporate Culture and Responsibility Committee.
Ms. Wong was Group Executive responsible for the institutional banking
business at the Singapore-based DBS Group from 2008 to March 2019,
encompassing Corporate Banking, Global Transaction Services, Strategic
Advisory and Mergers & Acquisitions. Previously, she served as Chief
Financial Officer of the DBS Group between 2003 and 2008. Ms. Wong
has spent more than 30 years working in different senior management
roles within the financial industry in Singapore. She started her career in
1982 with positions at Banque Paribas and Citibank, before helping to
build up JP Morgan’s Asia and emerging markets business over a
sixteen-year career with the firm. Ms. Wong holds a bachelor’s in
business administration from the National University of Singapore and an
MBA from the University of Chicago.
Listed company boards
– Member of the Board of EssilorLuxottica (chair of the corporate social
Year of birth | Nationality
1963 | Swiss
Professional history and education
Markus Baumann was appointed Group Company
Secretary of UBS Group AG and Company Secretary
of UBS AG by the BoD in 2017. He has been with
UBS for more than 40 years and has held a broad
range of leadership roles across the Group in
Switzerland, the US and Japan, including Chief of
Staff to the Chairman of the BoD since 2015 and
Chief Operating Officer of Group Internal Audit from
2006 to 2015. Before that, he worked as Chief
Operating Officer EMEA for UBS Asset Management.
Earlier in his career, Mr. Baumann worked in Japan
for four years, as Corporate Planning Officer and
assistant to the CEO. He joined UBS in 1979 as a
banking apprentice, covering the full range of
universal banking activities. Mr. Baumann holds an
MBA from INSEAD Fontainebleau and a Swiss
Federal Diploma as a Business Analyst.
globally leading companies in development finance, pharmaceuticals,
and acquiring his doctorate in mathematics in 1985.
responsibility committee)
Non-listed company boards
– Member of the Board of Jurong Town Corporation
– Member of the Board of PSA International
– Member of the Board of FFMC Holdings Pte. Ltd. and of Fullerton
Fund Management Company Ltd.
Other activities and functions
– Member of the Global Advisory Board, Asia, University of Chicago
Monetary and Banking Studies (ICMB)
– Member of the Berlin Center of Corporate Governance
Booth School of Business
– Member of the Franco-German Council of Economic Experts
– President of the Centre for Economic Policy Research
Key competencies
– Member of the Securities Industry Council
– Member of the Board of Trustees of the National University of
– Commissioner on Pan-European Commission on Health and
– Banking (wealth management, asset management, personal and
Singapore
Sustainable Development, the World Health Organization, Geneva
corporate banking; insurance)
– Advisor to the Board of Unigestion
Key competencies
– Finance, audit, accounting
– Risk management, compliance and legal
– Regulatory authority, central bank
– ESG (environmental, social and governance)
– Investment banking, capital markets
– Finance, audit, accounting
– Risk management, compliance and legal
Leadership experience
– Executive board leadership
Key competencies
– Banking (wealth management, asset management, personal and
corporate banking; insurance)
– Investment banking, capital markets
– Finance, audit, accounting
– ESG (environmental, social and governance)
Leadership experience
– Executive board leadership
190
191
191
Corporate governance and compensation Corporate governance and compensation | Corporate governance
Elections and terms of office
Shareholders annually elect each member of
the BoD
individually, as well as the Chairman and the members of the
Compensation Committee, based on proposals from the BoD.
As set out in the Organization Regulations, BoD members are
normally expected to serve for at least three years. No BoD
member may serve for more than 10 consecutive terms of office;
in exceptional circumstances the BoD may extend that limit.
› Refer to “Skills, expertise and training of the Board of Directors”
in this section for more information
Organizational principles and structure
Following each AGM, the BoD meets to appoint one or more
Vice Chairmen, a Senior
Independent Director, the BoD
committee members (other than the Compensation Committee
members, who are elected by the shareholders) and the
respective committee Chairpersons. At the same meeting the
BoD appoints the Group Company Secretary, who, pursuant to
the Organization Regulations, acts as secretary to the BoD and
its committees.
Pursuant to the AoA and the Organization Regulations, the
BoD meets as often as business requires, but it must meet at
least six times a year. Due to COVID-19, from March 2020
onward the meetings were organized as video calls. Additional
video calls were also organized during the reporting period to
facilitate engagement between the members of the BoD. During
2020, a total of 23 BoD meetings were held, 15 of which were
attended by GEB members. Average participation in the BoD
meetings was 99%. In addition to the BoD meetings attended
by GEB members, the Group CEO attended some of the
meetings of the BoD without GEB participation. The meetings
had an average duration of 105 minutes and covered both UBS
Group AG and UBS AG. Additionally, 11 ad hoc calls were held,
5 of which were attended by GEB members. The BoD held three
days of
including deep dives on
environmental, social and governance (ESG) topics, our three
keys to success (our Pillars, Principles and Behaviors), and UBS’s
purpose. A two-day crisis management and simulation exercise
was also held.
strategy workshops,
At every BoD meeting, each committee Chairperson provides
the BoD with an update on current activities of his or her
committee and important committee issues.
In 2020, four UBS AG BoD meetings were held with members
of the Executive Board in attendance. Standalone meetings are
held regularly to discuss and agree on finance, risk, compliance,
operational risk, regulatory and other topics related to UBS AG.
We also enhanced
the coordination and exchange of
information between UBS Group AG and its significant group
entities. Joint meetings between the Group BoD and the boards
of directors of all significant group entities, as well as between
the respective chairs of the risk and audit committees, have been
held. As in prior years, the annual workshop, attended by
independent members of the boards of the Group and
significant group entities, was conducted, albeit virtually and in a
shortened format.
192
192
Corporate governance and compensation | Corporate governance
Elections and terms of office
attended by GEB members. Average participation in the BoD
meetings was 99%. In addition to the BoD meetings attended
Shareholders annually elect each member of
the BoD
by GEB members, the Group CEO attended some of the
individually, as well as the Chairman and the members of the
meetings of the BoD without GEB participation. The meetings
Compensation Committee, based on proposals from the BoD.
had an average duration of 105 minutes and covered both UBS
As set out in the Organization Regulations, BoD members are
Group AG and UBS AG. Additionally, 11 ad hoc calls were held,
normally expected to serve for at least three years. No BoD
5 of which were attended by GEB members. The BoD held three
member may serve for more than 10 consecutive terms of office;
days of
strategy workshops,
including deep dives on
in exceptional circumstances the BoD may extend that limit.
environmental, social and governance (ESG) topics, our three
› Refer to “Skills, expertise and training of the Board of Directors”
in this section for more information
keys to success (our Pillars, Principles and Behaviors), and UBS’s
purpose. A two-day crisis management and simulation exercise
Organizational principles and structure
was also held.
At every BoD meeting, each committee Chairperson provides
the BoD with an update on current activities of his or her
Following each AGM, the BoD meets to appoint one or more
committee and important committee issues.
Vice Chairmen, a Senior
Independent Director, the BoD
In 2020, four UBS AG BoD meetings were held with members
committee members (other than the Compensation Committee
of the Executive Board in attendance. Standalone meetings are
members, who are elected by the shareholders) and the
held regularly to discuss and agree on finance, risk, compliance,
respective committee Chairpersons. At the same meeting the
operational risk, regulatory and other topics related to UBS AG.
BoD appoints the Group Company Secretary, who, pursuant to
We also enhanced
the coordination and exchange of
the Organization Regulations, acts as secretary to the BoD and
information between UBS Group AG and its significant group
its committees.
entities. Joint meetings between the Group BoD and the boards
Pursuant to the AoA and the Organization Regulations, the
of directors of all significant group entities, as well as between
BoD meets as often as business requires, but it must meet at
the respective chairs of the risk and audit committees, have been
least six times a year. Due to COVID-19, from March 2020
held. As in prior years, the annual workshop, attended by
onward the meetings were organized as video calls. Additional
independent members of the boards of the Group and
video calls were also organized during the reporting period to
significant group entities, was conducted, albeit virtually and in a
facilitate engagement between the members of the BoD. During
shortened format.
2020, a total of 23 BoD meetings were held, 15 of which were
number
operating
effectively. A
Performance assessment
Every third year, an external assessment of the effectiveness of
the BoD is conducted; the most recent one was in 2019. In
2020, a self-assessment was completed for the BoD and its
committees. The results of the self-assessment did not raise any
material issues and concluded that the BoD and its committees
were
of minor
recommendations were considered for future agenda setting
and the feedback served as a source for the definition of the
BoD’s priorities for 2020–2021. Particular priorities for the BoD
were supporting a smooth CEO transition and providing
oversight with regard to dealing with the pandemic. Overall
corporate strategy and divisional strategic growth initiatives, as
well as oversight of digital transformation, remained at the core
of the BoD’s mandate. The BoD also continued to focus on
regulatory, risk, legal and remediation issues. ESG topics, in
particular sustainability and the continued emphasis on cultural
values, were other key priorities.
BoD committees
The committees listed on the following pages assist the BoD in
the performance of its responsibilities. These committees and
their charters are described in the Organization Regulations,
available at ubs.com/governance. The committees meet as often
as their business requires, although the Audit Committee, the
Risk Committee and the Compensation Committee must each
meet at least four times a year, and the Corporate Culture and
Responsibility Committee and the Governance and Nominating
Committee must each meet at least twice a year. Topics of
common interest or affecting more than one committee are
discussed at joint committee meetings. The Audit Committee
and the Risk Committee hold at least four joint meetings a year.
During 2020, a total of seven joint committee meetings were
held for UBS Group AG (six joint committee meetings were held
simultaneously for UBS AG). The Risk Committee held one
meeting with the Compensation Committee, one with the
Corporate Culture and Responsibility Committee, and five with
the Audit Committee.
Board of Directors
Members in 2020
Axel A. Weber 1, Chairman
David Sidwell 2
Jeremy Anderson
William C. Dudley
Reto Francioni
Fred Hu
Mark Hughes 3
Nathalie Rachou 3
Julie G. Richardson
Isabelle Romy 2
Robert W. Scully 2
Beatrice Weder di Mauro
Dieter Wemmer
Jeanette Wong
Meeting attendance
without GEB4
Meeting attendance
with GEB5
Key responsibilities include:
8/8
2/2
8/8
8/8
8/8
8/8
6/6
6/6
8/8
2/2
2/2
8/8
8/8
8/8
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
14/15
5/5
15/15
15/15
15/15
15/15
10/10
10/10
15/15
5/5
5/5
15/15
15/15
14/15
93% The Board has ultimate responsibility for the success of the Group and for
delivering sustainable shareholder value within a framework of prudent and
effective controls. It decides on the Group’s strategy and the necessary financial
and human resources upon recommendation of the Group CEO and sets
the Group’s values and standards to ensure that its obligations to shareholders
and other stakeholders are met.
› Refer to the Organization Regulations of UBS Group AG,
available at ubs.com/governance, for more information
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
93%
1 Due to the Chairman needing to attend the ad hoc CEO announcement, a single meeting had to be chaired by the Vice Chairman; for that sole reason, the Chairman’s attendance rate for the meetings with GEB was
brought down from 100% to 93%. 2 David Sidwell, Isabelle Romy and Robert W. Scully did not stand for re-election at the 2020 AGM; indicated are their attended and total meetings up to the 2020 AGM.
3 Mark Hughes and Nathalie Rachou were elected to the Board at the 2020 AGM; indicated are their attended and total meetings after their election. 4 Additionally, six ad hoc calls took place in 2020. 5 Additionally,
five ad hoc calls took place in 2020.
192
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Corporate governance and compensation Corporate governance and compensation | Corporate governance
Audit Committee
In 2020, the Audit Committee consisted of five BoD members
before the AGM, and four members after the AGM, all of whom
were determined by the BoD to be fully independent. As a
group, members of the Audit Committee must have the
necessary qualifications and skills to perform all their duties and
together must possess financial literacy and experience in
banking and risk management.
The Audit Committee itself does not perform audits; instead,
it oversees the work of the external auditors, Ernst & Young Ltd,
who in turn are responsible for auditing the annual financial
statements of UBS Group AG and UBS AG and for reviewing the
quarterly financial statements.
In particular, the Audit Committee monitors the integrity of
the financial statements of UBS Group AG and UBS AG and any
announcements related to financial performance, and reviews
significant financial reporting judgments contained in them,
before recommending their approval to the BoD or proposing
any adjustments the Audit Committee considers appropriate.
the
qualifications,
The Audit Committee oversees the relationship with, and
assesses
effectiveness,
independence and performance of, the external auditors and the
lead audit partner, and supports the BoD in reaching decisions
on the appointment, reappointment or dismissal of the external
auditors and the rotation of the lead audit partner. The BoD
then submits proposals for shareholder approval at the AGM.
expertise,
During 2020, the Audit Committee held 14 committee
meetings, with an average participation rate of 98%. The
meetings had an average duration of approximately 160 minutes
and covered both UBS Group AG and UBS AG. All the meetings
of the Audit Committee were attended by the Group Chief
Financial Officer and the Group Controller and Chief Accounting
Officer. The Chairperson and the committee continued to
maintain regular contact with core supervisory authorities.
All Audit Committee members have accounting or related
financial management expertise and, in compliance with the
rules established pursuant to the 2002 US Sarbanes–Oxley Act,
at least one member qualifies as a financial expert. The NYSE
listing standards on corporate governance and Rule 10A-3 under
the US Securities Exchange Act set more stringent independence
requirements for members of audit committees than for the
other members of the BoD. Throughout 2020, all members of
the Audit Committee, in addition to satisfying our independence
criteria, satisfied these requirements, in that they did not receive,
directly or indirectly, any consulting, advisory or compensatory
fees from any member of the Group other than in their capacity
as a BoD member, did not hold, directly or indirectly, UBS Group
AG shares in excess of 5% of the outstanding capital, and did
not serve on the audit committees of more than two other
public companies.
Audit Committee
Members in 2020
Meeting attendance
Key responsibilities include:
Jeremy Anderson (Chairperson)
Isabelle Romy 1
Beatrice Weder di Mauro
Dieter Wemmer
Jeanette Wong
14/14
6/6
13/14
14/14
14/14
100% The function of the Audit Committee is to support the Board in fulfilling its oversight duty relating to
financial reporting and internal controls over financial reporting, the effectiveness of the external and
internal audit functions, and the effectiveness of whistleblowing procedures.
100%
93%
100%
100%
Management is responsible for the preparation, presentation and integrity of the financial statements,
while the external auditors are responsible for auditing financial statements. The Audit Committee’s
responsibility is one of oversight and review.
1 Isabelle Romy did not stand for re-election at the 2020 AGM; indicated are her attended and total meetings up to the 2020 AGM.
› Refer to the Organization Regulations of UBS Group AG,
available at ubs.com/governance, for more information
194
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Corporate governance and compensation | Corporate governance
Audit Committee
During 2020, the Audit Committee held 14 committee
In 2020, the Audit Committee consisted of five BoD members
meetings, with an average participation rate of 98%. The
before the AGM, and four members after the AGM, all of whom
meetings had an average duration of approximately 160 minutes
were determined by the BoD to be fully independent. As a
and covered both UBS Group AG and UBS AG. All the meetings
group, members of the Audit Committee must have the
of the Audit Committee were attended by the Group Chief
necessary qualifications and skills to perform all their duties and
Financial Officer and the Group Controller and Chief Accounting
together must possess financial literacy and experience in
Officer. The Chairperson and the committee continued to
banking and risk management.
maintain regular contact with core supervisory authorities.
The Audit Committee itself does not perform audits; instead,
All Audit Committee members have accounting or related
it oversees the work of the external auditors, Ernst & Young Ltd,
financial management expertise and, in compliance with the
who in turn are responsible for auditing the annual financial
rules established pursuant to the 2002 US Sarbanes–Oxley Act,
statements of UBS Group AG and UBS AG and for reviewing the
at least one member qualifies as a financial expert. The NYSE
quarterly financial statements.
listing standards on corporate governance and Rule 10A-3 under
In particular, the Audit Committee monitors the integrity of
the US Securities Exchange Act set more stringent independence
the financial statements of UBS Group AG and UBS AG and any
requirements for members of audit committees than for the
announcements related to financial performance, and reviews
other members of the BoD. Throughout 2020, all members of
significant financial reporting judgments contained in them,
the Audit Committee, in addition to satisfying our independence
Compensation Committee
The Compensation Committee consisted of four independent
BoD members throughout 2020, as indicated in the table below.
In addition to the key responsibilities indicated in the same table,
the compensation
the Compensation Committee
disclosures included in this report.
reviews
During 2020, the Compensation Committee held seven
meetings, with a participation rate of 100%. The meetings had
an average duration of approximately 105 minutes and covered
both UBS Group AG and UBS AG. In addition, three ad hoc calls
took place. All meetings were held in the presence of the
Chairman and most were attended by the Group CEO and
external advisors. In 2020, the Chairperson met regularly with
core supervisory authorities.
› Refer to “Compensation for the Board of Directors” in the
“Compensation” section on page 244 of this report for more
information about the Compensation Committee’s decision-
before recommending their approval to the BoD or proposing
criteria, satisfied these requirements, in that they did not receive,
making procedures
any adjustments the Audit Committee considers appropriate.
directly or indirectly, any consulting, advisory or compensatory
The Audit Committee oversees the relationship with, and
fees from any member of the Group other than in their capacity
assesses
the
qualifications,
expertise,
effectiveness,
as a BoD member, did not hold, directly or indirectly, UBS Group
independence and performance of, the external auditors and the
AG shares in excess of 5% of the outstanding capital, and did
Compensation Committee
lead audit partner, and supports the BoD in reaching decisions
not serve on the audit committees of more than two other
Corporate Culture and Responsibility Committee
In 2020, the Corporate Culture and Responsibility Committee
consisted of the Chairperson and three independent BoD
members before the AGM, as listed in the table below; after the
AGM, there were four independent members. The Group CEO
and the Head UBS in Society are permanent guests of the
Corporate Culture and Responsibility Committee. During 2020,
six meetings were held, with an average participation rate of
93%. The average duration of each of the meetings was
approximately 95 minutes.
on the appointment, reappointment or dismissal of the external
public companies.
auditors and the rotation of the lead audit partner. The BoD
then submits proposals for shareholder approval at the AGM.
Members in 2020
Meeting attendance
Key responsibilities include:
Julie G. Richardson (Chairperson)
Reto Francioni
Fred Hu 1
Dieter Wemmer
Jeanette Wong 2
7/7
7/7
2/2
7/7
5/5
100% The Compensation Committee is responsible for:
100%
100%
100%
100%
(i) supporting the Board in its duties to set guidelines on compensation and benefits;
(ii) approving the total compensation for the Chairman and the non-independent Board members;
(iii) establishing, together with the Chairman, financial and non-financial performance targets for the
Group CEO and reviewing, upon the recommendation from the Group CEO, financial and non-financial
per formance targets for the other GEB members;
(iv) reviewing, in consultation with the Chairman, the performance of the Group CEO in meeting agreed
targets, as well as informing the Board of the individual performance assessments of the GEB members;
(v) proposing, together with the Chairman, total individual compensation for the independent Board
members and Group CEO for approval by the Board; and
(vi) proposing to the Board for approval, upon recommendation from the Group CEO, the total individual
compensation for GEB members.
› Refer to the Organization Regulations of UBS Group AG,
available at ubs.com/governance, for more information
1 After the 2020 AGM, Fred Hu was no longer member of this committee, instead he became member of the Governance and Nominating Committee as well as the Risk Committee; indicated are his attended and total
meetings up to the 2020 AGM. 2 Jeanette Wong was elected to this committee at the 2020 AGM; indicated are her attended and total meetings after her election.
Corporate Culture and Responsibility Committee
Members in 2020
Meeting attendance
Key responsibilities include:
Axel A. Weber 1 (Chairperson)
Jeremy Anderson 2
William C. Dudley
Mark Hughes 3
Beatrice Weder di Mauro
Jeanette Wong 3
5/6
2/2
6/6
4/4
6/6
3/4
83% The Corporate Culture and Responsibility Committee supports the Board in its duties to safeguard and
100%
100%
100%
100%
75%
advance the Group’s reputation for responsible and sustainable conduct. Its function is forward-looking in
that it monitors and reviews societal trends and transformational developments and assesses their
potential relevance for the Group.
In undertaking this assessment, it reviews stakeholder concerns and expectations pertaining to the societal
performance of UBS and to the development of its corporate culture. The Corporate Culture and Responsi-
bility Committee’s function also encompasses the monitoring of the current state and implementation of
the programs and initiatives within the Group pertaining to corporate culture and corporate responsibility.
1 Due to the Chairman needing to attend the ad hoc CEO announcement, a single meeting had to be chaired by William C. Dudley; for that sole reason, the Chairman’s attendance rate was brought down from 100% to
83%. 2 After the 2020 AGM, Jeremy Anderson was no longer member of this committee; indicated are his attended and total meetings up to the 2020 AGM. 3 Following the 2020 AGM, Mark Hughes and
Jeanette Wong became members of this committee; indicated are their attended and total meetings after their election.
› Refer to the Organization Regulations of UBS Group AG,
available at ubs.com/governance, for more information
194
195
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Corporate governance and compensation Corporate governance and compensation | Corporate governance
Governance and Nominating Committee
In 2020, the Governance and Nominating Committee consisted
of the Chairperson and four independent members before the
AGM, as listed in the table below; after the AGM there were five
independent members. During 2020, eight meetings were held,
with an average participation rate of 98%. The average duration
of each of the meetings was approximately 60 minutes. In
addition, four ad hoc calls took place. The Group CEO attended
meetings as appropriate.
Risk Committee
In 2020, the Risk Committee comprised five independent BoD
members before the AGM, as listed in the table below; after the
AGM, there were six independent members. During 2020, the
Risk Committee held twenty committee meetings, with an
average participation rate of 99%. The average duration of each
of the meetings was approximately 155 minutes, covering both
UBS Group AG and UBS AG. The Group CEO, the Group CFO,
the Group Chief Risk Officer, the Group Chief Operating Officer,
the Group Treasurer, the Group Chief Compliance and
Governance Officer, the Group General Counsel, and the Head
Group Internal Audit (GIA) attended all the meetings. In 2020,
the Chairperson or the full committee met with core supervisory
authorities.
Ad hoc committees
The Special Committee and the Strategy Committee are two ad
hoc committees, which have a standing composition and hold
meetings as and when required.
The Special Committee is composed of four BoD members. Its
primary purpose is to oversee activities related to key litigation
and investigation matters, review management’s respective
proposals and send to the BoD recommendations for decisions.
In 2020, the key focus was the French cross-border matter,
following the verdict of the court of first instance in 2019.
Jeremy Anderson chaired the Special Committee, with Julie
Richardson, David Sidwell and Axel Weber as additional
members; after the AGM, Nathalie Rachou replaced David
Sidwell. The Group CEO was a permanent guest. During 2020,
five meetings were held, covering both UBS Group AG and UBS
AG.
The Strategy Committee is composed of four BoD members.
Its primary purpose is to support management and the BoD with
regard to the assessment of strategic considerations and to assist
with the planning of the annual strategy meetings for the BoD
and the GEB. The committee sends recommendations for
decisions to the BoD. Axel Weber chaired the Strategy
Committee, with Fred Hu, Robert Scully and Dieter Wemmer as
additional members; after the AGM, William Dudley replaced
Robert Scully. The Group CEO, the Group CFO and the Head
Corporate Development & Performance were permanent guests.
During 2020, three meetings were held, covering both UBS
Group AG and UBS AG.
Governance and Nominating Committee
Members in 2020
Meeting attendance
Key responsibilities include:
Axel A. Weber 1 (Chairperson)
Jeremy Anderson
William C. Dudley 2
Fred Hu 2
Julie G. Richardson
Isabelle Romy 3
David Sidwell 3
Dieter Wemmer 2
7/8
8/8
4/4
4/4
8/8
4/4
4/4
4/4
88% The function of the Governance and Nominating Committee is to support the Board in fulfilling its duty to
establish best practices in corporate governance across the Group, including conducting a Board
assessment, establishing and maintaining a process for appointing new Board and GEB members, as well
as for the annual performance assessment of the Board.
› Refer to the Organization Regulations of UBS Group AG,
available at ubs.com/governance, for more information
100%
100%
100%
100%
100%
100%
100%
1 Due to the Chairman needing to attend the ad hoc CEO announcement, a single meeting had to be chaired by the Vice Chairman; for that sole reason, the Chairman’s attendance rate was brought down from 100% to
88%. 2 Following the 2020 AGM, William C. Dudley, Fred Hu and Dieter Wemmer became members of this committee; indicated are their attended and total meetings after their election. 3 Isabelle Romy and
David Sidwell did not stand for re-election at the 2020 AGM; indicated are their attended and total meetings up to the 2020 AGM.
Risk Committee
Members in 2020
Meeting attendance Key responsibilities include:
Mark Hughes1 (Chairperson after 2020 AGM)
11/11
100% The function of the Risk Committee is to oversee and support the Board in fulfilling its duty
David Sidwell2 (Chairperson until 2020 AGM)
9/9
100%
to set and supervise an appropriate risk management and control framework in the areas of:
(i) risk management and control, including credit, market and treasury risks as well as legal,
William C. Dudley
Reto Francioni
Fred Hu 3
Nathalie Rachou 3
Julie G. Richardson
Robert W. Scully 2
20/20
100%
compliance and operational risks, including conduct risks; and
20/20
100%
11/11
100%
10/11
91%
20/20
100%
9/9
100%
(ii) balance sheet, treasury and capital management, including funding, liquidity and equity
attribution.
The Risk Committee considers the potential effects of the aforementioned risks on
the Group’s reputation.
› Refer to the Organization Regulations of UBS Group AG,
available at ubs.com/governance, for more information
1 Following the 2020 AGM, Mark Hughes became the Chairperson of this committee. 2 David Sidwell and Robert W. Scully did not stand for re-election at the 2020 AGM; indicated are their attended and total meetings
up to the 2020 AGM. 3 Following the 2020 AGM, Fred Hu and Nathalie Rachou became members of the Risk Committee; indicated are their attended and total meetings after the 2020 AGM.
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Corporate governance and compensation | Corporate governance
Governance and Nominating Committee
Ad hoc committees
In 2020, the Governance and Nominating Committee consisted
The Special Committee and the Strategy Committee are two ad
of the Chairperson and four independent members before the
hoc committees, which have a standing composition and hold
AGM, as listed in the table below; after the AGM there were five
meetings as and when required.
independent members. During 2020, eight meetings were held,
The Special Committee is composed of four BoD members. Its
with an average participation rate of 98%. The average duration
primary purpose is to oversee activities related to key litigation
of each of the meetings was approximately 60 minutes. In
and investigation matters, review management’s respective
addition, four ad hoc calls took place. The Group CEO attended
proposals and send to the BoD recommendations for decisions.
meetings as appropriate.
Risk Committee
In 2020, the key focus was the French cross-border matter,
following the verdict of the court of first instance in 2019.
Jeremy Anderson chaired the Special Committee, with Julie
In 2020, the Risk Committee comprised five independent BoD
Richardson, David Sidwell and Axel Weber as additional
members before the AGM, as listed in the table below; after the
members; after the AGM, Nathalie Rachou replaced David
AGM, there were six independent members. During 2020, the
Sidwell. The Group CEO was a permanent guest. During 2020,
Risk Committee held twenty committee meetings, with an
five meetings were held, covering both UBS Group AG and UBS
average participation rate of 99%. The average duration of each
AG.
of the meetings was approximately 155 minutes, covering both
The Strategy Committee is composed of four BoD members.
UBS Group AG and UBS AG. The Group CEO, the Group CFO,
Its primary purpose is to support management and the BoD with
the Group Chief Risk Officer, the Group Chief Operating Officer,
regard to the assessment of strategic considerations and to assist
the Group Treasurer, the Group Chief Compliance and
with the planning of the annual strategy meetings for the BoD
Governance Officer, the Group General Counsel, and the Head
and the GEB. The committee sends recommendations for
Group Internal Audit (GIA) attended all the meetings. In 2020,
decisions to the BoD. Axel Weber chaired the Strategy
the Chairperson or the full committee met with core supervisory
Committee, with Fred Hu, Robert Scully and Dieter Wemmer as
authorities.
additional members; after the AGM, William Dudley replaced
Robert Scully. The Group CEO, the Group CFO and the Head
Corporate Development & Performance were permanent guests.
During 2020, three meetings were held, covering both UBS
Group AG and UBS AG.
Roles and responsibilities of the Chairman of the Board of
Directors
Important business connections of independent members
of the Board of Directors
the Chairman
Axel Weber serves as the full-time Chairman of the BoD. The
Chairman coordinates tasks within the BoD, calls BoD meetings
and sets their agendas. He presides over all general meetings of
shareholders and works with the committee Chairpersons to
coordinate the work of all BoD committees. Together with the
Group CEO,
for effective
communication with shareholders and other stakeholders,
including government officials,
and public
organizations. This is in addition to establishing and maintaining
close working relationships with the Group CEO and other GEB
members, and providing advice and support when appropriate,
including advice regarding the firm’s cultural change as a key
priority on the basis of our Pillars, Principles and Behaviors.
› Refer to “Employees” in the “How we create value for our
responsible
regulators
is
stakeholders” section on page 45 and the foldout pages of this
report for information about our Pillars, Principles and Behaviors
In 2020, the Chairman met regularly with core supervisory
authorities in all major regions where UBS is active. Meetings
with important supervisory authorities in other regions were
scheduled on an ad hoc or needs-driven basis.
Roles and responsibilities of the Vice Chairmen and the
Senior Independent Director
The BoD appoints one or more Vice Chairmen and a Senior
Independent Director. If the BoD appoints more than one Vice
Chairman, one of them must be independent. Both the Vice
Chairman and the Senior Independent Director support the
Chairman with regard to his responsibilities and authorities and
provide him with advice. In conjunction with the Chairman and
the Governance and Nominating Committee, they facilitate
good Group-wide corporate governance, as well as balanced
leadership and control within the Group, the Board and the
committees. Jeremy Anderson has been appointed as Vice
Chairman and Senior Independent Director. The Vice Chairman
is required to lead and has led meetings of the BoD in the
temporary absence of the Chairman. Together with the
Governance and Nominating Committee, he is tasked with the
ongoing monitoring and the annual evaluation of the Chairman.
He also represents UBS on behalf of the Chairman in meetings
with internal or external stakeholders. The Senior Independent
Director enables and supports communication and the flow of
information among the independent BoD members. At least
twice a year, he organizes and leads a meeting of the
independent BoD members without the participation of the
Chairman. In 2020, two independent BoD meetings were held,
covering both UBS Group AG and UBS AG, with a participation
rate of 100% and an average duration of approximately 110
minutes. One ad hoc meeting took place. The Senior
Independent Director also relays to the Chairman any issues or
concerns raised by the independent BoD members and acts as a
point of contact for shareholders and stakeholders seeking
discussions with an independent BoD member.
As a global financial services provider and a major Swiss bank,
we enter into business relationships with many large companies,
including some in which our BoD members have management
or independent board responsibilities. The Governance and
Nominating Committee determines in each instance whether the
nature of the Group’s business relationship with such a company
might compromise our BoD members’ capacity to express
independent judgment.
Our Organization Regulations require three-quarters of the
UBS Group AG BoD members and one-third of those at UBS AG
is
to be
determined
in accordance with FINMA Circular 2017/1
“Corporate governance – banks” and the NYSE rules.
independent. For
this purpose,
independence
In 2020, our BoD met the standards of the Organization
Regulations for the percentage of directors who are considered
independent under the criteria described above. Since our
Chairman has a full-time contract with UBS Group AG, he is not
considered independent. No other BoD member has a significant
business connection to UBS or any of its subsidiaries. No other
BoD member currently carries out, or has carried out over the
past three years, operational management tasks within the
Group.
All relationships and transactions with UBS Group AG’s
independent BoD members are conducted in the ordinary course
of business and are on the same terms as those prevailing at the
time for comparable transactions with non-affiliated persons. All
relationships and transactions with BoD members’ associated
companies are conducted at arm’s length.
› Refer to “Note 31 Related parties” in the “Consolidated financial
statements” section on page 398 of this report for more
information
Checks and balances: Board of Directors and Group
Executive Board
We operate under a strict dual board structure, as mandated by
Swiss banking law. The separation of responsibilities between
the BoD and the GEB is clearly defined in the Organization
Regulations. The BoD decides on the strategy of the Group,
upon recommendations by the Group CEO, and exercises
ultimate supervision over management; whereas the GEB,
headed by the Group CEO, has executive management
responsibility. The functions of Chairman and Group CEO are
assigned to two different people, leading to a separation of
power. This structure establishes checks and balances and
preserves the institutional independence of the BoD from the
day-to-day management of the Group, for which responsibility is
delegated to the GEB, under the leadership of the Group CEO.
No member of one board may simultaneously be a member of
the other.
Supervision and control of the GEB remains with the BoD.
The authorities and responsibilities of the two bodies are
governed by the AoA and the Organization Regulations.
196
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Corporate governance and compensation Corporate governance and compensation | Corporate governance
Skills, expertise and training of the Board of Directors
The BoD is composed of members with a broad spectrum of
skills, educational backgrounds, experience and expertise from a
range of sectors that reflect the nature and scope of the firm’s
business. With a view to recruiting needs, the Governance and
Nominating Committee uses a competencies and experience
matrix to identify any gaps in the competencies considered most
relevant to the BoD, taking into consideration the firm’s business
exposure, risk profile, strategy and geographic reach.
We asked our BoD members to select their four key
competencies from the following eight categories and to
indicate whether they have ever been a chief executive officer or
chairperson of a listed company or a member of the executive
board of such a company:
Key competencies
– banking (wealth management, asset management, personal
and corporate banking; insurance)
– investment banking, capital markets
– finance, audit, accounting
– risk management, compliance and legal
– human resources management, including compensation
– technology, cybersecurity
– regulatory authority, central bank
– environmental, social and governance (ESG)
Leadership experience
– experience as chief executive officer or chairperson
– executive board leadership experience (e.g., as chief financial
officer, chief risk officer or chief operating officer of a listed
company)
The Governance and Nominating Committee reviews these
categories and ratings annually to confirm that the BoD
continues to possess the most relevant experience and
competencies to perform its duties.
With regard to the BoD composition after the 2020 AGM,
members thereof identified all of the target competencies as
being their key competencies. Particularly strong levels of
experience and expertise existed in these areas:
– financial services
– risk management, compliance and legal
– finance, audit, accounting
Furthermore, 8 of the 11 BoD members have held or currently
hold chairperson, CEO or other executive board-level leadership
positions.
Moreover, education remained an important priority for our
BoD members. In addition to a comprehensive induction
program for new BoD members, continuous training and topical
deep dives are part of the BoD agenda.
› Refer to “Risk governance” in the “Risk management and
control” section on page 95 of this report for information about
our risk governance framework
Terms of office
Geographic diversity1
Gender
Competencies and experience2
Key competencies
0
2
4
6
8
10
4 <3 years
4 3 – 6 years
3 7 – 9 years
0 >9 years
28% Switzerland
27% Europe
27% USA / Canada
18% Asia
64% male
36% female
Banking3
Investment banking, capital markets
Finance, audit, accounting
Risk management, compliance and legal
HR management, incl. compensation
Technology, cybersecurity
Regulatory authority, central bank
ESG4
Leadership experience
0
2
4
6
8
10
Chief executive officer or chairman
Executive board5
1 In the case of dual-nationals, the domicile applies. 2 The number of BoD members identifying a key competency as one of his / her key competencies; each member identified up to four key competencies, plus one leadership
experience. 3 Wealth management, asset management, personal and corporate banking; insurance. 4 Environmental, social and governance. 5 For example a chief financial officer, chief risk officer or chief operating officer
of a listed company.
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198
Corporate governance and compensation | Corporate governance
The BoD is composed of members with a broad spectrum of
– executive board leadership experience (e.g., as chief financial
skills, educational backgrounds, experience and expertise from a
officer, chief risk officer or chief operating officer of a listed
– experience as chief executive officer or chairperson
range of sectors that reflect the nature and scope of the firm’s
company)
business. With a view to recruiting needs, the Governance and
Nominating Committee uses a competencies and experience
The Governance and Nominating Committee reviews these
matrix to identify any gaps in the competencies considered most
categories and ratings annually to confirm that the BoD
relevant to the BoD, taking into consideration the firm’s business
continues to possess the most relevant experience and
exposure, risk profile, strategy and geographic reach.
competencies to perform its duties.
We asked our BoD members to select their four key
With regard to the BoD composition after the 2020 AGM,
competencies from the following eight categories and to
members thereof identified all of the target competencies as
indicate whether they have ever been a chief executive officer or
being their key competencies. Particularly strong levels of
chairperson of a listed company or a member of the executive
experience and expertise existed in these areas:
– banking (wealth management, asset management, personal
board of such a company:
Key competencies
and corporate banking; insurance)
– investment banking, capital markets
– finance, audit, accounting
– risk management, compliance and legal
– technology, cybersecurity
– regulatory authority, central bank
– environmental, social and governance (ESG)
– financial services
– risk management, compliance and legal
– finance, audit, accounting
Furthermore, 8 of the 11 BoD members have held or currently
hold chairperson, CEO or other executive board-level leadership
positions.
Moreover, education remained an important priority for our
program for new BoD members, continuous training and topical
deep dives are part of the BoD agenda.
› Refer to “Risk governance” in the “Risk management and
control” section on page 95 of this report for information about
our risk governance framework
– human resources management, including compensation
BoD members. In addition to a comprehensive induction
Skills, expertise and training of the Board of Directors
Leadership experience
Succession planning
Succession planning is one of the key responsibilities of both the
BoD and the GEB. Across all divisions and regions, an inclusive
talent development and succession planning process is in place
that aims to foster the personal development and Group-wide
mobility of our employees. While the recruiting process for BoD
and GEB members takes into account a broad spectrum of
factors, such as skills, backgrounds, experience and expertise,
our approach with regard to diversity considerations does not
constitute a diversity policy within the meaning of the EU
Directive on Non-Financial Reporting and Swiss law does not
require UBS to maintain such a policy.
In 2020, the Chairman and the members of the BoD
supported the CEO transition from Sergio Ermotti to Ralph
Hamers. Despite challenges related to COVID-19, a smooth and
professional transition supported the new CEO, who started his
tenure well prepared. At the same time, he and the GEB
launched several strategic initiatives with the close involvement
of the BoD and with the aim of further strengthening UBS. The
succession plans for the GEB and the management layer below it
are managed under the lead of the Group CEO. The BoD
reviews and approves the succession plans of the GEB.
For the BoD, the Chairman leads a systematic succession
planning process as illustrated in the chart below.
Board of Directors’ succession planning process
Strategy / environment
Onboarding
AGM
election
Selection
Existing board
composition
Search
Our strategy and the business environment constitute the
main drivers in our succession planning process for new BoD
members, as they define the key competencies required on the
BoD. Taking diversity and tenure of the existing BoD into
account, the Governance and Nominating Committee defines
the recruiting profile for the search. Both external and internal
sources contribute to
identifying suitable candidates. The
Chairman and the members of the Governance and Nominating
Committee meet with potential candidates and, with the
support of the full BoD, nominations are submitted to the AGM
for approval. New BoD members follow an in-depth onboarding
process designed to enable them to integrate efficiently and
become effective in their new role. Due to this succession
planning process, the composition of the BoD is in line with the
demanding requirements of a leading global financial services
firm.
The succession of the Chairman is planned for the 2022
AGM, when Axel Weber will have served as Chairman for 10
years. The search for his successor began in early 2021 and is
being led by the Senior Independent Director, Jeremy Anderson.
In 2020, the Governance and Nominating Committee expanded
to include additional members, so that a broader range of
perspectives are taken into consideration during the process. The
Chairman and the CEO are also involved in the search process.
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Information and control instruments with regard to the
Group Executive Board
The BoD is kept informed of the GEB’s activities in various ways,
including regular meetings between the Chairman, the Group
CEO and GEB members. The Group CEO and other GEB
members also participate in BoD meetings to update its
members on all significant issues. The BoD also receives regular
comprehensive reports, covering financial, capital, funding,
liquidity, regulatory, compliance and legal developments, as well
as performance against plan and forecasts for the remainder of
the year. For important developments, BoD members are also
updated by the GEB in between meetings. In addition, the
Chairman receives the meeting material and minutes of the GEB
meetings.
BoD members may request from other BoD or GEB members
any information about matters concerning the Group that they
require in order to fulfill their duties. When these requests are
raised outside BoD meetings such requests must go through the
Group Company Secretary and be addressed to the Chairman.
The BoD
is supported
its governance
responsibilities by GIA, which independently assesses whether
risk management, control and governance processes are
designed and operating sustainably and effectively.
in discharging
its responsibilities as set forth
The Head GIA reports directly to the Chairman. In addition,
GIA has a functional reporting line to the Audit Committee in
accordance with
in our
Organization Regulations. The Audit Committee assesses the
independence and performance of GIA and the effectiveness of
both the Head GIA and GIA as an organization, approves GIA’s
annual audit plan and objectives and monitors GIA’s discharge
of these objectives.
The committee is also in regular contact with the Head GIA.
GIA issues quarterly reports that provide: a broad overview of
significant audit results and key issues; control themes and
individual audit results; continuous risk
trends based on
assessment; and
issue assurance results. The reports are
provided to the Chairman, the members of the Audit and the
Risk Committees, the GEB and other stakeholders. The Head GIA
regularly updates the Chairman and the Audit Committee on
GIA’s activities, processes, audit plan execution, resourcing
requirements and other important developments. GIA issues an
annual Activity Report, which is provided to the Chairman and
the Audit Committee to support their assessment of GIA’s
effectiveness.
› Refer to “Group Internal Audit” in this section for more
information
› Refer to “Internal risk reporting” in the “Risk management and
control” section on page 101 of this report for information about
reporting to the BoD
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Information and control instruments with regard to the
The Head GIA reports directly to the Chairman. In addition,
Group Executive Board
GIA has a functional reporting line to the Audit Committee in
accordance with
its responsibilities as set forth
in our
The BoD is kept informed of the GEB’s activities in various ways,
Organization Regulations. The Audit Committee assesses the
including regular meetings between the Chairman, the Group
independence and performance of GIA and the effectiveness of
CEO and GEB members. The Group CEO and other GEB
both the Head GIA and GIA as an organization, approves GIA’s
members also participate in BoD meetings to update its
annual audit plan and objectives and monitors GIA’s discharge
members on all significant issues. The BoD also receives regular
of these objectives.
comprehensive reports, covering financial, capital, funding,
The committee is also in regular contact with the Head GIA.
liquidity, regulatory, compliance and legal developments, as well
GIA issues quarterly reports that provide: a broad overview of
as performance against plan and forecasts for the remainder of
significant audit results and key issues; control themes and
the year. For important developments, BoD members are also
trends based on
individual audit results; continuous risk
updated by the GEB in between meetings. In addition, the
assessment; and
issue assurance results. The reports are
Chairman receives the meeting material and minutes of the GEB
provided to the Chairman, the members of the Audit and the
meetings.
Risk Committees, the GEB and other stakeholders. The Head GIA
BoD members may request from other BoD or GEB members
regularly updates the Chairman and the Audit Committee on
any information about matters concerning the Group that they
GIA’s activities, processes, audit plan execution, resourcing
require in order to fulfill their duties. When these requests are
requirements and other important developments. GIA issues an
raised outside BoD meetings such requests must go through the
annual Activity Report, which is provided to the Chairman and
Group Company Secretary and be addressed to the Chairman.
the Audit Committee to support their assessment of GIA’s
The BoD
is supported
in discharging
its governance
effectiveness.
responsibilities by GIA, which independently assesses whether
› Refer to “Group Internal Audit” in this section for more
risk management, control and governance processes are
information
designed and operating sustainably and effectively.
› Refer to “Internal risk reporting” in the “Risk management and
control” section on page 101 of this report for information about
reporting to the BoD
Group Executive Board
The BoD delegates the management of the business to the
Group Executive Board (the GEB).
Responsibilities, authorities and organizational principles
of the Group Executive Board
On 31 December 2020, the GEB, under the leadership of the
Group CEO, consisted of 13 members.
It has executive
management responsibility for the steering of the Group and its
business and assumes overall responsibility for developing and
implementing the strategies of the Group, business divisions and
Group Functions as approved by the BoD. The GEB is also the
risk council of the Group, with overall responsibility for
risk
establishing and supervising
management and control principles, as well as for managing the
risk profile of the Group, as determined by the BoD and the Risk
Committee.
implementation of
the
In 2020, the GEB held a total of 69 meetings for UBS Group
including 14 COVID-19 Group Steering Committee
AG,
meetings.
At UBS AG, management of the business is also delegated,
and its Executive Board, under the leadership of its President,
has executive management responsibility for UBS AG and its
business. In 2020, all members of the GEB were members of
UBS AG’s Executive Board, with the exception of Axel Lehmann,
who served as President of UBS Switzerland AG. The Executive
Board held four standalone meetings for UBS AG in 2020.
› Refer to the Organization Regulations of UBS Group AG,
available at ubs.com/governance, for more information about
the authorities of the Group Executive Board
New Group CEO and members of the Group Executive
Board
On 19 February 2020, the BoD appointed Ralph Hamers as the
new Group CEO, succeeding Sergio Ermotti. Ralph Hamers
joined UBS as a member of the GEB on 1 September 2020 and
became Group CEO on 1 November 2020. Before joining UBS,
Ralph Hamers served as CEO and Chairman of the Executive
Board of ING Group from 2013 to June 2020, spending in total
29 years of his career at the company. On 4 December 2020,
UBS appointed Sabine Keller-Busse as the successor to Axel
Lehmann (who will leave UBS) for the roles of President Personal
& Corporate Banking and President UBS Switzerland, effective
1 February 2021, while retaining her position of Group Chief
Operating Officer ad interim in the GEB and the Executive Board
of UBS AG. In addition to his responsibility as Co-President
Global Wealth Management, Iqbal Khan assumed the role of
President UBS EMEA from Sabine Keller-Busse as of 1 February
2021. On 15 February 2021, Robert Karofsky was appointed
sole President Investment Bank, following Piero Novelli’s decision
to step down as Co-President Investment Bank as of 31 March
2021.
The biographies on the following pages provide information
about the GEB members in office as of 31 December 2020 and
Sergio Ermotti, who stepped down as Group CEO on
31 October 2020. In addition to information on mandates, the
biographies
include memberships and other activities or
functions, as required by the SIX Swiss Exchange Corporate
Governance Directive.
In line with Swiss law, article 36 of UBS Group AG’s Articles
of Association limits the number of mandates that GEB members
may hold outside the UBS Group to one mandate in a listed
company and five additional mandates in non-listed companies.
Mandates in companies that are controlled by UBS or that
control UBS are not subject to this limitation. In addition, GEB
members may not hold more than 10 mandates at a time at the
request of the company and eight mandates in associations,
charitable organizations, foundations, trusts and employee
welfare foundations. On 31 December 2020, no member of the
GEB reached the aforementioned thresholds.
Responsibilities and authorities of the Asset and Liability
Committees
The Asset and Liability Committees (ALCOs) of UBS Group AG
and UBS AG support the GEB and the Executive Board with
regard to their responsibility to promote the usage of the assets
and liabilities in line with the strategy, regulatory commitments
and the interests of shareholders and other stakeholders. The
ALCO of UBS Group AG proposes the framework for capital
management, capital allocation, funding and liquidity risk, and
proposes limits and targets for the Group to the BoD for
approval. It oversees the balance sheet management of the
Group, its business divisions and Group Functions. In 2020, the
ALCOs of UBS Group AG and UBS AG held 11 meetings.
Management contracts
We have not entered into management contracts with any
companies or natural persons that do not belong to the Group.
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Corporate governance and compensation Corporate governance and compensation | Corporate governance
Ralph A. J. G. Hamers
Sergio P. Ermotti
Group Chief Executive Officer (from 1 November 2020)
Group Chief Executive Officer (until 31 October 2020)
Year of initial appointment
UBS: 2020
Year of birth | Nationality
1966 | Dutch
Year of initial appointment
UBS: 2011 (UBS Group AG: 2014, UBS AG: 2011)
Year of birth | Nationality
1960 | Swiss
Professional history and education
Ralph A. J. G. Hamers has been Group Chief Executive Officer of UBS
Group AG and President of the Executive Board of UBS AG since
1 November 2020. He became a member of the Group Executive Board
of UBS Group AG in September 2020. Before joining UBS, Mr. Hamers
served as CEO and Chairman of the Executive Board of ING Group from
2013 to June 2020. During his 29-year career at ING, he held a number
of leadership positions, such as CEO of ING Belgium and Luxembourg
from 2011 to 2013, Head of Network Management for Retail Banking
Direct & International from 2010 to 2011 and Global Head of the
Commercial Banking network from 2007 to 2010. Prior to that, Mr.
Hamers was CEO of ING Bank Netherlands from 2005 to 2007 and was
General Manager of the ING Bank branch network from 2002 to 2005,
as well as General Manager of ING Romania from 1999 to 2002. Mr.
Hamers holds a master’s degree in business econometrics and operations
research from Tilburg University in the Netherlands.
Professional history and education
Sergio P. Ermotti was Group Chief Executive Officer of UBS Group AG
from 2014 until October 2020, having held the same position at UBS AG
from 2011 to 2020. Mr. Ermotti was a member of the GEB from 2011 to
2020 and Chairman and CEO of UBS Group Europe, Middle East and
Africa before taking over as Group CEO. From 2007 to 2010, he served
as Group Deputy Chief Executive Officer at UniCredit, and was
responsible for the strategic business areas of Corporate and Investment
Banking, and Private Banking. He joined UniCredit in 2005 as Head of
the Markets & Investment Banking Division. His career began at Merrill
Lynch in 1987, where he held various positions within equity derivatives
and capital markets until 2003. In his last two years there, he served as
Co-Head of Global Equity Markets and as a member of the Executive
Management Committee for Global Markets & Investment Banking. Mr.
Ermotti is a Swiss-certified banking expert and is a graduate of the
Advanced Management Program at Oxford University.
Other activities and functions
– Chair of the Board of UBS Optimus Foundation
– Member of the Board of the Swiss-American Chamber of Commerce
– Member of the Institut International d’Etudes Bancaires
– Member of the McKinsey Advisory Council
– Member of the World Economic Forum International Business Council
– Governor of the World Economic Forum (Financial Services)
Other activities and functions (as of 31 October 2020)
– Chair of the Board of UBS Optimus Foundation
– Member of the Board of Swiss Re Ltd.
– Chairman of the Fondazione Ermotti, Lugano
– Member of the Board of the Swiss-American Chamber of Commerce
– Member of the Board of the Global Apprenticeship Network
– Member of the Institut International d’Etudes Bancaires
– Member of the Saïd Business School Global Leadership Council,
University of Oxford
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Corporate governance and compensation | Corporate governance
Ralph A. J. G. Hamers
Sergio P. Ermotti
Group Chief Executive Officer (from 1 November 2020)
Group Chief Executive Officer (until 31 October 2020)
Year of initial appointment
UBS: 2020
Year of birth | Nationality
1966 | Dutch
Year of initial appointment
UBS: 2011 (UBS Group AG: 2014, UBS AG: 2011)
Year of birth | Nationality
1960 | Swiss
Professional history and education
Professional history and education
Ralph A. J. G. Hamers has been Group Chief Executive Officer of UBS
Sergio P. Ermotti was Group Chief Executive Officer of UBS Group AG
Group AG and President of the Executive Board of UBS AG since
from 2014 until October 2020, having held the same position at UBS AG
1 November 2020. He became a member of the Group Executive Board
from 2011 to 2020. Mr. Ermotti was a member of the GEB from 2011 to
of UBS Group AG in September 2020. Before joining UBS, Mr. Hamers
2020 and Chairman and CEO of UBS Group Europe, Middle East and
served as CEO and Chairman of the Executive Board of ING Group from
Africa before taking over as Group CEO. From 2007 to 2010, he served
2013 to June 2020. During his 29-year career at ING, he held a number
as Group Deputy Chief Executive Officer at UniCredit, and was
of leadership positions, such as CEO of ING Belgium and Luxembourg
responsible for the strategic business areas of Corporate and Investment
from 2011 to 2013, Head of Network Management for Retail Banking
Banking, and Private Banking. He joined UniCredit in 2005 as Head of
Direct & International from 2010 to 2011 and Global Head of the
the Markets & Investment Banking Division. His career began at Merrill
Commercial Banking network from 2007 to 2010. Prior to that, Mr.
Lynch in 1987, where he held various positions within equity derivatives
Hamers was CEO of ING Bank Netherlands from 2005 to 2007 and was
and capital markets until 2003. In his last two years there, he served as
General Manager of the ING Bank branch network from 2002 to 2005,
Co-Head of Global Equity Markets and as a member of the Executive
as well as General Manager of ING Romania from 1999 to 2002. Mr.
Management Committee for Global Markets & Investment Banking. Mr.
Hamers holds a master’s degree in business econometrics and operations
Ermotti is a Swiss-certified banking expert and is a graduate of the
research from Tilburg University in the Netherlands.
Advanced Management Program at Oxford University.
Other activities and functions
– Chair of the Board of UBS Optimus Foundation
Other activities and functions (as of 31 October 2020)
– Chair of the Board of UBS Optimus Foundation
– Member of the Board of the Swiss-American Chamber of Commerce
– Member of the Board of Swiss Re Ltd.
– Member of the Institut International d’Etudes Bancaires
– Chairman of the Fondazione Ermotti, Lugano
– Member of the McKinsey Advisory Council
– Member of the Board of the Swiss-American Chamber of Commerce
– Member of the World Economic Forum International Business Council
– Member of the Board of the Global Apprenticeship Network
– Governor of the World Economic Forum (Financial Services)
– Member of the Institut International d’Etudes Bancaires
– Member of the Saïd Business School Global Leadership Council,
University of Oxford
Christian Bluhm
Group Chief Risk Officer
Year of initial appointment
UBS: 2016
Year of birth | Nationality
1969 | German
Markus U. Diethelm
Group General Counsel
Year of initial appointment
UBS: 2008 (UBS Group AG: 2014, UBS AG: 2008)
Year of birth | Nationality
1957 | Swiss
responsible
Professional history and education
Christian Bluhm became a member of the GEB and was appointed
Group Chief Risk Officer of UBS Group AG and UBS AG in 2016. He
joined UBS from FMS Wertmanagement, where he had been Chief Risk
& Financial Officer since 2010 and Spokesman of the Executive Board
from 2012 to 2015. From 2004 to 2009, he worked for Credit Suisse,
where he was Managing Director
for Credit Risk
Management in Switzerland and Private Banking worldwide. Mr. Bluhm
was Head of Credit Portfolio Management until 2008 and then Head of
Credit Risk Management Analytics & Instruments after the financial crisis
in 2008. From 2001 to 2004, he worked for Hypovereinsbank in Munich
in Group Credit Portfolio Management, heading a team that specialized
in Structured Finance Analytics. Before starting his banking career with
Deutsche Bank in Credit Risk Management in 1999, he worked as a
postdoctoral fellow at Cornell University and as a scientific assistant at
the University of Greifswald. Mr. Bluhm holds a degree in mathematics
and informatics from the University of Erlangen-Nuremberg and received
his PhD in mathematics from the same university in 1996.
Professional history and education
Markus U. Diethelm has been Group General Counsel of UBS Group AG
since 2014, having held the same position at UBS AG since 2008, when
he became a member of the GEB. He was a member of the Executive
Board of UBS Business Solutions AG from 2015 to 2016. From 1998 to
2008, he served as Group Chief Legal Officer at Swiss Re, and he was
appointed to that company’s Group Executive Board in 2007. Prior to
that, he was with Los Angeles-based law firm Gibson, Dunn & Crutcher
and focused on corporate matters, securities transactions, litigation and
regulatory investigations while working out of the firm’s Brussels and
Paris offices. From 1989 to 1992, he practiced at Shearman & Sterling in
New York, specializing in mergers and acquisitions. In 1988, he worked
at Paul, Weiss, Rifkind, Wharton & Garrison in New York. After starting
his career in 1983 with Bär & Karrer, he served as a law clerk at Uster
District Court in Switzerland from 1984 to 1985. Mr. Diethelm holds a
law degree from the University of Zurich and a master’s degree and a
PhD from Stanford Law School. He is a qualified attorney-at-law
admitted to the bar in Zurich, Geneva and New York State.
Other activities and functions
– Member of the Board of UBS Switzerland AG
– Member of the Foundation Board of the UBS Pension Fund
– Member of the Foundation Board – International Financial Risk
Other activities and functions
– Chairman of the Swiss-American Chamber of Commerce’s legal
committee
– Chairman of the Swiss Advisory Council of the American Swiss
Institute
Foundation
– Member of the Supervisory Board of the Fonds de Dotation LUMA /
Arles
– Member of the New York State Council of Business Leaders in
Support of Access to Justice
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Kirt Gardner
Suni Harford
Group Chief Financial Officer
President Asset Management
Year of initial appointment
UBS: 2016
Year of birth | Nationality
1959 | American (US)
Year of initial appointment
UBS: 2019
Year of birth | Nationality
1962 | American (US)
Professional history and education
Kirt Gardner became a member of the GEB and was appointed Group
Chief Financial Officer of UBS Group AG and UBS AG in 2016. He was
CFO Wealth Management from 2013 to 2015. Prior to that, he held a
number of leadership positions at Citigroup, including CFO and Head of
Strategy within Global Transaction Services from 2010 to 2013, Head of
Strategy, Planning and Risk Strategy for the Corporate and Institutional
Division from 2006 to 2010 and Head of Global Strategy and Cost
Management for the Consumer Bank from 2004 to 2006. Prior to that,
Mr. Gardner held the position of Global Head of Financial Services
Strategy for BearingPoint, for which he worked in Asia and New York for
four years. From 1994 to 2000, he was Managing Director at Barents
Group, working in the US, Asia, Latin America and Europe. Mr. Gardner
holds a bachelor’s degree in economics from Williams College, a
master’s degree from the University of Pennsylvania and an MBA in
finance from the Wharton School.
Other activities and functions
– Member of the Board of UBS Business Solutions AG
Professional history and education
Suni Harford became a member of the GEB and was appointed President
Asset Management of UBS Group AG and UBS AG in October 2019. She
has been with UBS since 2017 and joined as Group Managing Director
and Head Investments in the Asset Management business division.
Before joining UBS, Ms. Harford worked for almost 25 years at Citigroup
Inc. in various senior management positions: she was Regional Head of
Markets for North America from 2008 to 2017, with responsibility for
sales, trading, origination and research across all fixed
income,
currencies, commodities, equities and municipal businesses. She was also
a member of Citi’s Pension Plan Investment Committee and a Director
on the Board of Citibank Canada. From 2004 to 2008, Ms. Harford was
Global Head of Fixed Income Research and, from 1995 to 2004, Co-
Head Debt Capital Markets, Origination, Financial Institutions Group. She
started her career as an investment banker at Merrill Lynch & Co in
1988. Ms. Harford holds a bachelor’s degree in physics and mathematics
from Denison University, Ohio, and an MBA from Tuck School of
Business at Dartmouth.
Other activities and functions
– Chairman of the Board of Directors of UBS Asset Management AG
– Member of the Leadership Council of the Bob Woodruff Foundation
– Member of the Board of UBS Optimus Foundation
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Corporate governance and compensation | Corporate governance
Kirt Gardner
Suni Harford
Group Chief Financial Officer
President Asset Management
Year of initial appointment
UBS: 2016
Year of birth | Nationality
1959 | American (US)
Year of initial appointment
UBS: 2019
Year of birth | Nationality
1962 | American (US)
Professional history and education
Professional history and education
Kirt Gardner became a member of the GEB and was appointed Group
Suni Harford became a member of the GEB and was appointed President
Chief Financial Officer of UBS Group AG and UBS AG in 2016. He was
Asset Management of UBS Group AG and UBS AG in October 2019. She
CFO Wealth Management from 2013 to 2015. Prior to that, he held a
has been with UBS since 2017 and joined as Group Managing Director
number of leadership positions at Citigroup, including CFO and Head of
and Head Investments in the Asset Management business division.
Strategy within Global Transaction Services from 2010 to 2013, Head of
Before joining UBS, Ms. Harford worked for almost 25 years at Citigroup
Strategy, Planning and Risk Strategy for the Corporate and Institutional
Inc. in various senior management positions: she was Regional Head of
Division from 2006 to 2010 and Head of Global Strategy and Cost
Markets for North America from 2008 to 2017, with responsibility for
Management for the Consumer Bank from 2004 to 2006. Prior to that,
sales, trading, origination and research across all fixed
income,
Mr. Gardner held the position of Global Head of Financial Services
currencies, commodities, equities and municipal businesses. She was also
Strategy for BearingPoint, for which he worked in Asia and New York for
a member of Citi’s Pension Plan Investment Committee and a Director
four years. From 1994 to 2000, he was Managing Director at Barents
on the Board of Citibank Canada. From 2004 to 2008, Ms. Harford was
Group, working in the US, Asia, Latin America and Europe. Mr. Gardner
Global Head of Fixed Income Research and, from 1995 to 2004, Co-
holds a bachelor’s degree in economics from Williams College, a
Head Debt Capital Markets, Origination, Financial Institutions Group. She
master’s degree from the University of Pennsylvania and an MBA in
started her career as an investment banker at Merrill Lynch & Co in
finance from the Wharton School.
Other activities and functions
– Member of the Board of UBS Business Solutions AG
1988. Ms. Harford holds a bachelor’s degree in physics and mathematics
from Denison University, Ohio, and an MBA from Tuck School of
Business at Dartmouth.
Other activities and functions
– Chairman of the Board of Directors of UBS Asset Management AG
– Member of the Leadership Council of the Bob Woodruff Foundation
– Member of the Board of UBS Optimus Foundation
Robert Karofsky
Co-President Investment Bank
Year of initial appointment
UBS: 2018
Year of birth | Nationality
1967 | American (US)
Professional history and education
Robert Karofsky is Co-President Investment Bank at UBS Group AG and
UBS AG and became a member of the GEB in October 2018. He joined
UBS in 2014 as Global Head Equities and has been President UBS
Securities LLC since 2015. From 2011 to 2014, he was Global Head of
Equity Trading at AllianceBernstein. He began his career at Morgan
Stanley in 1994 and joined Deutsche Bank as Head of North American
Equities in 2005, later taking over as Co-Head of Global Equities from
2008 to 2010. Mr. Karofsky holds a bachelor’s degree in economics
from Hobart and William Smith Colleges and an MBA in finance and
statistics from the University of Chicago’s Booth School of Business.
Other activities and functions
– Member of the Board of UBS Securities LLC
–
Trustee of the UBS Americas Inc. Political Action Committee
Sabine Keller-Busse
President Personal & Corporate Banking and President UBS Switzerland
(from 1 February 2021)
Group Chief Operating Officer ad interim
President UBS Europe, Middle East and Africa (until 31 January 2021)
Year of initial appointment
UBS: 2016
Year of birth | Nationality
1965 | Swiss and German
Professional history and education
Sabine Keller-Busse was appointed President Personal & Corporate
Banking at UBS Group AG and President UBS Switzerland in February
2021. She also holds the position of President of the Executive Board of
UBS Switzerland AG. She has been Group Chief Operating Officer of
UBS Group AG and UBS AG as well as President of the Executive Board
of UBS Business Solutions AG since 2018. From 2019 to January 2021,
she was President UBS Europe, Middle East and Africa and from 2014 to
2017, she held the position of Group Head Human Resources. Ms.
Keller-Busse became a member of the GEB in 2016. Having joined UBS
in 2010, she served as Chief Operating Officer UBS Switzerland until
2014. Prior to that, she led Credit Suisse’s Private Clients Region Zurich
division for two years. From 1995 to 2008, she worked for McKinsey &
Company, where she was a Partner from 2002. Ms. Keller-Busse holds a
master’s degree and a PhD, both in business administration, from the
University of St. Gallen.
Other activities and functions
– Member of the Board of UBS Business Solutions AG
– Member of the Foundation Council of the UBS International Center of
Economics in Society
– Vice-Chairman of the Board of Directors of SIX Group (Chairman of
the nomination & compensation committee)
– Member of the Foundation Board of the UBS Pension Fund
– Member of the Board of the University Hospital Zurich Foundation
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Iqbal Khan
Edmund Koh
Co-President Global Wealth Management and (since 1 February 2021)
President UBS Europe, Middle East and Africa
President UBS Asia Pacific
Year of initial appointment
UBS: 2019
Year of birth | Nationality
1976 | Swiss
Year of initial appointment
UBS: 2019
Year of birth | Nationality
1960 | Singaporean
Professional history and education
Iqbal Khan became a member of the GEB and was appointed Co-
President Global Wealth Management of UBS Group AG and UBS AG in
October 2019. He was appointed President UBS Europe, Middle East and
Africa in February 2021. Mr. Khan joined UBS from Credit Suisse, where
he was CEO International Wealth Management from 2015 to 2019 and
CFO Private Banking & Wealth Management from 2013 to 2015. Prior to
that, he worked for Ernst & Young (EY), Switzerland, which he joined in
2001. At EY he was Managing Partner Assurance and Advisory Services –
Financial Services, as well as being a member of the Swiss management
committee from 2011 to 2013. Before that, from 2009 to 2011, he held
the position of Industry Lead Partner Banking and Capital Markets,
Switzerland and EMEA Private Banking. Mr. Khan holds an Advanced
Master of International Business Law degree (LLM) from the University of
Zurich. In addition, he is a Certified International Investment Analyst, a
Swiss Certified Public Accountant and a Swiss Certified Trustee.
Professional history and education
Edmund Koh became a member of the GEB and was appointed
President UBS Asia Pacific at UBS Group AG and UBS AG in January
2019. He was Head Wealth Management Asia Pacific from 2016 to
2018 and Country Head Singapore from 2012 to 2018. Mr. Koh has
more than 30 years’ experience in senior roles in financial services. He
joined UBS in 2012 as Head Wealth Management South East Asia and
Asia Pacific Hub and Country Head Singapore from Taiwan-based Ta
Chong Bank, where he served as President and Director from 2008 to
2011. From 2001 to 2008, Mr. Koh was Managing Director and
Regional Head Consumer Banking of DBS Bank in Singapore. In 2001,
he became CEO of Alverdine Pte Ltd and two years earlier he held the
same position for Prudential Assurance, both companies based in
Singapore. Mr. Koh holds a bachelor of science degree in psychology
from the University of Toronto.
Other activities and functions
– Member of the Supervisory Board of UBS Europe SE (since 1 February
2021)
Other activities and functions
– Member of the two sub-committees of the Singapore Ministry of
Finance’s Committee on the Future Economy
– Member of the Financial Centre Advisory Panel of the Monetary
– Member of the Board of Room to Read Switzerland
Authority of Singapore
– Council member of the Asian Bureau of Finance and Economic
Research
– Member of the Board of Trustees of the Wealth Management
Institute, Singapore
– Member of the Board of Next50 Limited, Singapore
– Member of the Board of Medico Suites (S) Pte Ltd
– Member of the Board of Medico Republic (S) Pte Ltd
– Council member of the KidSTART program of the Early Childhood
Development Agency, Singapore
– Trustee of the Cultural Matching Fund, Singapore
– Member of University of Toronto’s International Leadership Council
for Asia
206
206
Corporate governance and compensation | Corporate governance
Iqbal Khan
Edmund Koh
Axel P. Lehmann
Tom Naratil
Co-President Global Wealth Management and (since 1 February 2021)
President UBS Asia Pacific
President UBS Europe, Middle East and Africa
President Personal & Corporate Banking and President UBS Switzerland
(until 31 January 2021)
Co-President Global Wealth Management and President UBS Americas
Year of initial appointment
UBS: 2019
Year of birth | Nationality
1976 | Swiss
Year of initial appointment
UBS: 2019
Year of birth | Nationality
1960 | Singaporean
Year of initial appointment
UBS: 2016 (UBS Group AG: 2016, UBS AG: 2016–2017)
Year of initial appointment
UBS: 2011 (UBS Group AG: 2014, UBS AG: 2011)
Year of birth | Nationality
1959 | Swiss
Year of birth | Nationality
1961 | American (US)
Professional history and education
Professional history and education
Iqbal Khan became a member of the GEB and was appointed Co-
Edmund Koh became a member of the GEB and was appointed
President Global Wealth Management of UBS Group AG and UBS AG in
President UBS Asia Pacific at UBS Group AG and UBS AG in January
October 2019. He was appointed President UBS Europe, Middle East and
2019. He was Head Wealth Management Asia Pacific from 2016 to
Africa in February 2021. Mr. Khan joined UBS from Credit Suisse, where
2018 and Country Head Singapore from 2012 to 2018. Mr. Koh has
he was CEO International Wealth Management from 2015 to 2019 and
more than 30 years’ experience in senior roles in financial services. He
CFO Private Banking & Wealth Management from 2013 to 2015. Prior to
joined UBS in 2012 as Head Wealth Management South East Asia and
that, he worked for Ernst & Young (EY), Switzerland, which he joined in
Asia Pacific Hub and Country Head Singapore from Taiwan-based Ta
2001. At EY he was Managing Partner Assurance and Advisory Services –
Chong Bank, where he served as President and Director from 2008 to
Financial Services, as well as being a member of the Swiss management
2011. From 2001 to 2008, Mr. Koh was Managing Director and
committee from 2011 to 2013. Before that, from 2009 to 2011, he held
Regional Head Consumer Banking of DBS Bank in Singapore. In 2001,
the position of Industry Lead Partner Banking and Capital Markets,
he became CEO of Alverdine Pte Ltd and two years earlier he held the
Switzerland and EMEA Private Banking. Mr. Khan holds an Advanced
same position for Prudential Assurance, both companies based in
Master of International Business Law degree (LLM) from the University of
Singapore. Mr. Koh holds a bachelor of science degree in psychology
Zurich. In addition, he is a Certified International Investment Analyst, a
from the University of Toronto.
Swiss Certified Public Accountant and a Swiss Certified Trustee.
Other activities and functions
Other activities and functions
– Member of the two sub-committees of the Singapore Ministry of
– Member of the Supervisory Board of UBS Europe SE (since 1 February
Finance’s Committee on the Future Economy
2021)
– Member of the Financial Centre Advisory Panel of the Monetary
– Member of the Board of Room to Read Switzerland
Authority of Singapore
– Council member of the Asian Bureau of Finance and Economic
– Member of the Board of Trustees of the Wealth Management
Research
Institute, Singapore
– Member of the Board of Next50 Limited, Singapore
– Member of the Board of Medico Suites (S) Pte Ltd
– Member of the Board of Medico Republic (S) Pte Ltd
– Council member of the KidSTART program of the Early Childhood
Development Agency, Singapore
– Trustee of the Cultural Matching Fund, Singapore
– Member of University of Toronto’s International Leadership Council
for Asia
Professional history and education
Axel P. Lehmann was President Personal & Corporate Banking at UBS
Group AG and President UBS Switzerland, as well as President of the
Executive Board of UBS Switzerland AG from 2018, and stepped down
on 31 January 2021. Mr. Lehmann became a member of the GEB and
was appointed Group Chief Operating Officer of UBS Group AG and
UBS AG in 2016. He was a member of the BoD of UBS AG from 2009 to
2015 and of UBS Group AG from 2014 to 2015. Mr. Lehmann became a
member of the group executive committee of Zurich Insurance Group in
2002, holding various management positions, including CEO for the
European and North America businesses. From 2008 to 2015, he was
Chief Risk Officer with additional responsibilities for Group IT, Regional
Chairman for Europe, Middle East and Africa as well as Chairman for
Farmers Group Inc. In 2001, he was appointed CEO for Northern,
Central and Eastern Europe and Zurich Group Germany, having served as
a member of the company’s Group Management Board since 2000 with
responsibility for group-wide business development functions. In 1996,
he joined Zurich as a member of the Executive Committee Switzerland,
and previously he was Head of Corporate Planning and Controlling at
SwissLife, Vice President of the Institute of Insurance Economics and a
visiting professor at Bocconi University in Milan. Mr. Lehmann holds a
master’s degree and a PhD in business administration and economics
from the University of St. Gallen. He is also a graduate of the Advanced
Management Program of the Wharton School.
Other activities and functions
– Adjunct professor and Chairman of the Board of the Institute of
Insurance Economics, University of St. Gallen
– Member of the HSG Advisory Board, University of St. Gallen
– Vice Chairman of the Swiss Finance Institute Foundation Board
– Member of the IMD Foundation Board, Lausanne
– Member of the Board and Board Committee, Zurich Chamber of
Commerce
– Member of the Swiss-American Chamber of Commerce Chapter
Doing Business in USA
Professional history and education
Tom Naratil became Co-President Global Wealth Management at UBS
Group AG and UBS AG as well as CEO of UBS Americas Holding LLC in
2018. He was appointed President UBS Americas at UBS Group AG and
UBS AG in 2016 and served as President Wealth Management Americas
from 2016 to 2018. He became a member of the GEB in 2011 and was
Group CFO of UBS AG from 2011 to 2015. He held the same position
for UBS Group AG from 2014 to 2015. In addition to the role of Group
CFO, he was Group Chief Operating Officer from 2014 to 2015. Mr.
Naratil was President of the Executive Board of UBS Business Solutions
AG from 2015 to 2016. He served as CFO and Chief Risk Officer of
Wealth Management Americas from 2009 until his appointment as
Group CFO in 2011. Before 2009, he held various senior management
positions within UBS, including heading the Auction Rate Securities
Solutions Group during the financial crisis in 2008. Mr. Naratil was
named Global Head of Marketing, Segment & Client Development in
2007, Global Head of Market Strategy & Development in 2005, and
Director of Banking and Transactional Solutions, Wealth Management
USA, in 2002. During this time, he was a member of the Group
Managing Board. He joined Paine Webber Incorporated in 1983 and
after the merger with UBS became Director of the Investment Products
Group. Mr. Naratil holds a bachelor’s degree in history from Yale
University and an MBA in economics from New York University.
Other activities and functions
– Member of the Board of UBS Americas Holding LLC
– Member of the Board of the American Swiss Foundation
– Member of the Board of Consultors for the College of Nursing at
Villanova University
206
207
207
Corporate governance and compensation Corporate governance and compensation | Corporate governance
Piero Novelli
Markus Ronner
Co-President Investment Bank
Group Chief Compliance and Governance Officer
Year of initial appointment
UBS: 2018
Year of birth | Nationality
1965 | Italian
Year of initial appointment
UBS: 2018
Year of birth | Nationality
1965 | Swiss
Professional history and education
Piero Novelli is Co-President Investment Bank at UBS Group AG and UBS
AG and became a member of the GEB in October 2018. He was
appointed Co-Executive Chairman Global Investment Banking, Corporate
Client Solutions in 2017 and in 2016 became sole Global Head Advisory
Services including Global Mergers and Acquisitions (M&A). Mr. Novelli
rejoined UBS in 2013 as Chairman Global M&A and Group Managing
Director. From 2011 to 2012, he was Global Co-Head of M&A at
Nomura, having worked as Global Head M&A at UBS between 2004 and
2009. Before that he worked for Merrill Lynch and held the position of
Head of European M&A and Head of European Industrials. Mr. Novelli
holds a master‘s degree in management from the MIT Sloan School of
Management and a master’s degree in mechanical engineering from
Università degli Studi di Roma.
Professional history and education
Markus Ronner is Group Chief Compliance and Governance Officer at
UBS Group AG and UBS AG and became a member of the GEB in
November 2018. In this role, he is responsible at the Group level for
compliance and operational risk control, governmental and regulatory
affairs as well as investigations and governance matters. He became
Head Group Regulatory and Governance in 2012. During his 39 years
with UBS, Mr. Ronner has held various positions across the bank,
including: Group-wide program manager “too big to fail” (2011–2013);
Chief Operating Officer (COO) Wealth Management & Swiss Bank
(2010–2011); Head Products and Services of Wealth Management &
Swiss Bank (2009–2010); COO Asset Management (2007–2009); and
Head Group Internal Audit (2001–2007). Mr. Ronner joined the firm as
an apprentice in 1981 and holds a Swiss Banking Diploma.
Other activities and functions
None
Other activities and functions
None
208
208
Corporate governance and compensation | Corporate governance
Piero Novelli
Markus Ronner
Co-President Investment Bank
Group Chief Compliance and Governance Officer
Year of initial appointment
UBS: 2018
Year of birth | Nationality
1965 | Italian
Year of initial appointment
UBS: 2018
Year of birth | Nationality
1965 | Swiss
Professional history and education
Professional history and education
Piero Novelli is Co-President Investment Bank at UBS Group AG and UBS
Markus Ronner is Group Chief Compliance and Governance Officer at
AG and became a member of the GEB in October 2018. He was
UBS Group AG and UBS AG and became a member of the GEB in
appointed Co-Executive Chairman Global Investment Banking, Corporate
November 2018. In this role, he is responsible at the Group level for
Client Solutions in 2017 and in 2016 became sole Global Head Advisory
compliance and operational risk control, governmental and regulatory
Services including Global Mergers and Acquisitions (M&A). Mr. Novelli
affairs as well as investigations and governance matters. He became
rejoined UBS in 2013 as Chairman Global M&A and Group Managing
Head Group Regulatory and Governance in 2012. During his 39 years
Director. From 2011 to 2012, he was Global Co-Head of M&A at
with UBS, Mr. Ronner has held various positions across the bank,
Nomura, having worked as Global Head M&A at UBS between 2004 and
including: Group-wide program manager “too big to fail” (2011–2013);
2009. Before that he worked for Merrill Lynch and held the position of
Chief Operating Officer (COO) Wealth Management & Swiss Bank
Head of European M&A and Head of European Industrials. Mr. Novelli
(2010–2011); Head Products and Services of Wealth Management &
holds a master‘s degree in management from the MIT Sloan School of
Swiss Bank (2009–2010); COO Asset Management (2007–2009); and
Management and a master’s degree in mechanical engineering from
Head Group Internal Audit (2001–2007). Mr. Ronner joined the firm as
Università degli Studi di Roma.
an apprentice in 1981 and holds a Swiss Banking Diploma.
Other activities and functions
None
Other activities and functions
None
Change of control and defense measures
Our Articles of Association do not provide any measures for
delaying, deferring or preventing a change of control.
Clauses on change of control
Duty to make an offer
Pursuant to the Swiss Federal Act on Financial Market
Infrastructures and Market Conduct in Securities and Derivatives
Trading of 19 June 2015, an investor who has acquired more
than 331⁄3% of all voting rights of a company listed in
Switzerland (whether directly, indirectly or in concert with
third parties), whether such rights are exercisable or not, is
required to submit a takeover offer for all listed shares
outstanding. We have not elected to change or opt out of
this rule.
Neither the full-time contract with the Chairman of the BoD nor
any employment contracts with GEB members or employees
(e.g., Group
holding key functions within the company
Managing Directors) contain change of control clauses.
All employment contracts with GEB members stipulate a
notice period of six months. During the notice period, GEB
members are entitled to their salaries and the continuation of
existing employment benefits and may be eligible to be
considered for a discretionary performance award based on their
contribution during their tenure.
In case of a change of control, we may, at our discretion,
accelerate the vesting of and / or relax applicable forfeiture
provisions of employees’ awards.
› Refer to the “Compensation” section of this report on page 214
for more information
208
209
209
Corporate governance and compensation Corporate governance and compensation | Corporate governance
Auditors
Audit is an integral part of corporate governance. While
safeguarding their independence, the external auditors closely
coordinate their work with Group Internal Audit (GIA). The Audit
Committee and, ultimately, the BoD supervise the effectiveness
of audit work.
› Refer to “Board of Directors” in this section for more
information about the Audit Committee
External independent auditors
The AGM in 2020 re-elected Ernst & Young Ltd (EY) as auditors
for the Group for a one-year term of office. EY assumes virtually
all auditing functions according to laws, regulatory requests and
the AoA. Bob Jacob is the EY lead partner in charge of the
overall coordination of the UBS Group financial and regulatory
audits and the co-signing partner of the financial audit. In 2020,
Maurice McCormick became the lead audit partner for the
financial statement audit and has an incumbency limit of five
years. Patrick Schwaller has been the Lead Auditor to the Swiss
Financial Market Supervisory Authority (FINMA) since 2015, with
an incumbency limited to six years because of prior audit service
to the Group in another role. He will be succeeded in 2021 by
Hannes Smit, with an incumbency limit of seven years. Daniel
Martin has been the co-signing partner for the FINMA audit
since 2019, with an incumbency limit of seven years.
During 2020, the Audit Committee held twelve meetings
with the external auditors. The Audit Committee assesses the
performance, effectiveness and independence of the external
auditors on an annual basis. The assessment is based on
interviews with senior management and survey feedback from
stakeholders across the Group. Assessment criteria include
quality of service delivery, quality and competence of the audit
Fees paid to external independent auditors
team, value added as part of the audit, insightfulness, and the
overall relationship with EY. Based on its own analysis and the
assessment results, the Audit Committee concluded that EY’s
audit has been effective.
Special auditors for potential capital increases
At the AGM on 3 May 2018, BDO AG was reappointed as
special auditors for a three-year term of office. Special auditors
provide audit opinions in connection with potential capital
increases independently from other auditors.
Services performed and fees
The Audit Committee oversees all services provided to the bank
by the external auditors. For services requiring the approval from
the Audit Committee, a preapproval may be granted either for a
specific mandate or in the form of a blanket preapproval
authorizing a limited and well-defined type and amount of
services.
The fees (including expenses) paid to EY are set forth in the
table below. In addition, EY received USD 32.7 million in 2020
(USD 30.2 million in 2019) for services performed on behalf of
our investment funds, many of which have independent fund
boards or trustees.
Audit work includes all services necessary to perform the
audit for the Group in accordance with applicable laws and
generally accepted auditing standards, as well as other
assurance services that conventionally only the auditor can
provide. These
regulatory audits,
attestation services and the review of documents to be filed with
regulatory bodies. The additional services classified as audit in
2020 included several engagements for which EY was mandated
at the request of FINMA.
include statutory and
UBS Group AG and its subsidiaries (including UBS AG) paid the following fees (including expenses) to their external independent
auditors.
USD million
Audit
Global audit fees
Additional services classified as audit (services required by law or statute, including work of a non-recurring nature mandated by regulators)
TToottaall aauuddiitt11
Non-audit
Audit-related fees
of which: assurance and attestation services
of which: control and performance reports
of which: consultation concerning financial accounting and reporting standards
Tax fees
For the year ended
3311..1122..2200
31.12.19
5533
1100
6644
88
33
55
00
11
52
13
65
9
4
4
0
2
All other fees
TToottaall nnoonn--aauuddiitt11
11 Total audit and non-audit fees amounted to USD 73 million for UBS Group AG consolidated as of 31 December 2020 (31 December 2019: USD 78 million), of which USD 46 million related to UBS AG consolidated
(31 December 2019: USD 52 million).
13
00
99
2
210
210
Audit-related work comprises assurance and related services
traditionally performed by auditors, such as attestation services
related to financial reporting, internal control reviews and
performance
reviews, as well as consultation
concerning financial accounting and reporting standards.
standard
Tax work involves services performed by professional staff in
includes tax compliance and tax
EY’s tax division and
consultation with respect to our own affairs.
“Other” services are permitted services, which
include
technical IT security control reviews and assessments.
Group Internal Audit
Group Internal Audit (GIA) performs the internal auditing role
for the Group. It is an independent function that provides
expertise and insights to confirm controls are functioning well
and highlight where UBS needs to better manage current and
emerging risks. In 2020, it operated with an average headcount
of 582 full-time equivalent employees.
in discharging
GIA supports the BoD
its governance
responsibilities by taking a dynamic approach to audit, issue
assurance and risk assessment, calling attention to key risks in
order to drive action to prevent unexpected loss or damage to
the firm’s reputation. To support the achievement of UBS’s
objectives, GIA independently, objectively and systematically
assesses the:
(i)
(ii)
soundness of the Group’s risk and control culture;
reliability and
financial and operational
information, including whether activities are properly,
accurately and completely recorded, and the quality of
underlying data and models; and
integrity of
(iii) design, operating effectiveness and sustainability of:
– processes to define strategy and risk appetite, as well as
the overall adherence to the approved strategy;
including whether
– governance processes;
risk management,
–
appropriately identified and managed;
internal controls,
commensurate with the risks taken;
remediation activities; and
–
specifically whether
–
– processes
to comply with
legal and
risks are
they are
regulatory
the Group’s
For the year ended
3311..1122..2200
31.12.19
requirements,
internal policies, and
constitutional documents and contracts.
Corporate governance and compensation | Corporate governance
Auditors
Audit is an integral part of corporate governance. While
team, value added as part of the audit, insightfulness, and the
safeguarding their independence, the external auditors closely
overall relationship with EY. Based on its own analysis and the
coordinate their work with Group Internal Audit (GIA). The Audit
assessment results, the Audit Committee concluded that EY’s
Committee and, ultimately, the BoD supervise the effectiveness
audit has been effective.
of audit work.
› Refer to “Board of Directors” in this section for more
information about the Audit Committee
External independent auditors
Special auditors for potential capital increases
At the AGM on 3 May 2018, BDO AG was reappointed as
special auditors for a three-year term of office. Special auditors
provide audit opinions in connection with potential capital
increases independently from other auditors.
The AGM in 2020 re-elected Ernst & Young Ltd (EY) as auditors
for the Group for a one-year term of office. EY assumes virtually
Services performed and fees
all auditing functions according to laws, regulatory requests and
The Audit Committee oversees all services provided to the bank
the AoA. Bob Jacob is the EY lead partner in charge of the
by the external auditors. For services requiring the approval from
overall coordination of the UBS Group financial and regulatory
the Audit Committee, a preapproval may be granted either for a
audits and the co-signing partner of the financial audit. In 2020,
specific mandate or in the form of a blanket preapproval
Maurice McCormick became the lead audit partner for the
authorizing a limited and well-defined type and amount of
financial statement audit and has an incumbency limit of five
services.
years. Patrick Schwaller has been the Lead Auditor to the Swiss
The fees (including expenses) paid to EY are set forth in the
Financial Market Supervisory Authority (FINMA) since 2015, with
table below. In addition, EY received USD 32.7 million in 2020
an incumbency limited to six years because of prior audit service
(USD 30.2 million in 2019) for services performed on behalf of
to the Group in another role. He will be succeeded in 2021 by
our investment funds, many of which have independent fund
Hannes Smit, with an incumbency limit of seven years. Daniel
boards or trustees.
Martin has been the co-signing partner for the FINMA audit
Audit work includes all services necessary to perform the
since 2019, with an incumbency limit of seven years.
audit for the Group in accordance with applicable laws and
During 2020, the Audit Committee held twelve meetings
generally accepted auditing standards, as well as other
with the external auditors. The Audit Committee assesses the
assurance services that conventionally only the auditor can
performance, effectiveness and independence of the external
provide. These
include statutory and
regulatory audits,
auditors on an annual basis. The assessment is based on
attestation services and the review of documents to be filed with
interviews with senior management and survey feedback from
regulatory bodies. The additional services classified as audit in
stakeholders across the Group. Assessment criteria include
2020 included several engagements for which EY was mandated
quality of service delivery, quality and competence of the audit
at the request of FINMA.
Fees paid to external independent auditors
UBS Group AG and its subsidiaries (including UBS AG) paid the following fees (including expenses) to their external independent
Additional services classified as audit (services required by law or statute, including work of a non-recurring nature mandated by regulators)
of which: assurance and attestation services
of which: control and performance reports
of which: consultation concerning financial accounting and reporting standards
5533
1100
6644
88
33
55
00
11
00
99
52
13
65
9
4
4
0
2
2
13
11 Total audit and non-audit fees amounted to USD 73 million for UBS Group AG consolidated as of 31 December 2020 (31 December 2019: USD 78 million), of which USD 46 million related to UBS AG consolidated
(31 December 2019: USD 52 million).
auditors.
USD million
Audit
Global audit fees
TToottaall aauuddiitt11
Non-audit
Audit-related fees
Tax fees
All other fees
TToottaall nnoonn--aauuddiitt11
210
Audit reports that include significant issues are provided to
the Group CEO, relevant GEB members and other responsible
management. The Chairman, the Audit Committee and the Risk
Committee of the BoD are regularly informed of such issues.
In addition, GIA provides independent assurance on the
effective and sustainable remediation of control deficiencies
within its mandate, taking a prudent and conservative risk-based
approach and assessing at the issue level whether the root cause
and the potential exposure for the firm have been holistically
and sustainably addressed. GIA also cooperates closely with risk
control functions and internal and external legal advisors on
investigations into major control issues.
To maximize GIA’s independence from management, the
Head GIA reports to the Chairman of the BoD and to the Audit
Committee, which assesses annually whether GIA has sufficient
resources to perform its function, as well as its independence
and performance. In the Audit Committee’s assessment, GIA is
sufficiently resourced to fulfill its mandate and complete its
auditing objectives. GIA’s role, position, responsibilities and
accountability are set out in our Organization Regulations and
the Charter for GIA, available at ubs.com/governance. The latter
also applies to UBS AG’s internal audit function. GIA has
unrestricted access to all accounts, books, records, systems,
property and personnel, and must be provided with all
information and data that it needs to fulfill its auditing
responsibilities. GIA also conducts special audits at the request
of the Audit Committee, or other BoD members, committees or
the Group CEO in consultation with the Audit Committee.
GIA enhances the efficiency of its work through coordination
and close cooperation with the external auditors.
211
211
Corporate governance and compensation
Corporate governance and compensation | Corporate governance
Information policy
We provide regular information to our shareholders and to the
financial community.
Financial disclosure principles
Financial reports for UBS Group AG are expected to be
published on the following dates:
First quarter 2021
Second quarter 2021
Third quarter 2021
27 April 2021
20 July 2021
26 October 2021
The annual general meetings of the shareholders of UBS
Group AG will take place on the following dates:
2021
2022
8 April 2021
6 April 2022
› Refer to the corporate calendar at ubs.com/investors for future
financial report publication and other key dates, including UBS
AG’s financial report publication dates
We meet with institutional investors worldwide throughout
the year and regularly hold results presentations, attend and
present at investor conferences, and, from time to time, host
investor days. When appropriate, investor meetings are hosted
by senior management and are attended by members of our
Investor Relations team. We use various technologies, such as
webcasting, audio links and cross-location videoconferencing, to
widen our audience and maintain contact with shareholders
globally.
We fully support transparency, and consistent and informative
disclosure. We aim to communicate our strategy and results in a
manner that allows stakeholders to gain a good understanding
of how our Group works, what our growth prospects are, and
the risks that our businesses and our strategy entail. We assess
feedback from analysts and investors on a regular basis and,
where appropriate, reflect this in our disclosures. To continue
achieving these goals, we apply the following principles in our
financial reporting and disclosure:
– transparency that enhances the understanding of economic
drivers and builds trust and credibility;
– consistency within each reporting period and between
reporting periods;
– simplicity that allows readers to gain a good understanding of
the performance of our businesses;
– relevance, by focusing not only on what is required by
regulation or statute but also on what is relevant to our
stakeholders; and
– best practice that leads to improved standards.
We regard the continuous improvement of our disclosures as
an ongoing commitment.
All
financial
We make our publications available to all shareholders
simultaneously to provide them with equal access to our
financial information.
our
at
ubs.com/investors. Shareholders may opt to receive a printed
copy of our annual report. They may also request a copy of our
initiatives and
annual review, which reflects on specific
achievements of the Group and provides an overview of the
Group’s activities during the year, as well as key financial
information.
publications
available
are
› Refer to ubs.com/investors for a complete set of published
reporting documents and a selection of senior management
industry conference presentations
› Refer to the “Information sources” section on page 438 of this
report for more information
› Refer to “Corporate information” and “Contacts” on page 6 of
this report for more information
212
212
Financial reporting policies
We report our Group’s results for each financial quarter,
including a breakdown of results by business division and
disclosures or key developments relating to risk management
and control, capital, liquidity and funding management. Each
quarter, we publish quarterly financial reports for UBS Group
AG, on the same day as the earnings releases.
The consolidated financial statements of UBS Group AG and
UBS AG are prepared in accordance with International Financial
Reporting Standards as issued by the International Accounting
Standards Board.
› Refer to “Note 1 Summary of significant accounting policies” in
the “Consolidated financial statements” section on page 287 of
this report for more information about the basis of accounting
We are committed to maintaining the transparency of our
reported results and to allowing analysts and investors to make
meaningful comparisons with prior periods. If there is a major
reorganization of our business divisions or if changes to
accounting standards or interpretations lead to a material
change in the Group’s reported results, our results are restated
for previous periods as required by applicable accounting
standards. These restatements show how our results would have
been reported on the new basis and provide clear explanations
of all relevant changes.
US disclosure requirements
As a foreign private issuer, we must file reports and other
information, including certain financial reports, with the US
Securities and Exchange Commission (the SEC) under the US
federal securities laws. We file an annual report on Form 20-F
and furnish our quarterly financial reports and other material
information under cover of Form 6-K to the SEC. These reports
are available at ubs.com/investors and on the SEC’s website,
sec.gov.
An evaluation of the effectiveness of our disclosure controls
and procedures (as defined in Rule 13a–15e) under the US
Securities Exchange Act of 1934, has been carried out, under
the supervision of management, including the Group CEO, the
Group CFO and the Group Controller and Chief Accounting
Officer. Based on that evaluation, the Group CEO and the Group
CFO concluded that our disclosure controls and procedures were
effective as of 31 December 2020. No significant changes have
been made to our internal controls or to other factors that could
significantly affect these controls subsequent to the date of their
evaluation.
› Refer to the “Consolidated financial statements” section on page
276 of this report for more information
Corporate governance and compensation | Corporate governance
Information policy
We provide regular information to our shareholders and to the
Financial disclosure principles
financial community.
Financial reports for UBS Group AG are expected to be
disclosure. We aim to communicate our strategy and results in a
published on the following dates:
First quarter 2021
Second quarter 2021
Third quarter 2021
27 April 2021
20 July 2021
26 October 2021
The annual general meetings of the shareholders of UBS
Group AG will take place on the following dates:
2021
2022
8 April 2021
6 April 2022
We fully support transparency, and consistent and informative
manner that allows stakeholders to gain a good understanding
of how our Group works, what our growth prospects are, and
the risks that our businesses and our strategy entail. We assess
feedback from analysts and investors on a regular basis and,
where appropriate, reflect this in our disclosures. To continue
achieving these goals, we apply the following principles in our
financial reporting and disclosure:
– transparency that enhances the understanding of economic
drivers and builds trust and credibility;
– consistency within each reporting period and between
reporting periods;
– simplicity that allows readers to gain a good understanding of
› Refer to the corporate calendar at ubs.com/investors for future
the performance of our businesses;
financial report publication and other key dates, including UBS
– relevance, by focusing not only on what is required by
AG’s financial report publication dates
regulation or statute but also on what is relevant to our
We meet with institutional investors worldwide throughout
– best practice that leads to improved standards.
the year and regularly hold results presentations, attend and
present at investor conferences, and, from time to time, host
investor days. When appropriate, investor meetings are hosted
an ongoing commitment.
We regard the continuous improvement of our disclosures as
stakeholders; and
by senior management and are attended by members of our
Investor Relations team. We use various technologies, such as
webcasting, audio links and cross-location videoconferencing, to
widen our audience and maintain contact with shareholders
globally.
We make our publications available to all shareholders
simultaneously to provide them with equal access to our
financial information.
All
our
financial
publications
are
available
at
ubs.com/investors. Shareholders may opt to receive a printed
copy of our annual report. They may also request a copy of our
annual review, which reflects on specific
initiatives and
achievements of the Group and provides an overview of the
Group’s activities during the year, as well as key financial
information.
› Refer to ubs.com/investors for a complete set of published
reporting documents and a selection of senior management
industry conference presentations
› Refer to the “Information sources” section on page 438 of this
report for more information
› Refer to “Corporate information” and “Contacts” on page 6 of
this report for more information
212
213
213
Corporate governance and compensation
Advisory vote
Compensation
Julie G. Richardson
Chair of the
Compensation Committee
of the Board of Directors
Dear Shareholders,
The Board of Directors and I wish to thank you for your support
once again at last year’s Annual General Meeting and for
sharing your views on our compensation practices over the past
year.
Throughout 2020, the Board of Directors (BoD) Compensation
Committee continued to oversee the compensation process,
ensuring that rewards reflect performance, appropriate risk-
taking and support the alignment of employees’ interests with
those of our shareholders. As the Chair of the Compensation
Committee, I am pleased to present our Compensation Report
for 2020.
As part of our ongoing engagement with shareholders during
2020, we received positive feedback in response to the changes
we made in 2019, notably the introduction of a long-term
incentive plan. In our annual review of the compensation
framework, we concluded that it remains well suited to support
us in achieving our ambitions for the Group and that it provides
strong alignment with shareholders’ interests.
Strategy and execution leading to strong results
2020 resulted in unprecedented times and challenges for
society, clients and employees due to the COVID-19 pandemic. It
required us to focus on safeguarding the well-being of our
employees and their families, serving our clients and ensuring
operational continuity.
Our employees met these challenges with energy, determination
and commitment to continue delivering value for both our
clients and shareholders.
Clients continued to place their trust in UBS during a tough year,
as they sought stability, and we helped them navigate
uncertainty through advice and solutions. UBS’s strength and
resilience allowed us to responsibly deploy resources for the
benefit of clients, employees and society throughout the
pandemic.
UBS performed well in this environment, demonstrating the
strength of its strategy, as well as its integrated and diversified
business model. The resilience of our operations, our disciplined
risk management and our ongoing investment in technology
and infrastructure have been critical in successfully operating
through the pandemic. Our full-year results further demonstrate
that our strategy is the right one for UBS as we continuously
adapt and accelerate the pace of change.
Our employees worked from home to a significant degree
throughout 2020, serving our clients and enabling us to deliver
on our targets, to make progress toward our strategic objectives
and to accelerate progress on our digitalization agenda. This is
also reflected in our total shareholder returns in 2020, which
outperformed those of our peers.
We met or exceeded all our financial targets in 2020. Our return
on CET1 capital was 17.4%, compared with our target of 12–
15%, and our return on tangible equity was 12.8%. We
delivered the lowest cost / income ratio since 2006 at 73.3%,
compared with our target of 75–78%. Every region and business
division contributed over USD 1 billion in profits, as we benefited
from our business and geographical diversification.
› Refer to “Financial and operating performance” in our Annual
Report 2020 for further details about our Group and business
division performance
Supporting society and clients
– We committed USD 30 million to various COVID-19-related aid projects that provide support across the communities in which we
operate.
A part of this amount has been used to match the USD 15 million raised by our clients and our employees for the UBS Optimus
Foundation’s COVID-19 Response Fund.
Lending and commitments to clients globally significantly increased in 2020, including CHF 3 billion to Swiss small and medium-
sized entities (SMEs) under the Swiss government-backed program and USD 656 million under the US Paycheck Protection Program.
As previously communicated, we intend to donate any economic profits from these programs to COVID-19 relief efforts.
› Refer to ubs.com/insociety for more information about how we support society and clients
–
–
–
214
214
Group profit before tax
Return on CET1 capital
USD billion
in %
Cost/income ratio
in %
+36%
+46%
430 bps
500 bps
(660 bps)
improvement
(720 bps)
improvement
6.0
2018
5.6
2019
8.2
2020
13.1
2018
12.4
2019
17.4
2020
79.9
2018
80.5
2019
73.3
2020
Group performance award pool
GEB performance award pool
Per capita GEB performance award pool
CHF billion
CHF million
CHF million
+24%
+6%
2.7
2019
3.3
2020
3.1
2018
+16%
+21%
+1%
+18%
73.3
2018
70.3
2019
85.0
2020
6.3
2018
5.4
2019
6.4
2020
Advisory vote
Compensation
Julie G. Richardson
Chair of the
Compensation Committee
of the Board of Directors
Dear Shareholders,
The Board of Directors and I wish to thank you for your support
once again at last year’s Annual General Meeting and for
sharing your views on our compensation practices over the past
year.
Throughout 2020, the Board of Directors (BoD) Compensation
Committee continued to oversee the compensation process,
ensuring that rewards reflect performance, appropriate risk-
taking and support the alignment of employees’ interests with
those of our shareholders. As the Chair of the Compensation
Committee, I am pleased to present our Compensation Report
for 2020.
As part of our ongoing engagement with shareholders during
2020, we received positive feedback in response to the changes
we made in 2019, notably the introduction of a long-term
incentive plan. In our annual review of the compensation
framework, we concluded that it remains well suited to support
us in achieving our ambitions for the Group and that it provides
strong alignment with shareholders’ interests.
Strategy and execution leading to strong results
2020 resulted in unprecedented times and challenges for
society, clients and employees due to the COVID-19 pandemic. It
required us to focus on safeguarding the well-being of our
employees and their families, serving our clients and ensuring
operational continuity.
Our employees met these challenges with energy, determination
and commitment to continue delivering value for both our
clients and shareholders.
Clients continued to place their trust in UBS during a tough year,
as they sought stability, and we helped them navigate
uncertainty through advice and solutions. UBS’s strength and
resilience allowed us to responsibly deploy resources for the
benefit of clients, employees and society throughout the
pandemic.
UBS performed well in this environment, demonstrating the
strength of its strategy, as well as its integrated and diversified
business model. The resilience of our operations, our disciplined
risk management and our ongoing investment in technology
and infrastructure have been critical in successfully operating
through the pandemic. Our full-year results further demonstrate
that our strategy is the right one for UBS as we continuously
adapt and accelerate the pace of change.
Our employees worked from home to a significant degree
throughout 2020, serving our clients and enabling us to deliver
on our targets, to make progress toward our strategic objectives
and to accelerate progress on our digitalization agenda. This is
also reflected in our total shareholder returns in 2020, which
outperformed those of our peers.
We met or exceeded all our financial targets in 2020. Our return
on CET1 capital was 17.4%, compared with our target of 12–
15%, and our return on tangible equity was 12.8%. We
delivered the lowest cost / income ratio since 2006 at 73.3%,
compared with our target of 75–78%. Every region and business
division contributed over USD 1 billion in profits, as we benefited
from our business and geographical diversification.
› Refer to “Financial and operating performance” in our Annual
Report 2020 for further details about our Group and business
division performance
Supporting society and clients
operate.
Foundation’s COVID-19 Response Fund.
– We committed USD 30 million to various COVID-19-related aid projects that provide support across the communities in which we
A part of this amount has been used to match the USD 15 million raised by our clients and our employees for the UBS Optimus
Lending and commitments to clients globally significantly increased in 2020, including CHF 3 billion to Swiss small and medium-
sized entities (SMEs) under the Swiss government-backed program and USD 656 million under the US Paycheck Protection Program.
As previously communicated, we intend to donate any economic profits from these programs to COVID-19 relief efforts.
› Refer to ubs.com/insociety for more information about how we support society and clients
–
–
–
214
Delivered on our capital returns commitment
Our financial position remained very strong despite the
uncertainties caused by the COVID-19 pandemic. Credit
impairments and expected credit loss expenses under IFRS 9
were elevated compared with prior years, although our loan
impairment ratios remain low by industry standards, reflecting
the quality of our loan book. UBS neither required nor received
any COVID-19-related financial support from the Swiss federal
government. Our strong financial position and capital generation
by our businesses enabled us to pay out the full dividend for
2019 and accrue a dividend for the 2020 financial year.
The balance between cash dividends and share repurchases has
been adjusted from 2020 onward, with a greater weight on
share repurchases compared with prior years. We remain
committed to returning excess capital to our shareholders and
delivering total capital returns consistent with our previous
levels. For 2020, the BoD intends to propose a dividend of
USD 0.37 per share for approval at the Annual General Meeting
of shareholders on 8 April 2021.
In the first quarter of 2021, we repurchased the remaining
CHF 100 million of our 2018–2021 USD 2 billion share
repurchase program, which is now complete and closed. In
February 2021, we launched a new three-year share repurchase
program of up to CHF 4 billion, of which we expect to execute
up to USD 1 billion by the end of the first quarter of 2021.
Group profit before tax
Return on CET1 capital
USD billion
in %
Cost/income ratio
in %
+36%
+46%
430 bps
500 bps
(660 bps)
improvement
(720 bps)
improvement
6.0
2018
5.6
2019
8.2
2020
13.1
2018
12.4
2019
17.4
2020
79.9
2018
80.5
2019
73.3
2020
Group performance award pool
GEB performance award pool
Per capita GEB performance award pool
CHF billion
CHF million
CHF million
+24%
+6%
2.7
2019
3.3
2020
3.1
2018
+16%
+21%
+1%
+18%
73.3
2018
70.3
2019
85.0
2020
6.3
2018
5.4
2019
6.4
2020
2020 performance award pool
Over the past years, our performance award pool has
consistently reflected our strict pay-for-performance philosophy
and our disciplined approach in managing compensation over
business cycles, as well as alignment with shareholder interests.
This was especially evident in 2019, when our performance
award pool reflected factors such as risk-adjusted profit, the
impact of the verdict from the Court of First Instance in the
French cross-border matter and the resulting share price
development, leading to a year-on-year performance award pool
reduction beyond that implied by underlying performance.
For 2020, although business performance was strong, we
remain committed to moderation in performance-related pay.
The 2020 performance award pool is aligned with previous years
in which we delivered strong performance. It further considers
the economic impact of COVID-19 and regulatory directives to
maintain capital flexibility.
Given the reduction in our 2019 performance award pool, which
was a negative outlier versus many peers, we believe it is
important to compare the 2020 pool not only with the 2019
outlier but also with the 2018 pool. For 2020, the performance
award pool for the Group was USD 3.3 billion, an increase of
6% compared with 2018 (or 24% compared with 2019).
The Group Executive Board (GEB) performance award pool,
which includes the Group CEOs’ performance awards and is part
of the Group pool, was CHF 85.0 million, an increase of 1% on
a per capita basis and 16% overall compared with 2018 (and
+18% per capita and +21% overall compared with 2019). This
reflects a smaller increase in executive compensation compared
with the overall pool development in 2020. As a percentage of
Group profit before tax, the GEB performance award pool was
1.1%, well below the cap of 2.5%.
› Refer to the “Group compensation” section of this report for
more information
215
215
Corporate governance and compensation Advisory vote
Our focus on ESG including diversity, equity and inclusion
We remain fully committed to our ESG-related objectives and
reflect them in our performance and compensation processes.
We are widely recognized for our sustainable practices. During
2020, we were named an industry leader in the Dow Jones
Sustainability Indices for the sixth consecutive year, rated AA by
MSCI, and were included in CDP’s Climate A List.
We pay for performance, and a strong commitment to pay
fairness is embedded in our compensation policies. We conduct
both internal and independent external reviews aiming to ensure
that all employees are paid fairly. In 2020, UBS was certified by
the EQUAL-SALARY Foundation for its equal pay practices in
Switzerland, the US, the UK, Hong Kong and Singapore.
In a global business such as ours, a diverse workforce is a
competitive advantage. Our strategy is to continuously shape a
Supporting our employees
diverse and inclusive organization that is innovative, provides
outstanding service to our clients, offers equitable opportunities
for all and is a great place to work for everyone. While race and
ethnicity were already a priority in prior years, in 2020 we
elevated our focus on this important topic. To increase the
representation of diverse heritage employees at UBS, we take a
multi-faceted approach, including setting aspirational ethnicity
goals in several locations, such as the US and the UK, and rolling
out race awareness training to all employees.
Our broad approach focuses on gender, race, ethnicity, LGBTQ+,
age, disability, and mental health, among other aspects, with
inclusive leadership playing an important role. Increasing gender
and ethnic diversity are our highest near-term strategic diversity,
equity and inclusion priorities.
– A large proportion of our workforce worked from home throughout 2020, with more than 95% of internal and external staff able
to work concurrently on a remote basis. We provided extra flexibility for employees to care for their families and address their
evolving needs.
– In 2020, we suspended any new restructuring activities that would have resulted in redundancies and potential loss of
employment for our employees.
– As a sign of appreciation for their contributions throughout the pandemic, employees at less senior ranks received a one-time cash
payment equivalent to one week’s salary.
– We introduced a mindfulness app-based solution designed to help our employees find more balance. It also gives helpful advice
on physical exercises and healthy living, improving sleeping habits, and increasing energy levels overall.
– Our Employee Assistance Program (EAP) supports our employees, as well as their family members, with any personal or work-
related issues that may be affecting their well-being.
– To further support the health, connectivity and resilience of our employees worldwide, UBS provided them with relevant tools
and resources on key topics, such as working from home, team building in a virtual set up, leading remote teams, thriving at home
and at work, keeping one’s mind and body fit, and relieving stress and anxiety.
– We are very proud that our 2020 employee survey results indicated strong improvements across all dimensions and in particular with
regard to employees feeling supported by UBS and being part of a highly professional and respectful work environment.
› Refer to ubs.com/global/en/our-firm/our-employees/working-at-ubs for more information about how we support our employees
Change at the top
2021 Annual General Meeting
Ralph Hamers joined UBS as a member of the GEB on
1 September 2020 and took over from Sergio Ermotti as Group
CEO on 1 November 2020.
We sincerely thank Sergio Ermotti for his exceptional commitment
and contribution to the success of our firm since taking office in
2011. He led the transformation of UBS into the largest truly
global wealth manager, and the leading bank in Switzerland,
supported by a global, focused investment bank and a large-scale
and diversified asset manager with a strong focus on sustainable
investing. Since 2011, UBS has strengthened its profitability,
generating USD 36 billion of CET1 capital, of which USD 23 billion
has been returned to shareholders or reserved for returns to
shareholders. Today, we operate a capital-efficient business model
with a strong competitive position in our key markets and we
have an attractive outlook for long-term and sustainable growth.
Under Sergio Ermotti’s strong leadership in a challenging year
marked by the COVID-19 pandemic, UBS demonstrated the
strength of its business model and delivered excellent financial
results. Finally, Sergio Ermotti contributed to a smooth and
efficient Group CEO transition, supporting this critical process
effectively beyond his step-down in October until his departure at
the end of 2020.
216
216
At the 2021 AGM on 8 April, we will seek your support on the
following compensation-related items:
– the maximum aggregate amount of compensation for the
BoD for the period from the 2021 AGM to the 2022 AGM;
– the maximum aggregate amount of fixed compensation for
the GEB for 2022;
– the aggregate amount of variable compensation for the GEB
for 2020; and
– shareholder endorsement
Compensation Report.
in an advisory vote for this
On behalf of the Compensation Committee and the BoD, I
thank you again for your feedback and we respectfully ask for
your continued support at the upcoming AGM.
Julie G. Richardson
Chair of the Compensation Committee of the Board of Directors
Advisory vote
Our focus on ESG including diversity, equity and inclusion
diverse and inclusive organization that is innovative, provides
We remain fully committed to our ESG-related objectives and
reflect them in our performance and compensation processes.
We are widely recognized for our sustainable practices. During
2020, we were named an industry leader in the Dow Jones
Sustainability Indices for the sixth consecutive year, rated AA by
MSCI, and were included in CDP’s Climate A List.
outstanding service to our clients, offers equitable opportunities
for all and is a great place to work for everyone. While race and
ethnicity were already a priority in prior years, in 2020 we
elevated our focus on this important topic. To increase the
representation of diverse heritage employees at UBS, we take a
multi-faceted approach, including setting aspirational ethnicity
goals in several locations, such as the US and the UK, and rolling
We pay for performance, and a strong commitment to pay
out race awareness training to all employees.
fairness is embedded in our compensation policies. We conduct
both internal and independent external reviews aiming to ensure
that all employees are paid fairly. In 2020, UBS was certified by
the EQUAL-SALARY Foundation for its equal pay practices in
Switzerland, the US, the UK, Hong Kong and Singapore.
In a global business such as ours, a diverse workforce is a
competitive advantage. Our strategy is to continuously shape a
Supporting our employees
Our broad approach focuses on gender, race, ethnicity, LGBTQ+,
age, disability, and mental health, among other aspects, with
inclusive leadership playing an important role. Increasing gender
and ethnic diversity are our highest near-term strategic diversity,
equity and inclusion priorities.
– A large proportion of our workforce worked from home throughout 2020, with more than 95% of internal and external staff able
to work concurrently on a remote basis. We provided extra flexibility for employees to care for their families and address their
evolving needs.
employment for our employees.
payment equivalent to one week’s salary.
– In 2020, we suspended any new restructuring activities that would have resulted in redundancies and potential loss of
– As a sign of appreciation for their contributions throughout the pandemic, employees at less senior ranks received a one-time cash
– We introduced a mindfulness app-based solution designed to help our employees find more balance. It also gives helpful advice
on physical exercises and healthy living, improving sleeping habits, and increasing energy levels overall.
– Our Employee Assistance Program (EAP) supports our employees, as well as their family members, with any personal or work-
related issues that may be affecting their well-being.
– To further support the health, connectivity and resilience of our employees worldwide, UBS provided them with relevant tools
and resources on key topics, such as working from home, team building in a virtual set up, leading remote teams, thriving at home
and at work, keeping one’s mind and body fit, and relieving stress and anxiety.
– We are very proud that our 2020 employee survey results indicated strong improvements across all dimensions and in particular with
regard to employees feeling supported by UBS and being part of a highly professional and respectful work environment.
› Refer to ubs.com/global/en/our-firm/our-employees/working-at-ubs for more information about how we support our employees
Change at the top
2021 Annual General Meeting
Ralph Hamers joined UBS as a member of the GEB on
1 September 2020 and took over from Sergio Ermotti as Group
CEO on 1 November 2020.
At the 2021 AGM on 8 April, we will seek your support on the
following compensation-related items:
– the maximum aggregate amount of compensation for the
We sincerely thank Sergio Ermotti for his exceptional commitment
BoD for the period from the 2021 AGM to the 2022 AGM;
and contribution to the success of our firm since taking office in
– the maximum aggregate amount of fixed compensation for
2011. He led the transformation of UBS into the largest truly
the GEB for 2022;
global wealth manager, and the leading bank in Switzerland,
– the aggregate amount of variable compensation for the GEB
supported by a global, focused investment bank and a large-scale
for 2020; and
and diversified asset manager with a strong focus on sustainable
– shareholder endorsement
in an advisory vote for this
investing. Since 2011, UBS has strengthened its profitability,
Compensation Report.
On behalf of the Compensation Committee and the BoD, I
thank you again for your feedback and we respectfully ask for
your continued support at the upcoming AGM.
generating USD 36 billion of CET1 capital, of which USD 23 billion
has been returned to shareholders or reserved for returns to
shareholders. Today, we operate a capital-efficient business model
with a strong competitive position in our key markets and we
have an attractive outlook for long-term and sustainable growth.
Under Sergio Ermotti’s strong leadership in a challenging year
marked by the COVID-19 pandemic, UBS demonstrated the
strength of its business model and delivered excellent financial
results. Finally, Sergio Ermotti contributed to a smooth and
efficient Group CEO transition, supporting this critical process
effectively beyond his step-down in October until his departure at
the end of 2020.
Julie G. Richardson
Chair of the Compensation Committee of the Board of Directors
Shareholder engagement and say on pay
The feedback we seek from our shareholders on compensation-
related topics is very important to us, as we are committed to
maintaining a strong
interests of our
employees and those of our shareholders.
link between the
Our annual review of the compensation framework in 2020
concluded that it remains well suited to support us in achieving
our ambitions for the Group and provides strong alignment with
shareholders’ interests.
We continued engaging with shareholders during 2020 and
in response to the significant
received positive feedback
enhancements made to our compensation framework in 2019.
The responses below provide answers to the questions we
most frequently receive from shareholders.
Responses to frequently asked questions
How does variable compensation reflect the business
performance in 2020 (“pay for performance”)?
Our compensation philosophy is to align the interests of our
employees with those of our investors and clients. Our variable
compensation reflects a strict pay-for-performance approach
that considers a number of factors, including Group, division,
team and individual performance, as well as behaviors that help
build and protect the firm’s reputation.
For 2020, although business performance was strong, we
remained committed to moderation in performance-related pay.
The resulting 2020 performance award pool thus reflects our
pay-for-performance principles and is aligned with previous
years in which we delivered strong performance. It further
considers the economic impact of COVID-19, and regulatory
directives to maintain capital flexibility.
The Compensation Committee
discretionary
adjustments to the performance award pool. This has resulted in
an average 3% downward adjustment over the past eight years
with the largest negative adjustment made for the 2020 pool.
applies
How did UBS support society, clients and employees
during the COVID-19 pandemic?
During 2020, lending and commitments to clients globally
significantly increased, including CHF 3 billion to Swiss SMEs
under the government-backed program and USD 656 million
under the US Paycheck Protection Program (PPP). As previously
communicated, we intend to donate any economic profits from
these programs to COVID-19 relief efforts. We donated around
USD 2 million of fees earned on the loans provided under the
PPP in 2020 to COVID-19 relief efforts.
We committed USD 30 million to various COVID-19-related
aid projects that provide support across the communities in
which we operate. A part of this amount has been used to
match the USD 15 million raised by our clients and our
employees for the UBS Optimus Foundation’s COVID-19
Response Fund.
Recognizing the additional pressure placed on employees due
to varying degrees of lockdown, we introduced a variety of
measures throughout 2020 to help employees adapt. For
example, we suspended any new restructuring activities that
would have resulted in redundancies and potential loss of
employment for our employees. Furthermore, we offered extra
flexibility to care for children and introduced a variety of tools
and resources to support employees’ physical, mental, financial
and social well-being.
As a sign of appreciation for their contribution throughout
this challenging year, employees at less senior ranks received a
one-time cash payment equivalent to one week’s salary. This
had an impact of USD 27 million on personnel expenses in the
fourth quarter of 2020.
How does UBS support diversity and pay fairness?
In a global business such as ours, a diverse workforce is a
competitive advantage. Our strategy is to continuously shape a
diverse and inclusive organization that is innovative, provides
outstanding service to our clients, offers equal opportunities for
all and is a great place to work for everyone.
Our broad approach focuses on gender, race, ethnicity,
LGBTQ+, age, disability, and mental health, among other
aspects, with inclusive leadership playing an important role.
Regarding gender, we seek to hire, promote and retain more
women across the firm, aspiring to increase the percentage of
women at Director level and above to 30% by 2025.
We pay for performance, and a strong commitment to pay
fairness is embedded in our compensation policies. We conduct
both internal and independent external reviews aiming to ensure
that all employees are paid fairly and to address any unexplained
gaps. In 2020, UBS was certified by the EQUAL-SALARY
Foundation for its equal pay practices in Switzerland, the US, the
UK, Hong Kong and Singapore. These certifications are a
testament
opportunity
environment.
our well-established
equal
to
How is UBS compensating the new Group CEO?
We have a competitive compensation framework for all GEB
members, including the Group CEO. This framework also applies
for our new Group CEO. The Compensation Committee
annually reviews this framework. The most important elements
of the framework have remained unchanged since 2012.
The annual base salary for the Group CEO role has remained
unchanged at CHF 2.5 million since 2011, and remains the same
for the new Group CEO. When determining the Group CEO’s
performance award, the Compensation Committee factors in
the achievement of financial performance targets and qualitative
goal achievements relative to Pillars, Principles and Behaviors. To
judge the quality and sustainability of the financial results, the
Compensation Committee considers a range of factors including
relative performance and market conditions, as well as ESG-
related aspects.
216
217
217
Corporate governance and compensation
Compensation Report, up to CHF 7.9 million, or 30% of the
2019 LTIP awards at grant for GEB members active in March
2017, as well as the Chairman of the BoD’s unvested share
award, continues to be at risk and directly linked to the final
resolution of the French cross-border matter. In addition, a
malus clause allows the Compensation Committee to assess any
new information that becomes available in the future and to
retrospectively reduce the 2019 LTIP award by up to the full
amount if such new information would have impacted our
compensation decision in 2019.
Impact of litigation matters on the LTIP
)
P
I
T
L
(
n
a
l
P
e
v
i
t
n
e
c
n
I
m
r
e
T
-
g
n
o
L
LTIP design
(all years)
Performance metric
(Reported RoCET1 directly impacted
by litigation costs)
Added measure for
2019 LTIP award
(GEB members active
in March 2017)
Fact-based
adjustment
(up to CHF 7.3
million of the 2019
LTIP at grant is
directly linked to the
fi nal resolution of
the French cross
border matter)
Malus adjustment
(2019 LTIP award
may be reduced
based on new
information that
would have
impacted the
compensation for
2019)
(As disclosed in the Compensation Report 2019.)
How is ESG considered in the compensation process?
ESG objectives
compensation
considered
determination process in objective setting, performance award
pool funding, performance assessment and compensation
decisions.
the
are
in
talent management and diversity,
In the performance award pool funding, ESG is reflected
through the qualitative assessment of
legal, compliance,
reputational and operational risks, as well as regulatory
compliance. In addition, ESG-related objectives have been
embedded
in our Pillars and Principles since they were
established in 2011 and are reflected in governance and risk
management,
client
satisfaction, and corporate responsibility, including goals for
reducing our carbon footprint and corporate waste, as well as
progressing our philanthropic efforts. Achievements versus ESG-
related goals are part of
the qualitative performance
assessments and affect final compensation decisions.
is taken
into consideration when the
Compensation Committee assesses not only what results were
achieved, but also how they were achieved.
Therefore, ESG
Advisory vote
Corporate governance and compensation | Compensation
What happens to deferred compensation of the former
Group CEO?
The deferred compensation of the former Group CEO continues
to vest in line with standard compensation award plan rules as
per the original vesting schedule. No accelerated payouts will be
made. All deferred awards will continue to be subject to
forfeiture and performance conditions.
As previously disclosed, a portion of the former Group CEO’s
2019 Long-Term Incentive Plan (LTIP) award is additionally
subject to forfeiture depending on the final outcome of the
French cross-border matter.
How is litigation considered in the compensation process?
Litigation and regulatory matters, and their resolution and
remediation, are taken into consideration throughout the
compensation decision-making process. The Compensation
Committee distinguishes between current matters, where the
underlying issues are within the responsibility of management,
and legacy matters, where management is accountable for
resolving them but not responsible for the underlying issue.
Current matters have a direct impact on the performance
award pool, individual performance assessments and resulting
compensation decisions, as well as the payout of deferred
awards.
For legacy matters, the Compensation Committee seeks to
incentivize management to resolve these matters in the best
interest of shareholders and we hold management accountable
for the effective and efficient resolution of these matters.
Therefore, the performance and compensation assessment
reflects management’s responsibility for achieving a resolution
without creating an incentive to settle inappropriately or take
inappropriate risks on such matters. In addition, the use of
reported return on common equity tier 1 capital (RoCET1)
supports the focus on ensuring the cost of litigation matters has
a direct impact on the compensation awarded and realized by
our most senior leaders, including the GEB.
What progress has been made on resolving the French
cross-border matter and how is this reflected in GEB
compensation?
In February 2019, UBS appealed the decision of the Court of
First Instance relating to the French cross-border matter. The
Court of Appeal has scheduled the case to be heard anew
between 8–24 March 2021. As with all litigation matters, the
final outcome of the French cross-border matter will impact the
RoCET1 metric, and therefore, the final payout of the LTIP
reflecting alignment with
awards of all GEB members,
in our 2019
shareholders.
Furthermore, as outlined
218
218
What happens to deferred compensation of the former
Compensation Report, up to CHF 7.9 million, or 30% of the
Say-on-pay votes at the AGM
Approved fixed compensation
In line with the Swiss Ordinance against Excessive Compensation
in Listed Stock Corporations, we seek binding shareholder
approval for the aggregate compensation awarded to the GEB
and the BoD. Prospective approval of the fixed compensation of
the BoD and GEB provides the firm and its governing bodies
with the certainty needed to operate effectively. Retrospective
approval of the GEB’s variable compensation aligns their
compensation with performance and contribution.
These binding votes on compensation and the advisory vote
on our compensation framework reflect our commitment to
shareholders having their say on pay.
› Refer to “Provisions of the Articles of Association related to
compensation” in the “Supplemental information” section of
this report for more information
Say on pay – compensation-related votes at the 2020 AGM
At the 2019 AGM, shareholders approved a maximum
aggregate fixed compensation amount of CHF 33.0 million for
GEB members for the 2020 performance year. This amount
includes base salaries, role-based allowances in response to
Capital Requirements Directive
standard
contributions to retirement benefit plans, other benefits and a
buffer. The aggregate fixed compensation paid in 2020 to GEB
members was below the approved amount for 2020.
IV, estimated
› Refer to “2020 total compensation for GEB members” in the
“Compensation for GEB members” section of this report
2020 AGM say-on-pay voting schemes
2020 AGM actual shareholder votes
Binding vote on GEB variable compensation
Shareholders approved CHF 70,250,000 for the 2019 financial year1,2,3
Binding vote on GEB fixed compensation
Shareholders approved CHF 33,000,000 for the 2021 financial year1,2,3
Binding vote on BoD compensation
Shareholders approved CHF 13,000,000 for the period from the 2020 AGM
to the 2021 AGM1,2,4
Vote “for”
83.8%
91.3%
87.9%
Advisory vote on the Compensation Report
Shareholders approved the UBS Group AG Compensation Report 2019 in an advisory vote
84.6%
11 Local currencies are converted into Swiss francs at the exchange rates stated in “Note 33 Currency translation rates” in the “Consolidated financial statements” section of our Annual Report 2020. 22 Excludes the
portion related to the legally required employer’s social security contributions. 33 As stated in “Group Executive Board” in the “Corporate governance” section of our Annual Report 2020, thirteen GEB members
were in office on 31 December 2020 and on 31 December 2019, although not identical composition. 44 Eleven BoD members were in office on 31 December 2020.
Advisory vote
Corporate governance and compensation | Compensation
Group CEO?
2019 LTIP awards at grant for GEB members active in March
The deferred compensation of the former Group CEO continues
2017, as well as the Chairman of the BoD’s unvested share
to vest in line with standard compensation award plan rules as
award, continues to be at risk and directly linked to the final
per the original vesting schedule. No accelerated payouts will be
resolution of the French cross-border matter. In addition, a
made. All deferred awards will continue to be subject to
malus clause allows the Compensation Committee to assess any
forfeiture and performance conditions.
new information that becomes available in the future and to
As previously disclosed, a portion of the former Group CEO’s
retrospectively reduce the 2019 LTIP award by up to the full
2019 Long-Term Incentive Plan (LTIP) award is additionally
amount if such new information would have impacted our
subject to forfeiture depending on the final outcome of the
compensation decision in 2019.
Impact of litigation matters on the LTIP
French cross-border matter.
How is litigation considered in the compensation process?
Litigation and regulatory matters, and their resolution and
remediation, are taken into consideration throughout the
compensation decision-making process. The Compensation
Committee distinguishes between current matters, where the
underlying issues are within the responsibility of management,
and legacy matters, where management is accountable for
resolving them but not responsible for the underlying issue.
Current matters have a direct impact on the performance
award pool, individual performance assessments and resulting
compensation decisions, as well as the payout of deferred
awards.
For legacy matters, the Compensation Committee seeks to
incentivize management to resolve these matters in the best
interest of shareholders and we hold management accountable
for the effective and efficient resolution of these matters.
Therefore, the performance and compensation assessment
reflects management’s responsibility for achieving a resolution
without creating an incentive to settle inappropriately or take
inappropriate risks on such matters. In addition, the use of
reported return on common equity tier 1 capital (RoCET1)
decisions.
supports the focus on ensuring the cost of litigation matters has
a direct impact on the compensation awarded and realized by
our most senior leaders, including the GEB.
What progress has been made on resolving the French
cross-border matter and how is this reflected in GEB
compensation?
In February 2019, UBS appealed the decision of the Court of
First Instance relating to the French cross-border matter. The
Court of Appeal has scheduled the case to be heard anew
between 8–24 March 2021. As with all litigation matters, the
final outcome of the French cross-border matter will impact the
RoCET1 metric, and therefore, the final payout of the LTIP
awards of all GEB members,
reflecting alignment with
shareholders.
Furthermore, as outlined
in our 2019
How is ESG considered in the compensation process?
ESG objectives
are
considered
in
the
compensation
determination process in objective setting, performance award
pool funding, performance assessment and compensation
In the performance award pool funding, ESG is reflected
through the qualitative assessment of
legal, compliance,
reputational and operational risks, as well as regulatory
compliance. In addition, ESG-related objectives have been
embedded
in our Pillars and Principles since they were
established in 2011 and are reflected in governance and risk
management,
talent management and diversity,
client
satisfaction, and corporate responsibility, including goals for
reducing our carbon footprint and corporate waste, as well as
progressing our philanthropic efforts. Achievements versus ESG-
related goals are part of
the qualitative performance
assessments and affect final compensation decisions.
Therefore, ESG
is taken
into consideration when the
Compensation Committee assesses not only what results were
achieved, but also how they were achieved.
218
219
219
Corporate governance and compensation Advisory vote
Corporate governance and compensation | Compensation
Compensation-related proposals for 2021
At the 2021 AGM, we will ask our shareholders to vote on the
variable compensation for the GEB for 2020, the fixed
compensation for the GEB for 2022 and the compensation for
the BoD from the 2021 AGM to the 2022 AGM.
In addition, we will also ask shareholders for an advisory vote
on our Compensation Report, which describes our
compensation policy, including framework and governance.
The table below outlines our compensation proposals,
including supporting rationales, that we plan to submit to the
2021 AGM for binding votes (in line with the Swiss Ordinance
against Excessive Compensation in Listed Stock Corporations
and our Articles of Association (AoA)).
Compensation-related proposals for binding votes at the 2021 AGM
Item
Proposal
Rationale
GEB variable
compensation
The Board of Directors proposes an
aggregate amount of variable
compensation of CHF 85,000,000
for the members of the GEB for the
2020 financial year.
GEB fixed
compensation
BoD
compensation
The Board of Directors proposes a
maximum aggregate amount of
fixed compensation of
CHF 33,000,000 for the members
of the GEB for the 2022 financial
year.
The Board of Directors proposes a
maximum aggregate amount of
compensation of CHF 13,000,000
for the members of the Board of
Directors for the period from the
2021 AGM to the 2022 AGM.
The proposed amount reflects our strong financial performance despite the uncertainties caused by
the COVID-19 pandemic. For 2020, although business performance was strong, we remain
committed to moderation in performance-related pay. The GEB performance award pool, which
includes the Group CEOs’ performance awards and is part of the Group pool, increased 1% on a
per capita basis and 16% overall compared with 2018 (and +18% per capita and +21% overall
compared with 2019). This reflects a smaller increase in executive compensation compared with the
overall pool development in 2020.
The proposed amount for 2022 is unchanged from the previous year, reflecting unchanged base
salaries for the Group CEO and other GEB members. Since the budget is a maximum spend, we
include a reserve to maintain flexibility in light of evolving EU regulations, Brexit effects, competitive
considerations for potential additional RBAs, and potential changes in GEB composition or GEB
roles, as well as other factors (e.g., changes in FX rates or benefits).
The proposed amount is unchanged compared with the previous period. The amount includes the
Chairman’s compensation, which is unchanged since it was reduced by CHF 0.8 million effective
from the 2019 AGM, as well as fees for the independent BoD members, which are also unchanged
since the reduction effective from the 2020 AGM.
220
220
Advisory vote
Corporate governance and compensation | Compensation
Compensation-related proposals for 2021
In addition, we will also ask shareholders for an advisory vote
on our Compensation Report, which describes our
At the 2021 AGM, we will ask our shareholders to vote on the
compensation policy, including framework and governance.
variable compensation for the GEB for 2020, the fixed
The table below outlines our compensation proposals,
compensation for the GEB for 2022 and the compensation for
including supporting rationales, that we plan to submit to the
the BoD from the 2021 AGM to the 2022 AGM.
2021 AGM for binding votes (in line with the Swiss Ordinance
against Excessive Compensation in Listed Stock Corporations
and our Articles of Association (AoA)).
Compensation-related proposals for binding votes at the 2021 AGM
Item
Proposal
Rationale
GEB variable
compensation
The Board of Directors proposes an
The proposed amount reflects our strong financial performance despite the uncertainties caused by
aggregate amount of variable
the COVID-19 pandemic. For 2020, although business performance was strong, we remain
compensation of CHF 85,000,000
committed to moderation in performance-related pay. The GEB performance award pool, which
for the members of the GEB for the
includes the Group CEOs’ performance awards and is part of the Group pool, increased 1% on a
2020 financial year.
per capita basis and 16% overall compared with 2018 (and +18% per capita and +21% overall
compared with 2019). This reflects a smaller increase in executive compensation compared with the
overall pool development in 2020.
GEB fixed
The Board of Directors proposes a
The proposed amount for 2022 is unchanged from the previous year, reflecting unchanged base
compensation
maximum aggregate amount of
salaries for the Group CEO and other GEB members. Since the budget is a maximum spend, we
fixed compensation of
include a reserve to maintain flexibility in light of evolving EU regulations, Brexit effects, competitive
CHF 33,000,000 for the members
considerations for potential additional RBAs, and potential changes in GEB composition or GEB
of the GEB for the 2022 financial
roles, as well as other factors (e.g., changes in FX rates or benefits).
year.
BoD
The Board of Directors proposes a
The proposed amount is unchanged compared with the previous period. The amount includes the
compensation
maximum aggregate amount of
Chairman’s compensation, which is unchanged since it was reduced by CHF 0.8 million effective
compensation of CHF 13,000,000
from the 2019 AGM, as well as fees for the independent BoD members, which are also unchanged
for the members of the Board of
since the reduction effective from the 2020 AGM.
Directors for the period from the
2021 AGM to the 2022 AGM.
Compensation philosophy and governance
Our compensation philosophy
Total Reward Principles
Our compensation philosophy is to align the interests of our
employees with those of our investors and clients, building on
our three keys to success: our Pillars, Principles and Behaviors.
Our Total Reward Principles establish a framework for balancing
sustainable performance and supporting growth ambitions and
appropriate risk-taking, with a focus on conduct and sound risk
management practices.
Our compensation approach is aligned with our strategic
priorities and encourages our employees to focus on clients,
create sustainable value, deliver on growth ambitions and
achieve
reward
the highest performance standards. We
behaviors that help build and protect the firm’s reputation,
specifically integrity, collaboration and challenge. Compensation
for each employee is based on individual, team, business division
and Group performance, within the context of the markets in
which we operate.
Total Reward Principles
Our Total Reward Principles apply to all employees worldwide, but may vary in certain locations according to local legal requirements
and regulations. The table below provides a summary of our Total Reward Principles.
Attract and retain a diverse, talented workforce We provide pay that is fair, reflecting equal treatment of employees, appropriately balanced between
fixed and variable elements, competitive in the market, and delivered over an appropriate period.
Foster effective individual performance
management and communication
Thorough evaluation of individual performance and adherence to our Behaviors, combined with
effective communication, aims to ensure there is a direct connection between achieving business
objectives and compensation across the firm.
Align reward with sustainable performance, as
well as supporting our growth ambitions
We embrace a culture of diversity, inclusiveness and collaboration. Our approach to compensation
fosters engagement among employees and serves to align their long-term interests with those of
clients and stakeholders.
Support appropriate and controlled risk-taking
Compensation is structured such that employees behave in a manner consistent with the firm’s risk
framework and tolerance, thereby protecting our capital and reputation and enhancing the quality of
our financial results in line with what our stakeholders expect from us.
Our Total Reward approach
At UBS, we apply a holistic Total Reward approach, generally
consisting of fixed compensation (base salary and role-based
allowances,
if applicable), performance awards, pension
contributions and benefits. Our Total Reward approach is
structured to support sustainable results and growth ambitions.
For employees whose total compensation exceeds certain
levels, performance awards are delivered in a combination of
cash and deferred contingent capital awards and deferred
equity-based awards.
A substantial portion of performance awards is deferred and
vests over a five-year period (or longer for certain regulated
employees). This deferral approach supports alignment of
employee and investor interests, our capital base and the
creation of sustainable shareholder value.
› Refer to the “Compensation elements for all employees” section
of this report for more information
Total Reward
Total compensation
Performance award
Deferred Contingent Capital Plan
Deferred equity-based awards:
– Long-Term Incentive Plan
(GEB, GMDs, Group or Divisional
Vice Chair role holders)
– Equity Ownership Plan
(all other employees, as applicable)
Base salary /
fixed
compensation
Cash
Note: illustrative
Pension
and
benefits
m
r
e
t
-
r
e
g
n
o
L
-
r
e
t
r
o
h
S
m
r
e
t
220
221
221
Corporate governance and compensation Advisory vote
Corporate governance and compensation | Compensation
The Compensation Committee is required to meet at least
four times each year. During 2020, the Compensation
Committee held seven meetings, with a participation rate of
100%. In addition, three ad hoc calls took place. All meetings
were held in the presence of the Chairman and most were
attended by the Group CEO and external advisors. Individuals,
including the Chairman and the Group CEO, are not permitted
to attend a meeting or participate in a discussion on their own
performance and compensation.
to
reports
After the meetings, the Chair of the Compensation
Committee
the Compensation
the BoD on
Committee’s activities and discussions and, if necessary, submits
proposals
full BoD. Compensation
Committee meeting minutes are also sent to all members of the
BoD.
for approval by
the
On 31 December 2020, the members of the Compensation
Committee were Julie Richardson (Chair), Reto Francioni, Dieter
Wemmer and Jeanette Wong.
External advisors
The Compensation Committee may retain external advisors to
support it in fulfilling its duties. In 2020, HCM International Ltd.
(HCM) provided independent advice on compensation matters.
HCM holds no other mandates with UBS. Additionally, Willis
Towers Watson provided the Compensation Committee with
data on market trends and pay levels. Various subsidiaries of
Willis Towers Watson provide similar information to Human
Resources in relation to compensation for employees. Willis
Towers Watson holds no other compensation-related mandates
with UBS.
The Risk Committee’s role in compensation
The Risk Committee, a committee of the BoD, works closely with
the Compensation Committee to ensure that our compensation
approach reflects proper risk management and control. It
supervises and sets appropriate risk management and risk
control principles and is regularly briefed on how risk is factored
into the compensation process. It also monitors the involvement
of Group Risk Control and Compliance and Operational Risk in
compensation and
the
compensation process.
risk-related aspects of
reviews
› Refer to ubs.com/governance for more information
Compensation governance
Board of Directors and Compensation Committee
is ultimately
responsible
strategy proposed by
for approving
the
The BoD
compensation
the Compensation
Committee, which determines compensation-related matters in
line with the principles set forth in the AoA.
As determined in the AoA and the firm’s Organization
Regulations, the Compensation Committee supports the BoD
with its duties to set guidelines on compensation and benefits,
to approve certain compensation, and to scrutinize executive
compensation. Responsible for governance and oversight of our
compensation process and practices (such as the alignment
between pay and performance and ensuring our compensation
system does not encourage inappropriate risk-taking), the
Compensation Committee consists of four independent BoD
members elected annually by the shareholders at the AGM.
Annually, and on behalf of the BoD, the Compensation
Committee:
– reviews our Total Reward Principles;
– reviews and approves the compensation framework design;
– reviews performance award funding throughout the year and
proposes the final performance award pool for BoD approval;
– with the Group CEO, reviews performance targets and
performance assessments and proposes base salaries and
annual performance awards for the other GEB members to
the BoD, which approves the total compensation of each GEB
member;
– with the Chairman, establishes performance targets for the
Group CEO, evaluates the Group CEO’s performance and
proposes compensation to the BoD accordingly;
– approves the total compensation for the Chairman;
total
– with
the Chairman, proposes
individual
the
independent BoD members for BoD
compensation of
approval;
– with the BoD, proposes the maximum aggregate amounts of
BoD and GEB compensation for approval at the AGM;
– approves remuneration
/ fee frameworks for external
supervisory board members of Significant Group Entities and
periodically reviews remuneration / fee frameworks for
external supervisory board members of Significant Regional
Entities; and
– proposes for BoD approval the compensation report and
approves any material public disclosures on compensation.
222
222
Advisory vote
Corporate governance and compensation | Compensation
Compensation governance
Compensation Committee 2020 / 2021 key activities and timeline
April
July
Sept¹
Oct
Dec¹
Jan
Feb
Board of Directors and Compensation Committee
The Compensation Committee is required to meet at least
SSttrraatteeggyy,, ppoolliiccyy aanndd ggoovveerrnnaannccee
Total Reward Principles
The BoD
is ultimately
responsible
for approving
the
Committee held seven meetings, with a participation rate of
Compensation disclosure and stakeholder communication matters
compensation
strategy proposed by
the Compensation
100%. In addition, three ad hoc calls took place. All meetings
Committee, which determines compensation-related matters in
were held in the presence of the Chairman and most were
line with the principles set forth in the AoA.
attended by the Group CEO and external advisors. Individuals,
AGM reward-related items
Compensation Committee governance
As determined in the AoA and the firm’s Organization
including the Chairman and the Group CEO, are not permitted
AAnnnnuuaall ccoommppeennssaattiioonn rreevviieeww
Regulations, the Compensation Committee supports the BoD
to attend a meeting or participate in a discussion on their own
Accruals and full-year forecast of the performance award pool funding
four times each year. During 2020, the Compensation
Three-year strategic plan on variable compensation
Performance targets and performance assessment of the Group CEO and GEB members
Group CEO and GEB members’ salaries and individual performance awards
Update on market practice, trends and peer group matters
Pay for performance, including governance on certain higher-paid employees, and
non-standard compensation arrangements
Board of Directors remuneration
CCoommppeennssaattiioonn ffrraammeewwoorrkk
Compensation framework and deferred compensation matters
member;
data on market trends and pay levels. Various subsidiaries of
The table below provides an overview of compensation governance by specific role.
RRiisskk aanndd rreegguullaattoorryy
Risk management in the compensation approach and joint meeting with
BoD Risk Committee
Regulatory activities impacting employees and engagement with regulators
11 The Compensation Committee held two meetings in September 2020 and two meetings in December 2020.
Compensation governance
Recipients
Compensation recommendations proposed by
Approved by
Chairman of the BoD
Chairperson of the Compensation Committee
Compensation Committee1
Independent BoD members
(remuneration system and fees)
Compensation Committee and Chairman of the BoD
BoD1
Group CEO
Compensation Committee and Chairman of the BoD
Other GEB members
Compensation Committee and Group CEO
BoD1
BoD1
Key Risk Takers (KRTs) /
(senior) employees
Respective GEB member and functional management
team
Individual compensation for KRTs and senior employees:
Group CEO
11 Aggregate variable compensation and maximum aggregate amount of fixed compensation for the GEB, as well as aggregate remuneration for the BoD, are subject to shareholder approval.
with its duties to set guidelines on compensation and benefits,
performance and compensation.
to approve certain compensation, and to scrutinize executive
After the meetings, the Chair of the Compensation
compensation. Responsible for governance and oversight of our
Committee
reports
to
the BoD on
the Compensation
compensation process and practices (such as the alignment
Committee’s activities and discussions and, if necessary, submits
between pay and performance and ensuring our compensation
proposals
for approval by
the
full BoD. Compensation
system does not encourage inappropriate risk-taking), the
Committee meeting minutes are also sent to all members of the
Compensation Committee consists of four independent BoD
BoD.
members elected annually by the shareholders at the AGM.
On 31 December 2020, the members of the Compensation
Annually, and on behalf of the BoD, the Compensation
Committee were Julie Richardson (Chair), Reto Francioni, Dieter
Committee:
– reviews our Total Reward Principles;
Wemmer and Jeanette Wong.
– reviews and approves the compensation framework design;
External advisors
– reviews performance award funding throughout the year and
proposes the final performance award pool for BoD approval;
The Compensation Committee may retain external advisors to
– with the Group CEO, reviews performance targets and
support it in fulfilling its duties. In 2020, HCM International Ltd.
performance assessments and proposes base salaries and
(HCM) provided independent advice on compensation matters.
annual performance awards for the other GEB members to
HCM holds no other mandates with UBS. Additionally, Willis
the BoD, which approves the total compensation of each GEB
Towers Watson provided the Compensation Committee with
– with the Chairman, establishes performance targets for the
Willis Towers Watson provide similar information to Human
Group CEO, evaluates the Group CEO’s performance and
Resources in relation to compensation for employees. Willis
proposes compensation to the BoD accordingly;
Towers Watson holds no other compensation-related mandates
– approves the total compensation for the Chairman;
with UBS.
– with
the Chairman, proposes
the
total
individual
compensation of
independent BoD members for BoD
The Risk Committee’s role in compensation
approval;
– with the BoD, proposes the maximum aggregate amounts of
The Risk Committee, a committee of the BoD, works closely with
BoD and GEB compensation for approval at the AGM;
the Compensation Committee to ensure that our compensation
– approves remuneration
/ fee frameworks for external
approach reflects proper risk management and control. It
supervisory board members of Significant Group Entities and
supervises and sets appropriate risk management and risk
periodically reviews remuneration / fee frameworks for
control principles and is regularly briefed on how risk is factored
external supervisory board members of Significant Regional
into the compensation process. It also monitors the involvement
Entities; and
of Group Risk Control and Compliance and Operational Risk in
– proposes for BoD approval the compensation report and
compensation and
reviews
risk-related aspects of
the
approves any material public disclosures on compensation.
compensation process.
› Refer to ubs.com/governance for more information
222
223
223
Corporate governance and compensation Advisory vote
Corporate governance and compensation | Compensation
Environmental, Social and Governance at UBS
In 2020, UBS continued to enhance its position as a leader in
sustainable finance and to fulfill its ambitions of being a
recognized innovator and thought leader in philanthropy, an
industry leader in sustainable business practices and an employer
of choice.
An important part of our sustainable activities includes
engagement in client philanthropy. We offer clients expert
advice, carefully selected programs
from UBS Optimus
Foundation, and innovative social financing mechanisms, such as
development impact bonds.
Last year, we again gained industry recognition for our
commitment to improving performance under ESG criteria and
for our efforts in offering clients world-class expertise and
sustainable products. For the sixth year running, we were named
the best performer in the Diversified Financial Services and
Capital Markets Industry of the Dow Jones Sustainability Indices
(the DJSI), the most widely recognized corporate sustainability
rating. MSCI ESG Research maintained our rating at AA and CDP
moved UBS up into its top ranking, the A List.
We support clients’ sustainability efforts through thought
leadership,
innovation and partnerships, and we strive to
incorporate ESG factors into the products and services we provide.
We measure our culture-building progress through regular
employee surveys. We have an ongoing focus on inclusive
leadership and in 2020, our in-house UBS University further
updated its curriculum to emphasize development of skills
needed for the future and personal growth for all employees.
The table below summarizes our key achievements.
› Refer to “Our focus on sustainability,” “Employees” and
“Society” in the “How we create value for our stakeholders”
section of our Annual Report 2020 for more information
› Refer to ubs.com/gri for more information about ESG-related
topics
What we achieved in 2020
Serving clients’ sustainable
finance needs
- USD 793 billion in core sustainable investment assets (62% increase)
- USD 6.9 billion directed in SDG-related impact investments
- USD 15.3 billion in Climate Aware strategies
- 33 green, social and sustainability bond transactions supported
- 100% of assets of UBS retirement savings funds converted into sustainable investments (~USD 9 billion)
Transitioning to a low-carbon
economy
- 1.9% share of carbon-related assets on banking balance sheet
- USD 161 billion climate-related sustainable investment assets (49% increase)
- 49 oil & gas and utilities companies were actively engaged on climate topics
- 100% of our electricity consumption sourced from renewable sources
Addressing societal challenges
- USD 168 million in donations raised by UBS Optimus Foundation (74% increase)
Shaping a high-performing
organization
Leader in key sustainability
ratings
- USD 30 million committed to COVID-19-related aid projects supporting the communities
- 519,534 beneficiaries reached through strategic community affairs activities
- 3.7 million vulnerable people received support thanks to UBS Optimus Foundation
- 26% of Directors and above are women
- 20.7% of UK / 19.5% of US employees are from underrepresented ethnicities at Director level and above
- EQUAL-SALARY certification for equal pay practices in Switzerland, the US, the UK, Hong Kong and Singapore
-
Industry group leader (Dow Jones Sustainability Indices)
- Climate A List (CDP)
- AA rating (MSCI)
-
Included in Top 50 World’s Most Attractive Employers (Universum)
› Refer to the “Banking on sustainability” section of the Sustainability Report 2020, available from 11 March 2021 under “Annual reporting“
at ubs.com/investors, for more information
ESG in the compensation determination process
ESG objectives are considered in the compensation determination
process in objective setting, performance award pool funding,
performance assessment and compensation decisions.
At the beginning of the year, objectives related to Group,
business divisions, Pillars, Principles and Behaviors are set. ESG-
related objectives have been embedded in our Pillars and
Principles since they were established in 2011. This long-term
focus on ESG topics is reflected in the achievements outlined
above. To maintain the focus on these important ESG topics, our
Group CEO and other GEB members have specific ESG-aligned
goals under Pillars and Principles, including governance and risk
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talent management and diversity,
client
management,
satisfaction, and corporate responsibility. These include goals for
reducing our carbon footprint and corporate waste, as well as
for
Therefore,
achievements versus ESG-related goals are part of the qualitative
performance assessments and affect
final compensation
decisions.
philanthropic
progressing
efforts.
our
In the performance award pool funding, ESG is reflected
legal, compliance,
through the qualitative assessment of
reputational and operational risks, as well as regulatory
compliance. Therefore, ESG is taken into consideration when the
Compensation Committee assesses not only what results were
achieved but also how they were achieved.
Advisory vote
Corporate governance and compensation | Compensation
Environmental, Social and Governance at UBS
Our commitment to pay fairness, diversity, equity and
inclusion
We pay for performance, and a strong commitment to pay
fairness is embedded in our compensation policies. We conduct
both internal and independent external reviews aiming to ensure
that all employees are paid fairly and to address any unexplained
gaps. In 2020, UBS was certified by the EQUAL-SALARY
Foundation for its equal pay practices in Switzerland, the US, the
UK, Hong Kong and Singapore. These certifications are
testament
opportunity
environment.
our well-established
equal
to
Our commitment to pay fairness is further demonstrated by
in
the successful completion of the equal pay analysis
Switzerland as required by the newly introduced Swiss Federal
Act on Gender Equality. We had already completed this
important analysis by the end of the first year of the three-year
regulatory implementation period and the results confirm that
we are fully compliant with Swiss equal pay standards. The
analysis found that our statistical wage difference in Switzerland
is only 0.6% and thus significantly below the 5% regulatory
requirement. This achievement also reflects our ongoing efforts
to address any unexplained pay gaps as we uncover them. Ernst
& Young provided assurance regarding the analysis and affirmed
that we comply with the applicable legal requirements for each
legal entity in Switzerland.
We are committed to ensuring a workplace where employees
are fairly treated, with equal employment and advancement
opportunities for all. We do not tolerate harassment of any kind.
Our global measures include employee and line manager
training, specialist expertise in handling concerns, and a global
employee hotline. An internal anti-harassment officer appointed
by the Group Head Human Resources provides an independent
view of the firm’s various processes and procedures to prevent
harassment and sexual misconduct.
In a global business such as ours, a diverse workforce is a
competitive advantage. Our strategy is to continuously shape a
diverse and inclusive organization that is innovative, provides
outstanding service to our clients, offers equal opportunities for
In 2020, UBS continued to enhance its position as a leader in
An important part of our sustainable activities includes
sustainable finance and to fulfill its ambitions of being a
engagement in client philanthropy. We offer clients expert
recognized innovator and thought leader in philanthropy, an
advice, carefully selected programs
from UBS Optimus
industry leader in sustainable business practices and an employer
Foundation, and innovative social financing mechanisms, such as
of choice.
development impact bonds.
Last year, we again gained industry recognition for our
We measure our culture-building progress through regular
commitment to improving performance under ESG criteria and
employee surveys. We have an ongoing focus on inclusive
for our efforts in offering clients world-class expertise and
leadership and in 2020, our in-house UBS University further
sustainable products. For the sixth year running, we were named
updated its curriculum to emphasize development of skills
the best performer in the Diversified Financial Services and
needed for the future and personal growth for all employees.
Capital Markets Industry of the Dow Jones Sustainability Indices
The table below summarizes our key achievements.
(the DJSI), the most widely recognized corporate sustainability
rating. MSCI ESG Research maintained our rating at AA and CDP
› Refer to “Our focus on sustainability,” “Employees” and
“Society” in the “How we create value for our stakeholders”
moved UBS up into its top ranking, the A List.
We support clients’ sustainability efforts through thought
leadership,
innovation and partnerships, and we strive to
topics
incorporate ESG factors into the products and services we provide.
section of our Annual Report 2020 for more information
› Refer to ubs.com/gri for more information about ESG-related
What we achieved in 2020
finance needs
Serving clients’ sustainable
- USD 793 billion in core sustainable investment assets (62% increase)
- USD 6.9 billion directed in SDG-related impact investments
- USD 15.3 billion in Climate Aware strategies
- 33 green, social and sustainability bond transactions supported
- 100% of assets of UBS retirement savings funds converted into sustainable investments (~USD 9 billion)
Transitioning to a low-carbon
- 1.9% share of carbon-related assets on banking balance sheet
economy
- USD 161 billion climate-related sustainable investment assets (49% increase)
- 49 oil & gas and utilities companies were actively engaged on climate topics
- 100% of our electricity consumption sourced from renewable sources
Addressing societal challenges
- USD 168 million in donations raised by UBS Optimus Foundation (74% increase)
- USD 30 million committed to COVID-19-related aid projects supporting the communities
- 519,534 beneficiaries reached through strategic community affairs activities
- 3.7 million vulnerable people received support thanks to UBS Optimus Foundation
Shaping a high-performing
- 26% of Directors and above are women
- 20.7% of UK / 19.5% of US employees are from underrepresented ethnicities at Director level and above
- EQUAL-SALARY certification for equal pay practices in Switzerland, the US, the UK, Hong Kong and Singapore
organization
ratings
Leader in key sustainability
-
Industry group leader (Dow Jones Sustainability Indices)
- Climate A List (CDP)
- AA rating (MSCI)
-
Included in Top 50 World’s Most Attractive Employers (Universum)
› Refer to the “Banking on sustainability” section of the Sustainability Report 2020, available from 11 March 2021 under “Annual reporting“
at ubs.com/investors, for more information
ESG in the compensation determination process
management,
talent management and diversity,
client
satisfaction, and corporate responsibility. These include goals for
ESG objectives are considered in the compensation determination
reducing our carbon footprint and corporate waste, as well as
process in objective setting, performance award pool funding,
for
progressing
our
philanthropic
efforts.
Therefore,
performance assessment and compensation decisions.
achievements versus ESG-related goals are part of the qualitative
At the beginning of the year, objectives related to Group,
performance assessments and affect
final compensation
business divisions, Pillars, Principles and Behaviors are set. ESG-
decisions.
related objectives have been embedded in our Pillars and
In the performance award pool funding, ESG is reflected
Principles since they were established in 2011. This long-term
through the qualitative assessment of
legal, compliance,
focus on ESG topics is reflected in the achievements outlined
reputational and operational risks, as well as regulatory
above. To maintain the focus on these important ESG topics, our
compliance. Therefore, ESG is taken into consideration when the
Group CEO and other GEB members have specific ESG-aligned
Compensation Committee assesses not only what results were
goals under Pillars and Principles, including governance and risk
achieved but also how they were achieved.
all and is a great place to work for everyone. Our broad
approach focuses on gender, race, ethnicity, LGBTQ+, age,
disability, and mental health, among other aspects, with
inclusive leadership playing an important role. Increasing gender
and ethnic diversity are our highest near-term strategic diversity,
equity and inclusion priorities.
We take a multi-faceted approach to increasing our ethnic
diversity, including setting aspirational ethnicity targets in
locations such as the US and UK. We have a global framework
and drive our initiatives regionally, supported by our recruitment,
training and employee network organizations, in particular. Our
multi-cultural employee networks play an integral part in
building a more ethnically inclusive culture across UBS, and a
new firm-wide network of more than 140 Diversity & Inclusion
Ambassadors provide employee advice and coaching.
Pay equity is not the same as gender pay gap, which looks at
the average pay for all women versus all men. Our gender pay
gap reflects a representation gap brought about by having
unequal numbers of men and women at each level, with a
greater proportion of men in more senior positions.
We seek to hire, promote and retain more women across the
firm, aspiring to increase the percentage of women at Director
level and above to 30% by 2025. At the end of 2020, 26.0% of
all employees in roles at Director level and above were women,
up from 25.2% in 2019, and we are on track to achieve our
target.
Addressing gender representation is a priority we share with
many other organizations, in both financial services and other
sectors. To share best practices, learn from peers and receive
feedback, we take an active role in initiatives such as the
Bloomberg Gender-Equality Index and the DJSI, where we
maintain top ratings.
› Refer to ubs.com/diversity for additional information about our
priorities, commitments and progress, and the Sustainability
Report 2020, available from 11 March 2021 under “Annual
reporting” at ubs.com/investors, for our management practices
and detailed employee data, including gender- and region-
specific data
› Refer to "Employees" in the "How we create value for our
stakeholders" section of our Annual Report 2020 for more
information.
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Corporate governance and compensation Advisory vote
Corporate governance and compensation | Compensation
Performance award pool funding
on
focuses
philosophy
compensation
balancing
Our
performance with appropriate risk-taking and retaining talented
employees. We reduce our overall performance award funding
percentage as financial performance increases. In years of strong
financial performance, this prevents excessive compensation and
results in an increased proportion of profit before performance
award available for distribution to shareholders or growing the
Group’s capital. In years where performance declines, the
performance award pool will generally decrease; however, the
funding percentage may increase.
and
division
business
performance,
Our performance award pool funding framework is based on
including
Group
achievement against defined performance measures.
In
assessing performance, we also consider industry peers, market
competitiveness of our results and pay position, as well as
progress against our strategic objectives, including returns,
capital growth, risk-weighted assets and cost efficiency. We look
at the firm’s risk profile and culture, the extent to which
operational risks and audit issues have been identified and
resolved, and the success of risk reduction initiatives. The
funding for Group Functions
linked to overall Group
performance and reflects headcount, workforce location and
is
service
assessments
demographics. For each functional area, quantitative and
qualitative
risk
evaluate
management and financial achievements. Our decisions also
balance consideration of financial performance with a range of
qualitative
risk
management, litigation, regulatory costs, the effect of changes
in financial accounting standards, capital returns and relative
total shareholder return.
including ESG,
impact of
factors,
quality,
the
Before making its final recommendation to the BoD, the
Compensation Committee considers the CEO’s proposals and
can apply a positive or negative discretionary adjustment to the
performance award pool.
When considering the above proposals and factors, over the
past eight years the Compensation Committee has applied
discretionary adjustments to the performance award pool,
resulting in an average 3% downward adjustment over the past
eight years with the largest negative adjustment made for the
2020 pool.
› Refer to “2020 Group performance outcomes” in the “Group
compensation” section of this report
› Refer to the “Group performance” section of our Annual Report
2020 for more information about our results
Performance award pool funding process – illustrative overview
Financial
performance
Risk
adjustment
1
2
Risk-adjusted
business
division
performance
award pool
Business
division
financial
performance
Quantitative and qualitative adjustments
3
Business
division
measures
Qualitative,
risk and
regulatory
assessment
Relative
performance
versus peers
Market
position
and trends
Consultation of
Group CEO with
the business
division Presidents
Compensation
Committee / BoD
governance and
decision
4
5
Recommended
business
division
performance
award pools
Final
Group
performance
award pool
1
2
3
4
5
Business division
financial performance
The funding process begins with business division financial performance, which may be adjusted for items that are not reflective of
the underlying business division performance.
Risk-adjusted business
division performance
award pool
Predetermined business division-specific funding rates are applied to risk-adjusted performance, incorporating market,
credit, liquidity and operational (including conduct) risk.
Business division measures
Each business division is assessed based on specific measures (e.g., net new money growth rate, return on attributed equity).
Qualitative, risk and
regulatory assessment
Qualitative (e.g., quality of earnings, ESG factors), risk (e.g., legal, compliance, reputational and operational risk) and regulatory
compliance assessments support alignment to our Total Reward Principles.
Relative performance
versus peers
Market position
and trends
Performance is assessed relative to our peers, including financial performance, returns and relative total shareholder return.
Market intelligence from external advisors helps assess the competitiveness of our pay levels and compensation structure.
It also provides a prospective view of market trends in terms of absolute compensation levels, compensation framework and
industry practice.
Recommended business
division performance
award pools
The business division performance award pool determination process is based on quantitative and qualitative assessments,
resulting in a recommendation from the Group CEO (in consultation with the GEB) to the Compensation Committee
for consideration.
Final Group performance
award pool
The Compensation Committee considers the Group CEO’s recommendation in the context of the factors outlined above and verifies
it is in line with our strategy and our Total Reward Principles to create sustainable shareholder value and support our growth
ambitions. The Committee may alter the recommendations of the Group CEO (upward or downward, including recommending
no funding) before making its fi nal recommendation to the BoD.
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Advisory vote
Corporate governance and compensation | Compensation
Performance award pool funding
Our
compensation
philosophy
focuses
on
balancing
demographics. For each functional area, quantitative and
performance with appropriate risk-taking and retaining talented
qualitative
assessments
evaluate
service
quality,
risk
employees. We reduce our overall performance award funding
management and financial achievements. Our decisions also
percentage as financial performance increases. In years of strong
balance consideration of financial performance with a range of
financial performance, this prevents excessive compensation and
qualitative
factors,
including ESG,
the
impact of
risk
results in an increased proportion of profit before performance
management, litigation, regulatory costs, the effect of changes
award available for distribution to shareholders or growing the
in financial accounting standards, capital returns and relative
Group’s capital. In years where performance declines, the
total shareholder return.
performance award pool will generally decrease; however, the
Before making its final recommendation to the BoD, the
funding percentage may increase.
Compensation Committee considers the CEO’s proposals and
Our performance award pool funding framework is based on
can apply a positive or negative discretionary adjustment to the
Group
and
business
division
performance,
including
performance award pool.
achievement against defined performance measures.
In
When considering the above proposals and factors, over the
assessing performance, we also consider industry peers, market
past eight years the Compensation Committee has applied
competitiveness of our results and pay position, as well as
discretionary adjustments to the performance award pool,
progress against our strategic objectives, including returns,
resulting in an average 3% downward adjustment over the past
capital growth, risk-weighted assets and cost efficiency. We look
eight years with the largest negative adjustment made for the
at the firm’s risk profile and culture, the extent to which
2020 pool.
operational risks and audit issues have been identified and
› Refer to “2020 Group performance outcomes” in the “Group
resolved, and the success of risk reduction initiatives. The
compensation” section of this report
funding for Group Functions
is
linked to overall Group
› Refer to the “Group performance” section of our Annual Report
performance and reflects headcount, workforce location and
2020 for more information about our results
Performance award pool funding process – illustrative overview
Compensation for GEB members
GEB compensation framework
In 2020, we made no changes to our GEB compensation
illustrates the compensation
framework. The chart below
elements, pay mix and key features for GEB members. Of the
annual performance awards, 20% is paid in the form of cash
and 80% is deferred over a period of five years,1 with 50% of
the annual performance awards granted under the LTIP and
30% under the DCCP.
› Refer to “Our deferred compensation plans” in the “Group
compensation” section of this report for more information
2020 compensation framework for GEB members (illustrative example)
GEB¹
DCCP
30%
LTIP
50%
three-year
performance
period
~17%
Key features
– Notional additional tier 1 (AT1) instruments
– 30% of the performance award is granted under the DCCP
– Award vests in year 5 after grant year, subject to a write-down if a viability event occurs or the
CET1 capital ratio falls below 10% (i.e., a trigger event)
30%
– Award is subject to 20% forfeiture for each financial year that UBS does not achieve a reported
Group profit before tax, adjusted for disclosed items generally not representative of underlying
business performance
– Notional interest payments (granted where applicable regulations permit) will be made annually,
subject to review and confirmation by the firm
– Award is subject to employment conditions and harmful acts provisions
~17%
– Notional shares
– 50% of the performance award is granted under the LTIP
– Award vests in equal installments in years 3, 4 and 5 after grant year, depending on the
achievement of RoCET1 and rTSR measured over a three-year performance period2
– Dividend equivalents (granted where applicable regulations permit) are subject to the same terms
~17%
as the underlying LTIP award
– Award is subject to employment conditions and harmful acts provisions
– 20% of the performance award is paid out in cash3
Cash
20%
Base
salary4
2020
20%
2021
grant
year
year 1 year 2 year 3 year 4 year 5
11 Senior Management Functions Holders (SMFs) have extended deferral periods, with the deferred performance awards vesting no faster than pro rata between years 3 and 7. SMFs and Material Risk Takers (MRTs)
have an additional 12-month blocking period on their awards post vest. 22 Due to regulatory requirements, LTIP awards granted to UK MRTs and SMFs will be subject to an additional non-financial conduct-related
metric with a downward adjustment of up to 100% of the entire award. 33 SMFs and MRTs receive 50% in the form of immediately vested shares which are blocked for 12 months. 44 May include role-based
allowances in line with market practice and regulatory requirements.
Pay-for-performance safeguards for GEB members
Performance
award caps
Delivery and
deferral
– Cap on total GEB performance award pool (2.5% of profit before tax)1
– Caps on individual performance awards (for the Group CEO capped at five times the fixed compensation and at seven times for the other
GEB members)
– Cap of 20% of performance award in cash
– 80% of performance awards are at risk of forfeiture
– Long-term deferral over five years (or longer for certain regulated GEB members)
– Alignment with shareholders (through the LTIP) and bondholders (through the DCCP)
– Final payout of equity-based LTIP award (50% of performance award) subject to absolute and relative performance conditions (three-year
Contract
terms
Other
safeguards
performance period)
– No severance terms
– Six-month notice period
– Share ownership requirements
– No hedging allowed
11 The Compensation Committee may consider adjustments to profit for items that are not reflective of underlying performance.
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Corporate governance and compensation
Advisory vote
Corporate governance and compensation | Compensation
GEB share ownership requirements
To align the interests of GEB members with those of our
shareholders and to demonstrate personal commitment to the
firm, we require the Group CEO and the other GEB members to
hold a substantial number of UBS shares. GEB members must
build up their minimum shareholding within five years from their
appointment and retain it throughout their tenure. The total
number of UBS shares held by a GEB member consists of any
vested or unvested shares and any privately held shares. GEB
Share ownership requirements
members may not sell any UBS shares before they reach the
minimum ownership thresholds mentioned below. At the end of
2020, all GEB members met their share ownership requirements,
except for those appointed within the last four years, who still
have time to build up and meet the required share ownership.
As of 31 December 2020, our GEB members held shares with
an aggregate value of approximately USD 160 million
demonstrating their commitment to our strategy and alignment
with shareholders.
Group CEO
min. 1,000,000 shares
Other GEB members
min. 500,000 shares
Must be built up within five years from their appointment and retained throughout
their tenure.
GEB base salary and role-based allowance
Each GEB member receives a fixed base salary, which is reviewed
annually by the Compensation Committee. The 2020 annual
base salary for the Group CEO role was CHF 2.5 million and has
remained unchanged since 2011. The other GEB members each
received a base salary of CHF 1.5 million (or local currency
equivalent), also unchanged since 2011.
In 2020, two GEB members were considered Material Risk
Takers (MRTs), including one UK Senior Management Function
(SMF), for UK / EU entities due to their impact on those entities,
regardless of personal domicile. Base salary and role-based
allowances are considered fixed compensation.
At the AGM, shareholders are asked to approve the
maximum aggregate amount of fixed compensation for GEB
members for the following financial year. The amount requested
includes a reserve to consider potential future changes in GEB
composition or role changes, and potential additional role-based
allowances.
› Refer to the “Supplemental information” section of this report
for more information about MRTs and SMFs
› Refer to the “Shareholder engagement and say on pay” section
of this report for more information about the AGM vote on
fixed compensation for the GEB
Caps on the GEB performance award pool
The size of the GEB performance award pool may not exceed
2.5% of the Group profit before tax. This limits the overall GEB
compensation based on the firm’s profitability.
For 2020, the Group’s profit before tax was USD 8.2 billion
and the total GEB performance award pool was CHF 85.0
million. The GEB performance award pool as a percentage of
Group profit before tax was 1.1%, well below the 2.5% cap.
In line with the individual compensation caps on the
proportion of fixed pay to variable pay for all GEB members
(introduced in 2013), the Group CEO’s granted performance
award is capped at five times his fixed compensation. Granted
performance awards of other GEB members are capped at seven
times their fixed compensation (or two times for GEB members
who are also MRTs). For 2020, performance awards granted to
GEB members and the Group CEO were, on average, 3.1 times
their fixed compensation
awards, benefits and contributions to retirement benefit plans).
(excluding one-time replacement
› Refer to “Performance award pool funding” in the
“Compensation philosophy and governance” section of this
report for more information
GEB employment contracts and severance terms
GEB members’ employment contracts do not include severance
terms or supplementary pension plan contributions and are
subject to a notice period of at least six months. A GEB member
leaving UBS before the end of a performance year may be
considered for a performance award. Such awards are subject to
approval by the BoD, and ultimately by the shareholders at the
AGM.
Benchmarking for GEB members
When recommending performance awards for the Group CEO
and the other GEB members, the Compensation Committee
reviews the respective total compensation for each role against a
financial industry peer group. The peer group is selected based
on comparability of their size, business mix, geographic presence
and the extent to which they compete with us for talent. The
Compensation Committee considers our peers’ strategies,
practices and pay levels, as well as their regulatory environment;
it also periodically reviews other firms’ pay levels or practices,
including both financial and non-financial sector peers as
applicable. The total compensation for a GEB member’s specific
role considers the compensation paid by our peers for a
comparable role and performance within the context of our
The Compensation Committee
organizational
periodically reviews and approves the peer group composition.
profile.
The table below presents the composition of our peer group
as approved by the Compensation Committee for the 2020
performance year.
Bank of America
Goldman Sachs
Barclays
BlackRock
BNP Paribas
Citigroup
Credit Suisse
HSBC
JPMorgan Chase
Julius Baer
Morgan Stanley
Standard Chartered
Deutsche Bank
State Street
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Advisory vote
Corporate governance and compensation | Compensation
GEB share ownership requirements
members may not sell any UBS shares before they reach the
minimum ownership thresholds mentioned below. At the end of
GEB performance assessments
sustainable
talent management, diversity and
The Compensation Committee exercises its judgment with
respect to the performance achieved relative to the prior year,
the strategic plan and competitors, and considers the Group
CEO’s
recommendations. The Compensation Committee’s
recommendations are subject to approval by the BoD.
well as ESG-related aspects, such as client satisfaction, employee
satisfaction,
inclusion,
sustainable business practice,
finance, and
philanthropy. These factors are reflected in our Pillars, Principles
and Behaviors and assessed qualitatively based on the five-point
scale outlined on the next page. The total of all weighted
achievement scores across financial measures and qualitative
goals cannot exceed 100%.
We assess each GEB member’s performance against several
financial targets and qualitative goals related to our Pillars,
Principles and Behaviors.
Financial measures are assessed quantitatively based on full-
year financial results versus predetermined targets and plan
figures. The financial targets for the Group CEO are based on
overall Group performance. For the other GEB members, such
targets are based on both Group performance and the
performance of the relevant business division and / or region;
those who lead a Group function are assessed on the
performance of the Group and the function they oversee. A
significant weight is given to Group measures for all GEB
members.
To align the interests of GEB members with those of our
2020, all GEB members met their share ownership requirements,
shareholders and to demonstrate personal commitment to the
except for those appointed within the last four years, who still
firm, we require the Group CEO and the other GEB members to
have time to build up and meet the required share ownership.
hold a substantial number of UBS shares. GEB members must
As of 31 December 2020, our GEB members held shares with
build up their minimum shareholding within five years from their
an aggregate value of approximately USD 160 million
appointment and retain it throughout their tenure. The total
demonstrating their commitment to our strategy and alignment
number of UBS shares held by a GEB member consists of any
with shareholders.
vested or unvested shares and any privately held shares. GEB
Share ownership requirements
Group CEO
min. 1,000,000 shares
Must be built up within five years from their appointment and retained throughout
Other GEB members
min. 500,000 shares
their tenure.
GEB base salary and role-based allowance
their fixed compensation
(excluding one-time replacement
awards, benefits and contributions to retirement benefit plans).
Each GEB member receives a fixed base salary, which is reviewed
annually by the Compensation Committee. The 2020 annual
› Refer to “Performance award pool funding” in the
“Compensation philosophy and governance” section of this
base salary for the Group CEO role was CHF 2.5 million and has
report for more information
remained unchanged since 2011. The other GEB members each
received a base salary of CHF 1.5 million (or local currency
GEB employment contracts and severance terms
equivalent), also unchanged since 2011.
In 2020, two GEB members were considered Material Risk
GEB members’ employment contracts do not include severance
Takers (MRTs), including one UK Senior Management Function
terms or supplementary pension plan contributions and are
(SMF), for UK / EU entities due to their impact on those entities,
subject to a notice period of at least six months. A GEB member
regardless of personal domicile. Base salary and role-based
leaving UBS before the end of a performance year may be
allowances are considered fixed compensation.
considered for a performance award. Such awards are subject to
At the AGM, shareholders are asked to approve the
approval by the BoD, and ultimately by the shareholders at the
maximum aggregate amount of fixed compensation for GEB
AGM.
members for the following financial year. The amount requested
includes a reserve to consider potential future changes in GEB
Benchmarking for GEB members
composition or role changes, and potential additional role-based
allowances.
› Refer to the “Supplemental information” section of this report
for more information about MRTs and SMFs
› Refer to the “Shareholder engagement and say on pay” section
of this report for more information about the AGM vote on
fixed compensation for the GEB
Caps on the GEB performance award pool
When recommending performance awards for the Group CEO
and the other GEB members, the Compensation Committee
reviews the respective total compensation for each role against a
financial industry peer group. The peer group is selected based
on comparability of their size, business mix, geographic presence
and the extent to which they compete with us for talent. The
Compensation Committee considers our peers’ strategies,
practices and pay levels, as well as their regulatory environment;
it also periodically reviews other firms’ pay levels or practices,
The size of the GEB performance award pool may not exceed
including both financial and non-financial sector peers as
2.5% of the Group profit before tax. This limits the overall GEB
applicable. The total compensation for a GEB member’s specific
compensation based on the firm’s profitability.
role considers the compensation paid by our peers for a
For 2020, the Group’s profit before tax was USD 8.2 billion
comparable role and performance within the context of our
and the total GEB performance award pool was CHF 85.0
organizational
profile.
The Compensation Committee
million. The GEB performance award pool as a percentage of
periodically reviews and approves the peer group composition.
Group profit before tax was 1.1%, well below the 2.5% cap.
The table below presents the composition of our peer group
In line with the individual compensation caps on the
as approved by the Compensation Committee for the 2020
proportion of fixed pay to variable pay for all GEB members
performance year.
(introduced in 2013), the Group CEO’s granted performance
award is capped at five times his fixed compensation. Granted
performance awards of other GEB members are capped at seven
Barclays
times their fixed compensation (or two times for GEB members
BlackRock
who are also MRTs). For 2020, performance awards granted to
GEB members and the Group CEO were, on average, 3.1 times
Bank of America
Goldman Sachs
BNP Paribas
Citigroup
Credit Suisse
Deutsche Bank
HSBC
JPMorgan Chase
Julius Baer
Morgan Stanley
Standard Chartered
State Street
To judge the quality and sustainability of the financial results,
the Compensation Committee considers a range of qualitative
factors, including relative performance and market conditions, as
The Compensation Committee, and then the full BoD, follows
a similar process for the Group CEO, except that the
recommendation comes from the Chairman of the BoD.
Overview of the GEB compensation determination process
The compensation for the Group CEO and the other GEB members is governed by a rigorous process under Compensation
Committee and BoD oversight. The chart below shows how compensation for all GEB members is determined.
The Compensation Committee is involved at all stages of the performance and total compensation decision-making process for the Group CEO
and the other GEB members subject to review and approval by the BoD.
Objective setting
Performance assessment
Delivery and deferral
Financial results are assessed quantitatively.
Achievements related to Pillars and Principles
(including ESG-related goals) and Behaviors are
assessed qualitatively, based on a five-point scale.
Financial targets are based on Group, business
division, regional and / or functional performance
measures (depending on the role of the GEB
member).
Financial targets and qualitative goals related
to Pillars, Principles (including ESG-related goals)
and Behaviors reflect the strategic priorities
determined by the Chairman and the BoD.
Financial targets weight: 70%
Pillars and Principles weight: 15%
Behaviors weight: 15%
– Together with the BoD Chairman, establishes
the objectives for the Group CEO.
– Together with the Group CEO, reviews objec-
– Together with the BoD Chairman, evaluates the
performance of the Group CEO and determines
the overall assessment.
tives for the other GEB members.
– Together with the Group CEO, reviews the
performance assessment for the other
GEB members.
When determining actual pay levels, the
Compensation Committee considers several
relevant parameters, which may include:
– financial performance;
– performance assessment;
– relative performance versus peers; and
– compensation market benchmarks and trends.
Final compensation decisions for GEB members
consider the Group CEO’s recommendation
(the Group CEO makes no recommendation on
his own awards).
Proposes to the BoD:
– together with the BoD Chairman, the total
individual compensation for the Group CEO; and
– together with the Group CEO, the total individual
compensation for the other GEB members.
The final decision on the aggregate amount is
subject to shareholder approval.
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228
229
229
Corporate governance and compensation
Advisory vote
Corporate governance and compensation | Compensation
Overview of performance assessment measures
The table below presents the measures for the 2020 performance assessment of the Group CEO and GEB members.
Group measures
A range of financial measures, including reported Group profit before tax, reported Group cost / income
ratio, reported return on CET1 capital, and CET1 ratios.
Business division, regional and / or
functional measures (if applicable)1
Business division and / or regional measures vary, but may include: net new money, assets under
management, divisional / regional profit before tax, cost / income ratio, net new business volume growth
rate, net interest margin, RoAE, RWA and LRD.
Specific functional measures for Group Functions GEB members.
Pillars
Capital strength
Establishes and maintains capital. Generates efficiencies and deploys our capital more efficiently and
effectively.
Efficiency and effectiveness
Contributes to the development and execution of our strategy and success across all business lines,
functions and regions. Considers market conditions, relative performance and other factors.
Risk management
Reinforces risk management through an effective control framework. Captures the degree to which risks
are self-identified and focuses on the individual’s success to comply with all the various regulatory
frameworks. Helps shape the firm’s relationship with regulators through ongoing dialog.
Principles
Client focus
Excellence
Sustainable performance
Increases client satisfaction and maintains high levels of satisfaction over the long term. This includes
promoting collaboration across business divisions and fostering the delivery of the whole firm to our clients.
Human Capital Management – develops successors for the most senior positions, facilitates talent mobility
within the firm and promotes a diverse and inclusive workforce.
Product and Service Quality – strives for excellence in the products and services we offer to our clients.
Brand and Reputation – protects the Group’s reputation and reinforces full compliance with our standards
and principles. Culture and Growth – takes a personal role in making Principles and Behaviors front and
center of the business requirements, including a focus on sustainable growth. Furthermore, this measure
evaluates the individual’s ability to reinforce a culture of accountability and responsibility, demonstrating
our commitment to be a responsible corporate citizen and reinforcing our collective behaviors.
Behaviors
Integrity
Is responsible and accountable for what they say and do; cares about clients, investors, and colleagues; acts
as a role model.
Collaboration
Challenge
Places the interests of clients and the firm before their own and those of their business; works across the
firm; respects and values diverse perspectives.
Encourages self and others to constructively challenge the status quo; learns from mistakes and
experiences.
11 Both regional and functional measures may include qualitative measures.
Qualitative performance assessment scale
The table below presents the five-point scale used for the qualitative assessment of the performance against goals related to Pillars,
Principles and Behaviors.
Below expectations
Met most expectations
Met expectations
Exceeded expectations
Performance failed to meet
the standard expected,
immediate improvement
required
Reasonable performance, but
not consistently up to the
standard expected, some
improvement required
Performance consistently
met standard expected,
may have exceeded a few
goals
Performance exceeded most
expectations on a regular
basis
Significantly exceeded
expectations
Consistently achieved truly
exceptional results
Achievement score: 0–30% Achievement score: 40%
Achievement score: 60% Achievement score: 80%
Achievement score: 100%
230
230
Advisory vote
2020 performance for the Group CEOs
2020.
provide
sustainable
To
transparent
talent management, diversity and
Effective 1 November 2020, Sergio Ermotti was succeeded by
Ralph Hamers as Group CEO, but continued in an advisory
capacity on the GEB until the end of his employment on
31 December
shareholders with
information, we disclose
comprehensive and
performance assessments for both Sergio Ermotti and Ralph
Hamers, as well as their awarded compensation and realized pay
for 2020.
and the BoD. To judge the quality and sustainability of the
financial results, the Compensation Committee considers in the
qualitative goal assessment a range of additional factors
including relative performance and market conditions, as well as
ESG-related aspects, such as client satisfaction, employee
satisfaction,
inclusion,
sustainable business practice,
finance, and
philanthropy.
Corporate governance and compensation | Compensation
Overview of performance assessment measures
The table below presents the measures for the 2020 performance assessment of the Group CEO and GEB members.
Group measures
A range of financial measures, including reported Group profit before tax, reported Group cost / income
ratio, reported return on CET1 capital, and CET1 ratios.
Business division, regional and / or
functional measures (if applicable)1
Business division and / or regional measures vary, but may include: net new money, assets under
management, divisional / regional profit before tax, cost / income ratio, net new business volume growth
rate, net interest margin, RoAE, RWA and LRD.
Specific functional measures for Group Functions GEB members.
Pillars
Capital strength
Establishes and maintains capital. Generates efficiencies and deploys our capital more efficiently and
effectively.
Efficiency and effectiveness
Contributes to the development and execution of our strategy and success across all business lines,
functions and regions. Considers market conditions, relative performance and other factors.
Risk management
Reinforces risk management through an effective control framework. Captures the degree to which risks
are self-identified and focuses on the individual’s success to comply with all the various regulatory
frameworks. Helps shape the firm’s relationship with regulators through ongoing dialog.
Principles
Client focus
Increases client satisfaction and maintains high levels of satisfaction over the long term. This includes
promoting collaboration across business divisions and fostering the delivery of the whole firm to our clients.
Excellence
Human Capital Management – develops successors for the most senior positions, facilitates talent mobility
within the firm and promotes a diverse and inclusive workforce.
Product and Service Quality – strives for excellence in the products and services we offer to our clients.
Sustainable performance
Brand and Reputation – protects the Group’s reputation and reinforces full compliance with our standards
and principles. Culture and Growth – takes a personal role in making Principles and Behaviors front and
center of the business requirements, including a focus on sustainable growth. Furthermore, this measure
evaluates the individual’s ability to reinforce a culture of accountability and responsibility, demonstrating
our commitment to be a responsible corporate citizen and reinforcing our collective behaviors.
Behaviors
Integrity
Is responsible and accountable for what they say and do; cares about clients, investors, and colleagues; acts
Collaboration
Places the interests of clients and the firm before their own and those of their business; works across the
firm; respects and values diverse perspectives.
Challenge
Encourages self and others to constructively challenge the status quo; learns from mistakes and
as a role model.
experiences.
11 Both regional and functional measures may include qualitative measures.
Qualitative performance assessment scale
The table below presents the five-point scale used for the qualitative assessment of the performance against goals related to Pillars,
Principles and Behaviors.
Below expectations
Met most expectations
Met expectations
Exceeded expectations
Significantly exceeded
expectations
Performance failed to meet
Reasonable performance, but
Performance consistently
Performance exceeded most
Consistently achieved truly
the standard expected,
immediate improvement
required
not consistently up to the
standard expected, some
improvement required
goals
met standard expected,
expectations on a regular
exceptional results
may have exceeded a few
basis
Achievement score: 0–30% Achievement score: 40%
Achievement score: 60% Achievement score: 80%
Achievement score: 100%
The performance awards for the Group CEOs are based on
the achievement of financial performance targets and qualitative
goal achievements relative to Pillars, Principles and Behaviors, as
described earlier in this section. These targets and goals were set
to reflect the strategic priorities determined by the Chairman
The Group CEOs’ performance awards are subject to
shareholder approval as part of the aggregate GEB 2020 variable
compensation.
› Refer to “Compensation framework for GEB members” in this
section of this report for more information
Performance assessment for Sergio Ermotti
The BoD recognizes that Sergio Ermotti successfully led UBS
through a very challenging year marked by the COVID-19
pandemic. Under his strong leadership, the Group demonstrated
during this global crisis the overall strength of its business
model, the stability and quality of its services and support
provided to clients, a strong culture and the ability to adapt to
changing circumstances. As a result, the firm was able to deliver
excellent financial results and achieve significant progress in key
strategic areas,
risk management, progressing
regulatory initiatives and collaboration across the firm.
including
The table below illustrates the assessment criteria used to
evaluate the achievements of Sergio Ermotti in 2020.
Financial performance
Weight
Performance measures
2020
target /
guidance
2020
results
Achieve-
ment2
Weighted
assess-
ment
2020 commentary
30%
Return on CET1 capital
16%1
17.4%
100%2
30%
20%
Group profit before tax
USD 6.3
billion
USD 8.2
billion
100%2
20%
10%
Cost / income ratio
75%1
73.3%
100%2,3
10%
10%
Capital management
10%
CET1 capital ratio
CET1 leverage ratio
Post-stress CET1 capital ratio
13.8%
3.85%
Achieved
100%2
100%2
100%2
13.0%
3.7%
Above
one-year
minimum
objective
The Group delivered an exceptionally strong
performance with a return on CET1 capital of
17.4%, up from 12.4% in 2019 and exceeding
the 2020 target and expectations.
The Group achieved a profit before tax of
USD 8.2 billion, significantly up from the
USD 5.6 billion in 2019 and exceeding the
2020 target.
Costs were effectively and prudently managed
despite the challenges resulting from the COVID-
19 pandemic, resulting in a cost / income ratio
of 73.3%, a
improvement
substantial
compared with 2019 and exceeding the target
for 2020.
UBS maintained a strong capital position
throughout the COVID-19 pandemic, enabling
delivery of our 2019 dividend, as well as building
a USD 2 billion
future share
reserve
repurchases.
for
CET1 capital ratio of 13.8% and CET1
leverage ratio of 3.85% were above targets.
11 The return on CET1 capital and cost / income ratio performance targets are set at a stretch-target level relative to the Group return on CET1 capital target range of 12–15% and the cost / income ratio target range
of 75–78% in the spirit of setting ambitious goals to reach a 100% performance achievement. 22 Achievement score capped at 100%. 33 For the assessment of the cost / income ratio, each 1% difference between
actual and target affects the score by 10%.
230
231
231
Corporate governance and compensation Advisory vote
Corporate governance and compensation | Compensation
Performance assessment for Sergio Ermotti (continued)
Qualitative goals
Weight
Performance
measures
Achieve-
ment
2020 commentary
Weighted
assess-
ment
15%
Pillars and
Principles
Exceeded
expectations
12%
(80%)
15%
Behaviors
Exceeded
expectations
12%
(80%)
Total weighted assessment
(maximum 100%)
94%
In 2020, Sergio Ermotti demonstrated his leadership strength and ability to manage the
firm through challenging periods. As a result, the Group showed exemplary resilience
and strong ability to respond to the COVID-19 challenges and was able to provide
excellent client service and deliver strong financial results.
Sergio Ermotti continued to invest significant efforts in preparing and positioning UBS
for the future, in particular through successful implementation of growth initiatives, a
positive momentum for stronger collaboration and leveraging of capabilities across the
Group, as well as important structural changes to simplify client delivery.
Sergio Ermotti continued his personal engagement with clients, thereby setting the tone
from the top for the rest of the organization. He focused the Group on further improving
client centricity and the client experience, and delivering excellent, uninterrupted
services.
Sergio Ermotti continued to be a strong leader in risk management and to drive effective
and sustainable progress on regulatory initiatives that further strengthened the Group’s risk
and control environment overall, which was positively acknowledged by core regulators.
Through 2020, Sergio Ermotti continued to support the positioning of the firm as a leader
in sustainability, including making sustainable investments the preferred solutions for
clients. These efforts were recognized externally through the nomination as industry
leader in the Dow Jones Sustainability Indices for the sixth consecutive year and
surpassing the 2022 target of directing USD 5 billion of client assets into impact
investments as per our commitment to the UN’s Sustainable Development Goals.
Sergio Ermotti also continued to focus the organization on the importance of diversity,
including ethnicity and female representation. Overall, UBS’s attractiveness as employer
remained high, retaining a Top 50 ranking in the World’s Most Attractive Employers
(Universum), as well as being recognized for its diversity and inclusion efforts. The excellent
results of the employee survey, including record levels of participation and pride in working
for UBS, confirm Sergio Ermotti’s positive impact on the firm’s culture and the effectiveness
of his leadership and his decisive actions in response to the COVID-19 pandemic.
Sergio Ermotti continued to be a role model for the UBS behaviors. In particular, he
steered the Group toward stronger collaboration and leveraging of synergies in the
interests of clients. He consistently set a strong tone from the top in encouraging
constructive challenge and displayed an unwavering commitment for continuous
improvements through questioning the status quo.
Sergio Ermotti was once again the most influential ambassador for the Group’s culture and
behavior programs.
In addition to Sergio Ermotti’s achievements in 2020 outlined in
the performance assessment table above, the BoD also
considered other factors, such as the positive relative and
absolute share price developments and his excellent contribution
in the Group CEO transition process.
The BoD approved the proposal by the Compensation
Committee to grant Sergio Ermotti a performance award of
CHF 10.5 million (down 7% compared with 2018 and up 8%
compared with 2019), resulting in a total compensation for
2020 of CHF 13.0 million (excluding benefits and contributions
to his retirement benefit plan).
The performance award will be delivered 20% (CHF 2.1
million) in cash and the remaining 80% (CHF 8.4 million) subject
to deferral and forfeiture provisions, as well as meeting
performance conditions over five years.
232
232
Advisory vote
Performance assessment for Ralph Hamers
Ralph Hamers
joined UBS on 1 September 2020 as the
designated Group CEO, the role he took over on 1 November
2020. This assessment covers his performance since joining UBS
but, in light of the short tenure, it is an abbreviated qualitative
assessment.
Ralph Hamers demonstrated great commitment and strong
engagement during the two months of the CEO transition
phase. He effectively leveraged this period to establish a strong
understanding of UBS and its strategy, culture, clients, products
and services, and employees.
Ralph Hamers decisively led UBS as Group CEO through the
fourth quarter and delivered very strong results, thereby
successfully completing the year and contributing to achieving
the best results for UBS in a decade. He set a strong tone from
the top, continuing to execute on the capital and risk objectives
of the firm.
Ralph Hamers has launched a number of strategic initiatives,
all with the aim of ensuring the continued long-term success of
UBS.
Furthermore, Ralph Hamers fully embraced UBS’s core
behavioral values and drove measures to improve collaboration,
ownership and accountability, as well as constructive challenge
across all levels.
Considering these strong achievements of Ralph Hamers in
his first year with UBS, the BoD approved the proposal by the
Compensation Committee to grant Ralph Hamers a performance
award of CHF 3.0 million, resulting in a total compensation for
2020 of CHF 3.8 million (excluding benefits and contributions to
his retirement benefit plan).
The performance award will be delivered 20% (CHF 0.6
million) in cash and the remaining 80% (CHF 2.4 million) subject
to deferral and forfeiture provisions, as well as meeting
performance conditions over five years.
Corporate governance and compensation | Compensation
Performance assessment for Sergio Ermotti (continued)
Qualitative goals
Weight
Performance
Achieve-
Weighted
2020 commentary
measures
ment
assess-
ment
15%
Pillars and
Principles
Exceeded
expectations
(80%)
12%
In 2020, Sergio Ermotti demonstrated his leadership strength and ability to manage the
firm through challenging periods. As a result, the Group showed exemplary resilience
and strong ability to respond to the COVID-19 challenges and was able to provide
excellent client service and deliver strong financial results.
Sergio Ermotti continued to invest significant efforts in preparing and positioning UBS
for the future, in particular through successful implementation of growth initiatives, a
positive momentum for stronger collaboration and leveraging of capabilities across the
Group, as well as important structural changes to simplify client delivery.
Sergio Ermotti continued his personal engagement with clients, thereby setting the tone
from the top for the rest of the organization. He focused the Group on further improving
client centricity and the client experience, and delivering excellent, uninterrupted
services.
Sergio Ermotti continued to be a strong leader in risk management and to drive effective
and sustainable progress on regulatory initiatives that further strengthened the Group’s risk
and control environment overall, which was positively acknowledged by core regulators.
Through 2020, Sergio Ermotti continued to support the positioning of the firm as a leader
in sustainability, including making sustainable investments the preferred solutions for
clients. These efforts were recognized externally through the nomination as industry
leader in the Dow Jones Sustainability Indices for the sixth consecutive year and
surpassing the 2022 target of directing USD 5 billion of client assets into impact
investments as per our commitment to the UN’s Sustainable Development Goals.
Sergio Ermotti also continued to focus the organization on the importance of diversity,
including ethnicity and female representation. Overall, UBS’s attractiveness as employer
remained high, retaining a Top 50 ranking in the World’s Most Attractive Employers
(Universum), as well as being recognized for its diversity and inclusion efforts. The excellent
results of the employee survey, including record levels of participation and pride in working
for UBS, confirm Sergio Ermotti’s positive impact on the firm’s culture and the effectiveness
of his leadership and his decisive actions in response to the COVID-19 pandemic.
15%
Behaviors
12%
Sergio Ermotti continued to be a role model for the UBS behaviors. In particular, he
Exceeded
expectations
(80%)
steered the Group toward stronger collaboration and leveraging of synergies in the
interests of clients. He consistently set a strong tone from the top in encouraging
constructive challenge and displayed an unwavering commitment for continuous
improvements through questioning the status quo.
Sergio Ermotti was once again the most influential ambassador for the Group’s culture and
behavior programs.
Total weighted assessment
94%
(maximum 100%)
In addition to Sergio Ermotti’s achievements in 2020 outlined in
compared with 2019), resulting in a total compensation for
the performance assessment table above, the BoD also
2020 of CHF 13.0 million (excluding benefits and contributions
considered other factors, such as the positive relative and
to his retirement benefit plan).
absolute share price developments and his excellent contribution
The performance award will be delivered 20% (CHF 2.1
in the Group CEO transition process.
million) in cash and the remaining 80% (CHF 8.4 million) subject
The BoD approved the proposal by the Compensation
to deferral and forfeiture provisions, as well as meeting
Committee to grant Sergio Ermotti a performance award of
CHF 10.5 million (down 7% compared with 2018 and up 8%
performance conditions over five years.
232
233
233
Corporate governance and compensation Advisory vote
Corporate governance and compensation | Compensation
2020 total compensation for the GEB members
The aggregate performance award pool for the GEB for 2020
was CHF 85.0 million (USD 90.7 million); on a per capita basis,
this reflects an increase of 1% compared with 2018, or 18%
compared with 2019. This is a smaller increase than the change
in the overall performance award pool of the firm, which
increased 6% compared with 2018, or 24% compared with
2019. Group profit before tax was USD 8.2 billion, up 36%
compared with 2018 and 46% compared with 2019.
At the 2021 AGM, shareholders will vote on the aggregate
2020 total variable compensation for the GEB in Swiss francs.
The tables below provide the awarded compensation for the
Group CEO and the GEB members in Swiss francs and, for
reference, the total amounts in US dollars for comparability with
financial performance. The individual variable performance
awards for each GEB member will only be confirmed upon
shareholder approval at the AGM.
The Compensation Committee has
that
performance conditions for all GEB members’ awards due to
vest in March 2021 have been satisfied and will therefore vest in
full.
confirmed
› Refer to “Provisions of the Articles of Association related to
compensation” in the “Supplemental Information” section of
this report for more information
Audited |
Total compensation for GEB members
CHF, except where indicated
USD (for reference)1
FFoorr tthhee
yyeeaarr
Base salary
Contribution
to retirement
benefit plans
Benefits2
TToottaall ffiixxeedd
ccoommppeennssaa--
ttiioonn
Performance
award
under LTIP4
Cash3
Performance
award
under
DCCP5
TToottaall
vvaarriiaabbllee
ccoommppeennssaa--
ttiioonn
TToottaall ffiixxeedd
aanndd vvaarrii--
aabbllee ccoomm--
ppeennssaattiioonn66
Total fixed
compensa-
tion
Total
variable
compensa-
tion
Total fixed
and vari-
able com-
pensation6
Highest Paid Executive (former Group CEO Sergio P. Ermotti)
2200220077
2,500,000
22,,882233,,224444
244,353
78,891
2,100,000
5,250,000
3,150,000
1100,,550000,,000000
1133,,332233,,224444
3,011,952
11,201,828
14,213,780
22001199
2,500,000
244,353
65,048
22,,880099,,440011
1,940,000
4,850,000
2,910,000
99,,770000,,000000
1122,,550099,,440011
Group CEO Ralph A.J.G. Hamers
22002200
833,333
62,124
314,260
11,,220099,,771177
600,000
1,500,000
900,000
33,,000000,,000000
44,,220099,,771177
1,290,576
3,200,522
4,491,098
Aggregate of all GEB members8,9,10,11,12
1,145,489
22002200
27,469,369
2,249,276
3300,,886644,,113355 16,625,062 42,874,938 25,500,000
8855,,000000,,000000
111155,,886644,,113355
32,927,117
90,681,465 123,608,582
22001199
28,169,646
2,333,935
1,350,439
3311,,885544,,002200 14,050,000 35,125,000 21,075,000
7700,,225500,,000000
110022,,110044,,002200
11 Swiss franc amounts have been translated into US dollars for reference at the 2020 performance award currency exchange rate of CHF / USD 1.0668. 22 All benefits are valued at market price. 33 For GEB
members who are also MRTs or SMFs, the cash portion includes blocked shares. 44 LTIP awards for performance year 2020 were awarded at a value of 65.9% of maximum which reflects our best estimate of the
fair value of the award. The maximum number of shares is determined by dividing the awarded amount by the estimated fair value of the award at grant, divided by CHF 13.810 or USD 15.411, the average closing
price of UBS shares over the last ten trading days leading up to and including the grant date. 55 The amounts reflect the amount of the notional additional tier 1 (AT1) capital instrument excluding future notional
interest. 66 Excludes the portion related to the legally required employer’s social security contributions for 2020 and 2019, which are estimated at grant at CHF 5,497,811 and CHF 4,969,844, respectively, of which
CHF 880,496 and CHF 797,938, respectively, are for the highest-paid GEB member. The legally required employees’ social security contributions are included in the amounts shown in the table above, as appropriate.
77 Reflects compensation for 12 months until the end of his GEB employment on 31 December 2020. 88 As stated in “Group Executive Board” in the “Corporate governance” section of our Annual Report 2020,
thirteen GEB members were in office on 31 December 2020 and on 31 December 2019, although not identical composition. 99 Includes compensation paid under employment contracts during notice periods for
GEB members who stepped down during the respective years. 1100 Includes compensation for newly appointed GEB members for their time in office as GEB members during the respective years. 1111 For 2020, Ralph
A.J.G. Hamers received a one-time replacement award of CHF 163,399. This replacement award is not included in the above table; including this, the 2020 total aggregate compensation of all GEB members is CHF
116,027,534. For 2019, Iqbal Khan received a one-time replacement award of CHF 8,053,022. This replacement award is not included in the above table; including this, the 2019 total aggregate compensation of all
GEB members is CHF 110,157,042. 1122 Base salary may include role-based allowances in line with market practice in response to regulatory requirements.
234
234
Advisory vote
Corporate governance and compensation | Compensation
2020 total compensation for the GEB members
Total realized compensation for the Group CEOs
2019. Group profit before tax was USD 8.2 billion, up 36%
awards for each GEB member will only be confirmed upon
Total realized pay for Sergio Ermotti
The realized compensation reflects the total amount paid out in
the year. It includes the base salary, cash performance award
payments, and all deferred performance awards vested in the
year. As such, realized pay is the natural culmination of awards
granted and approved by shareholders in previous years.
To illustrate the effect of our long-term deferral approach,
which has been in place since 2012, we disclose the annual
realized compensation of Sergio Ermotti and Ralph Hamers,
including a comparison with their total awarded compensation.
Total realized compensation vs awarded compensation for Sergio P. Ermotti¹
CHF
AAwwaarrddeedd
Total awarded
fixed and variable
compensation6
FFoorr tthhee yyeeaarr
13,000,000
22002200
12,200,000
22001199
13,800,000
22001188
22001177
13,900,000
13,400,000
22001166
14,000,000
22001155
22001144
10,900,000
10,400,000
22001133
22001122
8,600,000
11 Appointed on 24 September 2011 as Group CEO ad interim and confirmed on 15 November 2011. 22 Paid out based on the previous performance year. For 2012 this includes Cash Balance Plan installments
(discontinued in 2012). 33 Cash Balance Plan installments. For 2012, due to applicable UK FSA regulations, deferred cash includes blocked shares. 44 Excludes dividend / interest payments. 55 Includes all
installments paid out under the EOP, Senior Executive Equity Ownership Plan (SEEOP, discontinued in 2012) and Performance Equity Plan (PEP, discontinued in 2012). 66 Excludes contributions to retirement
benefit plans and benefits. Includes social security contributions paid by Sergio P. Ermotti but excludes the portion related to the legally required social security contributions paid by UBS.
RReeaalliizzeedd
TToottaall rreeaalliizzeedd
ffiixxeedd aanndd vvaarriiaabbllee
ccoommppeennssaattiioonn66
1111,,333344,,006611
11,403,741
11,926,563
6,451,043
5,167,128
3,518,440
4,410,658
3,273,245
3,606,400
Performance
award under
equity plans4,5
4,374,061
4,533,741
4,986,563
2,951,043
1,667,128
1,018,440
537,217
423,623
0
Performance
award under
DCCP4
2,520,000
2,370,000
2,440,000
0
0
0
0
0
0
Deferred cash
award3,4
0
0
0
0
0
0
373,441
349,622
553,200
Cash award2
1,940,000
2,000,000
2,000,000
1,000,000
1,000,000
0
1,000,000
0
553,2003
Base salary
2,500,000
2,500,000
2,500,000
2,500,000
2,500,000
2,500,000
2,500,000
2,500,000
2,500,000
The chart below further illustrates the effect of our deferral
approach over time. The bars for realized pay show which
components (base salary, cash, equity plans, or DCCP) deliver
the realized compensation in the year indicated and for which
year the respective component was initially awarded.
The bars for awarded compensation show the split between
fixed compensation (base salary) and variable compensation
(cash component and deferred awards) and highlight that a
significant portion of the variable compensation is deferred.
CHF million1
14.0
13.4
13.9
13.8
The aggregate performance award pool for the GEB for 2020
At the 2021 AGM, shareholders will vote on the aggregate
was CHF 85.0 million (USD 90.7 million); on a per capita basis,
2020 total variable compensation for the GEB in Swiss francs.
this reflects an increase of 1% compared with 2018, or 18%
The tables below provide the awarded compensation for the
compared with 2019. This is a smaller increase than the change
Group CEO and the GEB members in Swiss francs and, for
in the overall performance award pool of the firm, which
reference, the total amounts in US dollars for comparability with
increased 6% compared with 2018, or 24% compared with
financial performance. The individual variable performance
compared with 2018 and 46% compared with 2019.
shareholder approval at the AGM.
The Compensation Committee has
confirmed
that
performance conditions for all GEB members’ awards due to
› Refer to “Provisions of the Articles of Association related to
compensation” in the “Supplemental Information” section of
vest in March 2021 have been satisfied and will therefore vest in
this report for more information
full.
Audited |
Total compensation for GEB members
CHF, except where indicated
FFoorr tthhee
yyeeaarr
Contribution
to retirement
TToottaall ffiixxeedd
ccoommppeennssaa--
Performance
award
Base salary
benefit plans
Benefits2
ttiioonn
Cash3
under LTIP4
Performance
award
under
DCCP5
TToottaall
vvaarriiaabbllee
ccoommppeennssaa--
ttiioonn
TToottaall ffiixxeedd
aanndd vvaarrii--
aabbllee ccoomm--
ppeennssaattiioonn66
Total fixed
compensa-
tion
Total
variable
compensa-
tion
Total fixed
and vari-
able com-
pensation6
USD (for reference)1
Highest Paid Executive (former Group CEO Sergio P. Ermotti)
2200220077
22001199
2,500,000
2,500,000
244,353
244,353
78,891
65,048
22,,882233,,224444
2,100,000
5,250,000
3,150,000
1100,,550000,,000000
1133,,332233,,224444
3,011,952
11,201,828
14,213,780
22,,880099,,440011
1,940,000
4,850,000
2,910,000
99,,770000,,000000
1122,,550099,,440011
Group CEO Ralph A.J.G. Hamers
22002200
833,333
62,124
314,260
11,,220099,,771177
600,000
1,500,000
900,000
33,,000000,,000000
44,,220099,,771177
1,290,576
3,200,522
4,491,098
Aggregate of all GEB members8,9,10,11,12
22002200
22001199
27,469,369
2,249,276 1,145,489
3300,,886644,,113355 16,625,062 42,874,938 25,500,000
8855,,000000,,000000
111155,,886644,,113355
32,927,117
90,681,465 123,608,582
28,169,646
2,333,935 1,350,439
3311,,885544,,002200 14,050,000 35,125,000 21,075,000
7700,,225500,,000000
110022,,110044,,002200
11 Swiss franc amounts have been translated into US dollars for reference at the 2020 performance award currency exchange rate of CHF / USD 1.0668. 22 All benefits are valued at market price. 33 For GEB
members who are also MRTs or SMFs, the cash portion includes blocked shares. 44 LTIP awards for performance year 2020 were awarded at a value of 65.9% of maximum which reflects our best estimate of the
fair value of the award. The maximum number of shares is determined by dividing the awarded amount by the estimated fair value of the award at grant, divided by CHF 13.810 or USD 15.411, the average closing
price of UBS shares over the last ten trading days leading up to and including the grant date. 55 The amounts reflect the amount of the notional additional tier 1 (AT1) capital instrument excluding future notional
interest. 66 Excludes the portion related to the legally required employer’s social security contributions for 2020 and 2019, which are estimated at grant at CHF 5,497,811 and CHF 4,969,844, respectively, of which
CHF 880,496 and CHF 797,938, respectively, are for the highest-paid GEB member. The legally required employees’ social security contributions are included in the amounts shown in the table above, as appropriate.
77 Reflects compensation for 12 months until the end of his GEB employment on 31 December 2020. 88 As stated in “Group Executive Board” in the “Corporate governance” section of our Annual Report 2020,
thirteen GEB members were in office on 31 December 2020 and on 31 December 2019, although not identical composition. 99 Includes compensation paid under employment contracts during notice periods for
GEB members who stepped down during the respective years. 1100 Includes compensation for newly appointed GEB members for their time in office as GEB members during the respective years. 1111 For 2020, Ralph
A.J.G. Hamers received a one-time replacement award of CHF 163,399. This replacement award is not included in the above table; including this, the 2020 total aggregate compensation of all GEB members is CHF
116,027,534. For 2019, Iqbal Khan received a one-time replacement award of CHF 8,053,022. This replacement award is not included in the above table; including this, the 2019 total aggregate compensation of all
GEB members is CHF 110,157,042. 1122 Base salary may include role-based allowances in line with market practice in response to regulatory requirements.
Deferred
Deferred
Deferred
Deferred
8.6
Deferred
10.4
10.9
Deferred
Deferred
3.6
2011
Base
salary
2012
3.3
2011
2011
2013
Cash
Base
salary
Base
salary
13.0
12.2
11.4
2013
Deferred
Deferred
2015
2014
2013
11.3
2014
2016
2015
2014
11.9
2012
2014
2013
2012
6.5
2013
2012
2011
2016
Cash
4.4
2011
2013
2011
2014
3.5
2011
2015
Cash
Base
salary
Cash
Base
salary
5.2
2012
2011
2015
2016
Cash
2017
Cash
2018
Cash
2019
Base
salary
2017
Base
salary
2018
Base
salary
2019
Base
salary
2020
234
235
235
Awarded Realized
Awarded Realized
Awarded
Realized
Awarded
Realized
Awarded
Realized
Awarded
Realized
Awarded
Realized
Awarded
Realized
Awarded
Realized
2012
2013
2014
2015
2016
2017
2018
2019
2020
Base salary
Cash2
Equity plans3 vesting from previous years
DCCP vesting from previous years
11 Excludes contributions to retirement benefit plans and benefits. Includes social security contributions paid by Sergio P. Ermotti but excludes the portion related to the legally required social security contributions paid
by UBS. 22 Paid out based on the previous performance year. 2012, 2013 and 2014 include Cash Balance Plan installments. 33 Includes all installments paid out under respective EOP, SEEOP and PEP plans,
excludes dividend payments.
Corporate governance and compensation Advisory vote
Corporate governance and compensation | Compensation
Total realized pay for Ralph Hamers
Total realized compensation vs awarded compensation for Ralph A.J.G. Hamers
CHF
AAwwaarrddeedd
Total awarded
fixed and variable
compensation3, 4
FFoorr tthhee yyeeaarr
220022001
3,833,333
11 Includes compensation for 4 months as Ralph A.J.G. Hamers joined UBS on 1 September 2020. 22 Excludes dividend / interest payments. 33 Excludes contributions to retirement benefit plans and benefits.
Includes social security contributions paid by Ralph A.J.G. Hamers but excludes the portion related to the legally required social security contributions paid by UBS. 44 Excludes the one-time replacement award.
RReeaalliizzeedd
TToottaall rreeaalliizzeedd
ffiixxeedd aanndd vvaarriiaabbllee
ccoommppeennssaattiioonn
883333,,333333
Performance
award under
equity plans2
0
Performance
award under
DCCP2
0
Deferred cash
award2
0
Cash award
0
Base salary
833,333
236
236
Advisory vote
Corporate governance and compensation | Compensation
Total realized pay for Ralph Hamers
Total realized compensation vs awarded compensation for Ralph A.J.G. Hamers
CHF
FFoorr tthhee yyeeaarr
220022001
Base salary
Cash award
833,333
0
Deferred cash
award2
0
Performance
award under
equity plans2
0
Performance
award under
DCCP2
0
TToottaall rreeaalliizzeedd
Total awarded
ffiixxeedd aanndd vvaarriiaabbllee
fixed and variable
ccoommppeennssaattiioonn
compensation3, 4
883333,,333333
3,833,333
RReeaalliizzeedd
AAwwaarrddeedd
11 Includes compensation for 4 months as Ralph A.J.G. Hamers joined UBS on 1 September 2020. 22 Excludes dividend / interest payments. 33 Excludes contributions to retirement benefit plans and benefits.
Includes social security contributions paid by Ralph A.J.G. Hamers but excludes the portion related to the legally required social security contributions paid by UBS. 44 Excludes the one-time replacement award.
Group compensation
Compensation elements for all employees
All elements of pay are considered when making our
compensation decisions. We regularly review our principles and
compensation framework in order to remain competitive and
aligned with stakeholders. In 2020, we made no material
changes to our overall framework. We will continue to review
our approach to salaries and performance awards, considering
market developments, our performance and our commitment to
deliver sustainable returns to shareholders.
Base salary and role-based allowance
Employees’ fixed compensation (e.g., base salary) reflects their
level of skill, role and experience, as well as local market
practice. Base salaries are usually paid monthly or fortnightly, in
line with local market practice. We offer competitive base
salaries that reflect location, function and role. Salary increases
generally consider promotions, skill set, performance and overall
responsibility.
In addition to base salary, and as part of fixed compensation,
some employees may receive a role-based allowance. This
allowance is a shift in the compensation mix between fixed and
variable compensation, not an increase in total compensation. It
reflects the market value of a specific role and is fixed, non-
forfeitable compensation. Unlike salary, a role-based allowance
is paid only if the employee is in a specific role. Similar to
previous years, 2020 role-based allowances consisted of a cash
portion and, where applicable, a blocked UBS share award.
.
Pensions and benefits
location and are
We offer certain benefits for all employees, such as health
insurance and retirement benefits. These vary depending on the
for
employee’s
competitiveness. Pension contributions and pension plans also
vary in accordance with local requirements and market practice.
However, pension plan rules in any one location are generally
the same for all employees, including management.
reviewed periodically
GEB members’ pension contributions and benefits are in line
with local practices for other employees. There are no enhanced
or supplementary pension contributions for the GEB.
Performance award
Most of our employees are eligible for an annual performance
award. The level of this award, where applicable, generally
depends on the firm’s overall performance, the employee’s
business division, team and
individual performance, and
behavior, reflecting their overall contribution to the firm’s
results. These awards are
local
in
employment conditions and at the discretion of the firm.
line with applicable
In addition to the firm’s Pillars and Principles, Behaviors
related to integrity, collaboration and challenge are part of the
performance management approach. Therefore, when assessing
performance, we consider not only what was achieved but also
how it was achieved.
236
237
237
Corporate governance and compensation Advisory vote
Corporate governance and compensation | Compensation
Our deferred compensation plans
To reinforce our emphasis on sustainable performance and risk
management, and our focus on achieving growth ambitions, we
deliver part of our employees’ annual variable compensation
through deferred compensation plans. We are convinced that
our approach, with a single incentive decision and a deferral, is
simple, transparent and well suited to implementing our
compensation
sustainable
performance. This aligns the interests of our employees and
shareholders and appropriately links compensation to longer-
term sustainable performance.
philosophy
delivering
and
Our mandatory deferral approach applies to all employees
total
requirements or
regulatory-driven deferral
with
compensation greater than USD
/ CHF 300,000. Certain
regulated employees, such as SMFs and MRTs, are subject to
additional
(e.g., an additional non-financial
conduct-related performance metric under the LTIP, more
stringent deferral requirements, additional blocking periods). In
addition, SMFs and MRTs receive 50% of their cash portion in
the form of immediately vested shares, which are blocked for
12 months.
requirements
Variable compensation elements by employee category
The deferred amount increases at higher marginal rates in line
with the value of the performance award. The effective deferral
rate therefore depends on the amount of the performance
award and the amount of total compensation.
We believe our deferral regime has one of the longest vesting
periods in the industry. The average deferral period is 4.4 years
for GEB members, 4 years for GMDs and 3.5 years for
employees below GEB / GMD level. On an exceptional basis, we
may utilize alternative deferred compensation arrangements to
remain competitive in specific business areas.
To further promote sustainable performance, all of our
deferred compensation plans include malus conditions. These
enable the firm to reduce or fully forfeit unvested deferred
awards under certain circumstances, pursuant to performance
and harmful acts provisions. In addition, forfeiture is triggered in
most cases where employment has been terminated.
Our share delivery obligations related to notional share
awards are satisfied by delivering treasury shares to employees
at vesting.
› Refer to “Note 27 Employee benefits: variable compensation” in
the “Consolidated financial statements” section of our Annual
Report 2020 for more information
› Refer to the “Supplemental information” section of this report
for more information about MRTs and SMFs
Deferred compensation elements
Employee category
Cash
LTIP
EOP
DCCP
GEB, GMDs, Group or Divisional Vice Chair role holders
Asset Management GMDs
Employees subject to
mandatory deferral framework
All employees (except AM employees)
AM employees
1
1
1 AM GMDs and AM employees in investment areas receive AM EOP (notional funds) instead of EOP (notional shares) in order to align their compensation more closely with industry standards. AM employees
in non-investment areas receive both EOP and AM EOP in their plan mix.
Deferred compensation plans – key features
Delivery
Vesting period1
Performance conditions
– Notional shares (eligible for
– For GEB members, award vests in equal installments
LTIP
dividend equivalents2)
– Generally delivered as shares
in years 3, 4 and 5 after the grant year
– For GMDs and Divisional Vice Chair role holders,
award cliff-vests in year 3 after the grant year
– Achievement of RoCET1 and rTSR measured over a
three-year performance period starting with the
grant year
– Notional shares (eligible for
– Award vests 50% in year 2 and 50% in year 3 after
– For KRTs, Highly Paid Employees3, SMFs and certain
dividend equivalents2)
– Generally delivered as shares
the grant year
MRTs, the awards granted will only vest if the
Group performance condition (RoCET1) is met
EOP
For AM EOP:
– Notional funds (eligible for
dividend equivalents2)
– Generally delivered as cash
For AM EOP:
– For AM investment areas, award vests 40% in
year 2, 40% in year 3 and 20% in year 5 after the
grant year
– For AM non-investment areas, award vests 35% in
year 2, 35% in year 3 and 30% in year 5 after the
grant year
– For AM GMDs, award vests 50% in year 3 and 50%
in year 5 after the grant year
– Notional bonds (eligible for
– Award cliff-vests in year 5 after the grant year
DCCP
notional interest2)
– Settled as either a cash
payment or a perpetual,
marketable AT1 capital
instrument
– Awards are forfeited if a viability event occurs
– Awards are written down for GEB members if the
Group’s CET1 capital ratio falls below 10% and for
all other employees if it falls below 7%
– GEB members forfeit 20% of their award for each
year that UBS does not achieve a reported Group
profit before tax during the vesting period
11 Variations apply for regulated employees. 22 Excluding MRTs, who are ineligible to receive dividends, including dividend equivalents, as well as notional interest. 33 Employees with a total compensation exceeding
USD / CHF 2.5 million).
238
238
Advisory vote
Corporate governance and compensation | Compensation
Our deferred compensation plans
The deferred amount increases at higher marginal rates in line
with the value of the performance award. The effective deferral
Long-Term Incentive Plan
The LTIP is a mandatory deferral plan for senior leaders of the
Group (i.e., GEB members, GMDs and Group / Divisional Vice
Chair role holders). For the 2020 performance year, we granted
LTIP awards to 115 employees at a fair value of 65.9% of
maximum. The value was calculated by an independent third
party using a well-established valuation methodology.
The performance metrics of the equity-based LTIP awards are
average reported return on CET1 capital (RoCET1) and relative
total shareholder return (rTSR) over a three-year performance
period starting in the year of grant. Performance outcomes and
actual payout levels will be disclosed at the end of the
performance period.
The three-year average reported RoCET1 performance metric
reflects our strategic return ambitions:
–
–
–
the required RoCET1 performance for a maximum payout is
set at 18%, which represents a stretch objective relative to
our communicated ambitions;
the required performance threshold of 6% for the minimum
payout supports our focus on delivering sustainable results
and appropriate risk-taking; and
the linear payout design between threshold and maximum
level reflects our focus on sustainable performance, supports
our growth ambitions, and does not encourage excessive
risk-taking.
The rTSR performance metric over the three-year period further
aligns the interests of employees with shareholders:
– the metric compares the total shareholder return (TSR) of UBS
with the TSR of an index consisting of listed Global
Systemically Important Banks (G-SIBs) as determined by the
Financial Stability Board;
– the G-SIBs are independently defined and reflect companies
with a comparable risk profile and impact on the global
economy;
– the index, which includes publicly traded G-SIBs, is equal
weighted, calculated in Swiss francs and maintained by an
independent index provider to increase transparency and
ensure independence of the TSR calculation; and
– the payout interval of ±25 percentage points versus the index
performance demonstrates our ambition of delivering
attractive relative returns to shareholders. The linear payout
and the threshold level set below index performance further
support sustainability of results and prudent risk-taking.
Global Systemically Important Banks (G-SIBs) listed companies1
Agricultural Bank of China
Goldman Sachs
Santander
Bank of America
Groupe Crédit Agricole
Société Générale
Bank of China
HSBC
Standard Chartered
Bank of New York Mellon
ING Bank
State Street
Barclays
BNP Paribas
ICBC
Sumitomo Mitsui FG
JPMorgan Chase
Toronto-Dominion
China Construction Bank
Mitsubishi UFJ FG
UniCredit
Citigroup
Credit Suisse
Mizuho FG
Wells Fargo
Morgan Stanley
Deutsche Bank
Royal Bank of Canada
1 As of November 2020.
LTIP awards reflect the long-term focus of our compensation
framework. The final number of shares as determined at the end
of the three-year performance period will vest in three equal
installments
the
performance period for GEB members, and cliff-vest in the first
year following the performance period for GMDs and Group /
Divisional Vice Chair role holders (longer deferral periods may
apply for regulated employees).
in each of
three years
following
the
LTIP payout illustration
– The final number of notional
shares vesting will vary based on
the achievement versus the
performance metrics.
– Linear payout between threshold
and maximum performance.
– Vesting levels are a percentage of
the maximum opportunity of the
LTIP and cannot exceed 100%.
– Full forfeiture for performance
below the predefined threshold
levels.
– SMFs and UK MRTs are subject to
an additional non-financial metric
based on a conduct assessment.
Performance metric: average reported RoCET1 (50% of award)
Below threshold (<6%)
Threshold (6%) up to
maximum (18%)
Maximum and above (>18%)
Full forfeiture
Partial vest
(payout between 33% and <100%)
Full vest
Performance metric: rTSR vs G-SIBs index (50% of award)
Below threshold (<–25 pps)
Threshold (–25 pps) up to
maximum (+25 pps)
Maximum and above (>+25 pps)
Full forfeiture
Partial vest
(payout between 33% and <100%)
Full vest
239
239
To reinforce our emphasis on sustainable performance and risk
rate therefore depends on the amount of the performance
management, and our focus on achieving growth ambitions, we
award and the amount of total compensation.
deliver part of our employees’ annual variable compensation
We believe our deferral regime has one of the longest vesting
through deferred compensation plans. We are convinced that
periods in the industry. The average deferral period is 4.4 years
our approach, with a single incentive decision and a deferral, is
for GEB members, 4 years for GMDs and 3.5 years for
simple, transparent and well suited to implementing our
employees below GEB / GMD level. On an exceptional basis, we
compensation
philosophy
and
delivering
sustainable
may utilize alternative deferred compensation arrangements to
performance. This aligns the interests of our employees and
remain competitive in specific business areas.
shareholders and appropriately links compensation to longer-
To further promote sustainable performance, all of our
term sustainable performance.
deferred compensation plans include malus conditions. These
Our mandatory deferral approach applies to all employees
enable the firm to reduce or fully forfeit unvested deferred
with
regulatory-driven deferral
requirements or
total
awards under certain circumstances, pursuant to performance
compensation greater than USD
/ CHF 300,000. Certain
and harmful acts provisions. In addition, forfeiture is triggered in
regulated employees, such as SMFs and MRTs, are subject to
most cases where employment has been terminated.
additional
requirements
(e.g., an additional non-financial
Our share delivery obligations related to notional share
conduct-related performance metric under the LTIP, more
awards are satisfied by delivering treasury shares to employees
stringent deferral requirements, additional blocking periods). In
at vesting.
addition, SMFs and MRTs receive 50% of their cash portion in
the form of immediately vested shares, which are blocked for
› Refer to “Note 27 Employee benefits: variable compensation” in
the “Consolidated financial statements” section of our Annual
12 months.
Report 2020 for more information
› Refer to the “Supplemental information” section of this report
for more information about MRTs and SMFs
Variable compensation elements by employee category
Deferred compensation plans – key features
Delivery
Vesting period1
Performance conditions
LTIP
– Notional shares (eligible for
– For GEB members, award vests in equal installments
– Achievement of RoCET1 and rTSR measured over a
dividend equivalents2)
in years 3, 4 and 5 after the grant year
three-year performance period starting with the
– Generally delivered as shares
– For GMDs and Divisional Vice Chair role holders,
grant year
award cliff-vests in year 3 after the grant year
– Notional shares (eligible for
– Award vests 50% in year 2 and 50% in year 3 after
– For KRTs, Highly Paid Employees3, SMFs and certain
MRTs, the awards granted will only vest if the
Group performance condition (RoCET1) is met
dividend equivalents2)
– Generally delivered as shares
the grant year
For AM EOP:
For AM EOP:
EOP
– Notional funds (eligible for
dividend equivalents2)
– For AM investment areas, award vests 40% in
year 2, 40% in year 3 and 20% in year 5 after the
– Generally delivered as cash
– For AM non-investment areas, award vests 35% in
year 2, 35% in year 3 and 30% in year 5 after the
grant year
grant year
– For AM GMDs, award vests 50% in year 3 and 50%
in year 5 after the grant year
– Notional bonds (eligible for
– Award cliff-vests in year 5 after the grant year
– Awards are forfeited if a viability event occurs
– Awards are written down for GEB members if the
Group’s CET1 capital ratio falls below 10% and for
all other employees if it falls below 7%
– GEB members forfeit 20% of their award for each
year that UBS does not achieve a reported Group
profit before tax during the vesting period
11 Variations apply for regulated employees. 22 Excluding MRTs, who are ineligible to receive dividends, including dividend equivalents, as well as notional interest. 33 Employees with a total compensation exceeding
DCCP
notional interest2)
– Settled as either a cash
payment or a perpetual,
marketable AT1 capital
instrument
USD / CHF 2.5 million).
238
Corporate governance and compensation Advisory vote
Corporate governance and compensation | Compensation
Equity Ownership Plan
Deferred Contingent Capital Plan
The EOP is the deferred compensation plan for employees who
are subject to deferral requirements but do not receive LTIP. For
the 2020 performance year, we granted EOP awards to 3,934
employees.
Delivering sustainable performance is a key objective for UBS,
and we therefore link EOP award vesting with minimum
performance thresholds over a multi-year time horizon. Our EOP
awards have no upward leverage, and this approach promotes
sustainable performance by establishing a minimum level of
performance, below which awards are subject to full or partial
forfeiture.
EOP awards vest in equal installments in years 2 and 3 after
the grant year. For KRTs (including Highly Paid Employees) and
SMFs, EOP awards granted will vest based on the average
reported RoCET1 over the applicable performance period. If the
Group performance condition RoCET1 outcome is equal to or
above the threshold, the award will vest in full; if it is between
0% and the threshold, the award will vest on a linear basis
between 0% and 100%. If the outcome is 0% or negative, the
installment will be fully forfeited. The Compensation Committee
retains discretion to adjust the award if the performance metric
does not reflect a fair measure of performance.
Asset Management employees receive some or all of their
EOP in the form of notional funds under the AM EOP to align
their compensation more closely with industry standards. This
plan is generally delivered in cash at vesting.
The Compensation Committee sets the minimum future
performance threshold at levels to demonstrate that the long-
term quality of the past year’s performance is sustainable. Once
set, the threshold remains in place for that particular award. The
Compensation Committee also determines whether
the
performance condition has been met.
› Refer to “Vesting of outstanding awards granted in prior years
subject to performance conditions” in the “Supplemental
information” section of this report for more information
All employees subject to deferral requirements receive DCCP
awards. For the 2020 performance year, we granted DCCP
awards to 4,013 employees.
Employees are awarded notional additional tier 1 (AT1)
capital instruments, which, at the discretion of the firm, can be
settled as a cash payment or a perpetual, marketable AT1 capital
instrument. Prior to granting, employees can elect to have their
DCCP awards denominated in Swiss francs or US dollars.
DCCP awards vest in full after five years (up to seven years for
SMFs), unless a trigger event occurs. Awards are forfeited if a
viability event occurs, i.e., if FINMA notifies the firm in writing
that the DCCP awards must be written down to prevent an
insolvency, bankruptcy or failure of UBS or if the firm receives a
commitment of extraordinary support from the public sector
that is necessary to prevent such an event. DCCP awards are
also written down for GEB members if the Group’s CET1 capital
ratio falls below 10% and for all other employees if it falls below
7%.
As an additional performance condition, GEB members forfeit
20% of DCCP awards for each loss-making year during the
vesting period. This means 100% of the award is subject to risk
of forfeiture.
Under the DCCP, employees who are not MRTs may receive
discretionary annual notional interest payments. The notional
in 2021 was 2.6% for awards
interest rate for grants
denominated in Swiss francs and 4.0% for awards denominated
in US dollars. These interest rates are based on the current
market rates for similar AT1 capital instruments. Notional
interest will be paid out annually, subject to review and
confirmation by the Compensation Committee.
Over the last five years, USD 1.9 billion of DCCP awards have
been issued, contributing to the Group’s total loss-absorbing
capacity (TLAC). Therefore, DCCP awards not only support
competitive pay but also provide a loss absorption buffer that
protects the firm’s capital position. The following table illustrates
the contribution of the DCCP to our AT1 and the effect on our
TLAC ratio.
› Refer to the “Supplemental information” section of this report
for more information about performance award- and personnel-
related expenses
› Refer to the “Supplemental information” section of this report
for more information about longer vesting and clawback periods
for MRTs and SMFs
Contribution of the Deferred Contingent Capital Plan to our loss-absorbing capacity1
USD million, except where indicated
Deferred Contingent Capital Plan (DCCP), eligible as high-trigger loss-absorbing additional
tier 1 capital
DCCP contribution to the total loss-absorbing capacity ratio (%)
11 Refer to “Bondholder information” at ubs.com/investors for more information about the capital instruments of UBS Group AG and UBS AG both on a consolidated and a standalone basis.
11,,887755
00..66
1,962
0.8
31.12.19
3311..1122..2200
31.12.18
2,005
0.8
240
240
Advisory vote
Corporate governance and compensation | Compensation
Equity Ownership Plan
Deferred Contingent Capital Plan
Replacement awards and forfeitures
Other variable compensation components
In line with industry practice, our compensation framework and
plans include provisions generally requiring reduction / forfeiture
of a terminated employee’s unvested or deferred awards. In
particular, these provisions apply if the terminated employee
joins another financial services organization and / or violates
restrictive covenants, such as solicitation of clients or employees.
Conversely, to support talent acquisition, and consistent with
industry practice, we may offer replacement awards to attract
senior candidates by offsetting deferred compensation being
forfeited at their previous employer as a result of joining UBS.
When making such awards, we aim to match the previous
employer’s terms and conditions for the awards to be forfeited
upon joining UBS.
received
replacement awards
Ralph Hamers joined UBS on 1 September 2020 as a GEB
member, and subsequently became Group CEO on 1 November
for deferred
2020. He
compensation forfeited at his previous employer as a result of
joining UBS. Ralph Hamer’s replacement payment consists of an
EOP share award representing 14,841 UBS shares (denominated
in Swiss francs) with a grant date total fair market value of
CHF 163,399. The award will vest in various installments
between 2021 and 2025 but will only be delivered in line with
additional blocking periods between 2023 and 2026, all
consistent with the terms of the original awards. This
replacement award is subject to UBS’s harmful acts provisions.
The total 2020 forfeitures of USD 145 million of previously
awarded deferred compensation offset the 2020 total sign-on
payments, replacement payments and guarantees of USD 94
million.
To support hiring and retention, particularly at senior levels, we
may offer other compensation components, such as:
– retention payments to key employees to induce them to stay,
particularly during critical periods for the firm, such as a sale
or wind-down of a business;
– on a limited basis, guarantees may be required to attract
individuals with certain skills and experience – these awards
are fixed incentives subject to our standard deferral rules and
limited to the first full year of employment;
– award grants to employees hired late in the year to replace
performance awards that they would have earned at their
previous employers, but have foregone by joining UBS – these
awards are generally structured with the same level of
deferral as for employees at a similar level at UBS; and
– in exceptional cases, candidates may be offered a sign-on
award to increase the chances of them accepting our offer.
These other variable compensation components are subject to
a comprehensive governance process, which may involve the
Compensation Committee, depending on the amount or type of
such payments.
Below-GEB level employees who are made redundant may
receive severance payments. Our severance terms comply with
the applicable local laws (legally obligated severance). In certain
locations, we may provide severance packages that are
negotiated with our local social partners and may go beyond the
applicable minimum legal requirements (standard severance).
Such payments are governed by location-specific severance
policies. In addition, we may make severance payments that
exceed legally obligated or standard severance payments where
we believe these are aligned with market practice and
appropriate under the circumstances (supplemental severance).
Sign-on payments, replacement payments, guarantees and severance payments
The EOP is the deferred compensation plan for employees who
All employees subject to deferral requirements receive DCCP
are subject to deferral requirements but do not receive LTIP. For
awards. For the 2020 performance year, we granted DCCP
the 2020 performance year, we granted EOP awards to 3,934
awards to 4,013 employees.
employees.
Employees are awarded notional additional tier 1 (AT1)
Delivering sustainable performance is a key objective for UBS,
capital instruments, which, at the discretion of the firm, can be
and we therefore link EOP award vesting with minimum
settled as a cash payment or a perpetual, marketable AT1 capital
performance thresholds over a multi-year time horizon. Our EOP
instrument. Prior to granting, employees can elect to have their
awards have no upward leverage, and this approach promotes
DCCP awards denominated in Swiss francs or US dollars.
sustainable performance by establishing a minimum level of
DCCP awards vest in full after five years (up to seven years for
performance, below which awards are subject to full or partial
SMFs), unless a trigger event occurs. Awards are forfeited if a
forfeiture.
viability event occurs, i.e., if FINMA notifies the firm in writing
EOP awards vest in equal installments in years 2 and 3 after
that the DCCP awards must be written down to prevent an
the grant year. For KRTs (including Highly Paid Employees) and
insolvency, bankruptcy or failure of UBS or if the firm receives a
SMFs, EOP awards granted will vest based on the average
commitment of extraordinary support from the public sector
reported RoCET1 over the applicable performance period. If the
that is necessary to prevent such an event. DCCP awards are
Group performance condition RoCET1 outcome is equal to or
also written down for GEB members if the Group’s CET1 capital
above the threshold, the award will vest in full; if it is between
ratio falls below 10% and for all other employees if it falls below
0% and the threshold, the award will vest on a linear basis
7%.
between 0% and 100%. If the outcome is 0% or negative, the
As an additional performance condition, GEB members forfeit
installment will be fully forfeited. The Compensation Committee
20% of DCCP awards for each loss-making year during the
retains discretion to adjust the award if the performance metric
vesting period. This means 100% of the award is subject to risk
does not reflect a fair measure of performance.
of forfeiture.
Asset Management employees receive some or all of their
Under the DCCP, employees who are not MRTs may receive
EOP in the form of notional funds under the AM EOP to align
discretionary annual notional interest payments. The notional
their compensation more closely with industry standards. This
interest rate for grants
in 2021 was 2.6% for awards
plan is generally delivered in cash at vesting.
denominated in Swiss francs and 4.0% for awards denominated
The Compensation Committee sets the minimum future
in US dollars. These interest rates are based on the current
performance threshold at levels to demonstrate that the long-
market rates for similar AT1 capital instruments. Notional
term quality of the past year’s performance is sustainable. Once
interest will be paid out annually, subject to review and
set, the threshold remains in place for that particular award. The
confirmation by the Compensation Committee.
Compensation Committee also determines whether
the
Over the last five years, USD 1.9 billion of DCCP awards have
performance condition has been met.
› Refer to “Vesting of outstanding awards granted in prior years
subject to performance conditions” in the “Supplemental
information” section of this report for more information
been issued, contributing to the Group’s total loss-absorbing
capacity (TLAC). Therefore, DCCP awards not only support
competitive pay but also provide a loss absorption buffer that
protects the firm’s capital position. The following table illustrates
the contribution of the DCCP to our AT1 and the effect on our
TLAC ratio.
› Refer to the “Supplemental information” section of this report
for more information about performance award- and personnel-
related expenses
› Refer to the “Supplemental information” section of this report
for more information about longer vesting and clawback periods
for MRTs and SMFs
Contribution of the Deferred Contingent Capital Plan to our loss-absorbing capacity1
USD million, except where indicated
Deferred Contingent Capital Plan (DCCP), eligible as high-trigger loss-absorbing additional
tier 1 capital
DCCP contribution to the total loss-absorbing capacity ratio (%)
3311..1122..2200
31.12.19
31.12.18
11,,887755
00..66
1,962
0.8
2,005
0.8
11 Refer to “Bondholder information” at ubs.com/investors for more information about the capital instruments of UBS Group AG and UBS AG both on a consolidated and a standalone basis.
TToottaall 22002200
ooff wwhhiicchh:: eexxppeennsseess
rreeccooggnniizzeedd iinn 2200220055
of which: expenses
to be recognized in
2021 and later5
TToottaall 22001199
NNuummbbeerr ooff bbeenneeffiicciiaarriieess
2200
22
5588
1177
1166
55
113344
1144
11
1111
11
1100
22
11003366
7
1
47
16
6
2
0
31
9
57
22
27
6
144
22002200
9999
33
220000
1133
3322
22
11,,001199
2019
644
6
178
12
32
3
1,444
18
11 GEB members are not eligible for sign-on or severance payments. 22 Expenses for Key Risk Takers are full-year amounts for individuals in office on 31 December 2020. Key Risk Takers as defined by UBS,
including all employees with a total compensation exceeding USD / CHF 2.5 million (Highly Paid Employees). 33 Includes replacement payments for one GEB member in 2020 and for another GEB member in 2019.
No GEB member received a guarantee in 2020 or 2019. 44 Includes legally obligated and standard severance payments as well as payments in lieu of notice. 55 Expenses before post-vesting transfer restrictions.
66 Represents expenses recognized in 2020 associated with payments made in 2020 as well as provisions for expected payments in 2021.
USD million, except where indicated
TToottaall ssiiggnn--oonn ppaayymmeennttss11
of which: Key Risk Takers2
TToottaall rreeppllaacceemmeenntt ppaayymmeennttss33
of which: Key Risk Takers2
TToottaall gguuaarraanntteeeess33
of which: Key Risk Takers2
TToottaall sseevveerraannccee ppaayymmeennttss11,,44
of which: Key Risk Takers2
00
0
3
00
00
Forfeitures1
USD million, except where indicated
TToottaall ffoorrffeeiittuurreess
of which: former GEB members
TToottaall 22002200
Total 2019
Population affected
114455
00
173
16
22002200
558888
00
2019
653
1
240
241
241
of which: Key Risk Takers2
6
11 For notional share awards, forfeitures are calculated as units forfeited during the year, valued at the share price on 31 December 2020 (USD 14.13) for 2020. The 2019 data is valued using the share price on 31
December 2019 (USD 12.58). For LTIP the forfeited units reflect the fair value awarded at grant. For the notional funds awarded to Asset Management employees under the EOP, this represents the forfeiture credits
recognized in 2020 and 2019. For the DCCP, the fair value at grant of the forfeited awards during the year is reflected. Numbers presented may differ from the effect on the income statement in accordance with
IFRS. 22 Key Risk Takers as defined by UBS, including all employees with a total compensation exceeding USD / CHF 2.5 million (Highly Paid Employees) and excluding former GEB members who forfeited awards in
2020 or 2019.
6
33
66
Corporate governance and compensation Advisory vote
Corporate governance and compensation | Compensation
Benchmarking for employees other than GEB members
Compensation for US financial advisors in Global Wealth
Management
In line with market practice for US wealth management
businesses, the compensation for US financial advisors in Global
Wealth Management is comprised of production payout and
deferred compensation awards. Production payout, paid
monthly, is primarily based on compensable revenue. Financial
advisors may also qualify for deferred compensation awards,
which generally vest over a six-year period. The awards are
based on strategic performance measures, including production,
length of service with UBS and net new business. Production
payout rates and deferred compensation awards may be
reduced for, among other things, errors, negligence or
carelessness, or failure to comply with the firm’s rules,
standards, practices and / or policies, and / or applicable laws
and regulations.
We generally consider market practice in our pay decisions and
framework. Our market review reflects several factors, including
the comparability of the business division, location, scope and
the diversity of our businesses. For certain businesses or roles,
we may consider practices at other major international banks,
other large Swiss private banks, private equity firms, hedge
funds and non-financial firms. We also internally benchmark
employee compensation for comparable roles within and across
business divisions and locations.
Employee share ownership
According to available records on employee shareholdings,
including unvested deferred compensation, as of 31 December
2020, employees held at least USD 3.6 billion of UBS shares (of
approximately USD 2.2 billion were unvested),
which
representing approximately 7% of our total shares issued. Our
senior leaders (i.e., GEB members and GMDs, excluding GMDs
on notice) held approximately USD 416 million of UBS shares (of
which approximately USD 279 million were unvested).
The Equity Plus Plan is our employee share purchase program.
It allows employees at Executive Director level and below to
voluntarily invest up to 30% of their base salary and / or regular
commission payments to purchase UBS shares. In addition
(where offered), eligible employees can invest up to 35% of
their performance award under the program. Participation in the
program is capped at USD / CHF 20,000 annually. Eligible
employees may purchase UBS shares at market price and receive
one additional share for every three shares purchased through
the program. Additional shares vest after a maximum of three
years, provided the employee remains employed by UBS and has
retained the purchased shares throughout the holding period.
› Refer to “Note 27 Employee benefits: variable compensation” in
the “Consolidated financial statements” section of our Annual
Report 2020 for more information
242
242
which
approximately USD 2.2 billion were unvested),
representing approximately 7% of our total shares issued. Our
senior leaders (i.e., GEB members and GMDs, excluding GMDs
on notice) held approximately USD 416 million of UBS shares (of
which approximately USD 279 million were unvested).
The Equity Plus Plan is our employee share purchase program.
It allows employees at Executive Director level and below to
voluntarily invest up to 30% of their base salary and / or regular
commission payments to purchase UBS shares. In addition
(where offered), eligible employees can invest up to 35% of
their performance award under the program. Participation in the
program is capped at USD / CHF 20,000 annually. Eligible
employees may purchase UBS shares at market price and receive
one additional share for every three shares purchased through
the program. Additional shares vest after a maximum of three
years, provided the employee remains employed by UBS and has
retained the purchased shares throughout the holding period.
› Refer to “Note 27 Employee benefits: variable compensation” in
the “Consolidated financial statements” section of our Annual
Report 2020 for more information
Advisory vote
Corporate governance and compensation | Compensation
Benchmarking for employees other than GEB members
Compensation for US financial advisors in Global Wealth
Management
We generally consider market practice in our pay decisions and
framework. Our market review reflects several factors, including
In line with market practice for US wealth management
the comparability of the business division, location, scope and
businesses, the compensation for US financial advisors in Global
the diversity of our businesses. For certain businesses or roles,
Wealth Management is comprised of production payout and
we may consider practices at other major international banks,
deferred compensation awards. Production payout, paid
other large Swiss private banks, private equity firms, hedge
monthly, is primarily based on compensable revenue. Financial
funds and non-financial firms. We also internally benchmark
advisors may also qualify for deferred compensation awards,
employee compensation for comparable roles within and across
which generally vest over a six-year period. The awards are
business divisions and locations.
Employee share ownership
based on strategic performance measures, including production,
length of service with UBS and net new business. Production
payout rates and deferred compensation awards may be
reduced for, among other things, errors, negligence or
According to available records on employee shareholdings,
carelessness, or failure to comply with the firm’s rules,
including unvested deferred compensation, as of 31 December
standards, practices and / or policies, and / or applicable laws
2020, employees held at least USD 3.6 billion of UBS shares (of
and regulations.
2020 Group performance outcomes
Performance awards granted for the 2020 performance year
The “Variable compensation” table below shows the amount of
variable compensation awarded to employees for the 2020
performance year, together with the number of beneficiaries for
each type of award granted. In the case of deferred awards, the
final amount paid to an employee depends on performance
conditions and consideration of relevant forfeiture provisions.
The deferred share award amount is based on the market value
of these awards on the date of grant.
Variable compensation1
USD million, except where indicated
Non-deferred cash
Deferred compensation awards
of which: Equity Ownership Plan
of which: Deferred Contingent Capital Plan
of which: Long-Term Incentive Plan
of which: Asset Management EOP
Expenses recognized
in the IFRS income
statement
22002200
2019
22,,116677
1,894
334411
113377
111122
4422
4499
299
122
113
39
25
Expenses deferred to
future periods4
22002200
2019
00
775566
330066
228800
5500
112200
0
429
205
173
25
26
Adjustments4
22002200
2019
00
5511
0
51
3355 55
35 5
00
0
1166 55
16 5
00
0
Total
22002200
2019
Number of beneficiaries
2019
22002200
22,,116677
1,894
5588,,884433
54,179
11,,114488
447788
339922
110099
116699
779
362
286
80
51
33,,993377
33,,556666
33,,991100
111155
333355
3,572
3,228
3,552
119
307
429
117
775566
118811
2,193
159
22,,550088
112266
Variable compensation – performance
award pool
Variable compensation – other2
Total variable compensation excluding
financial advisor variable compensation
Financial advisor (FA) variable compensation3
TToottaall vvaarriiaabbllee ccoommppeennssaattiioonn iinncclluuddiinngg FFAA vvaarriiaabbllee
ccoommppeennssaattiioonn
11 Expenses under “Variable compensation – other” and “Financial advisor variable compensation” are not part of UBS’s performance award pool. 22 Comprised of replacement payments, forfeiture credits,
severance payments, retention plan payments and interest expense related to the Deferred Contingent Capital Plan. 33 Financial advisor compensation consists of formulaic compensation based directly on
compensable revenues generated by financial advisors and supplemental compensation calculated based on financial advisor productivity, firm tenure, new assets and other variables. It also includes expenses
related to compensation commitments with financial advisors entered into at the time of recruitment that are subject to vesting requirements. 44 Estimates as of 31 December 2020 and 2019. Actual amounts to be
expensed in future periods may vary, e.g., due to forfeiture of awards. 55 Represents estimated post-vesting transfer restriction and permanent forfeiture discounts. 66 Included in expenses deferred to future
periods is an amount of USD 74 million (2019: USD 50 million) in interest expense related to the Deferred Contingent Capital Plan. As the amount recognized as performance award represents the present value of
the award at the date it is granted to the employee, this amount is excluded.
33,,331155
223333
2,673
226
5511
((7744))66
51
(50)6
54,210
5588,,885500
22,,663344
44,,220000
11,,776600
33,,554488
77,,774499
66,,330055
66,,001122
1,093
33,,337788
2,352
5,617
6,549
3,813
2,899
3,265
6,711
((2233))
((2233))
993388
882222
545
548
00
2
0
2
2020 performance award pool and expenses
The performance award pool, which includes performance-
based variable awards for 2020, was USD 3.3 billion, reflecting
an increase of 24% from 2019. Performance award expenses for
2020 increased 16% to USD 3.2 billion, reflecting the increase
of the performance award pool for 2020 and additional
expenses relating to prior years as a result of modifying the
terms of certain outstanding deferred compensation awards.
The “Performance award pool and expenses” table below
compares the performance award pool with performance award
expenses.
› Refer to “Note 1b Changes in accounting policies, comparability
and other adjustments” in the “Consolidated financial
statements” section of our Annual Report 2020 for more
information
Performance award pool and expenses
USD million, except where indicated
Performance award pool1
of which: expenses deferred to future periods and accounting adjustments 2,3
Performance award expenses accrued in the performance year
22002200
33,,331155
880077
22,,550088
2019
2,673
480
2,193
% change
24
68
14
Performance award expenses related to prior performance years
TToottaall ppeerrffoorrmmaannccee aawwaarrdd eexxppeennsseess rreeccooggnniizzeedd ffoorr tthhee yyeeaarr44
11 Excluding employer-paid taxes and social security. 22 Estimate as of the end of the performance year. Actual amounts expensed in future periods may vary, e.g., due to forfeiture of awards. 33 Accounting
adjustments represent estimated post-vesting transfer restriction and permanent forfeiture discounts. 44 Refer to “Note 27 Employee benefits: variable compensation” in the “Consolidated financial statements”
section of our Annual Report 2020 for more information
33,,220099
2,755
770011
562
25
16
242
243
243
Corporate governance and compensation
Advisory vote
Corporate governance and compensation | Compensation
Compensation for the Board of Directors
Chairman of the BoD
Under the leadership of the Chairman, Axel Weber, the BoD
determines, among other things, the strategy for the Group,
based on recommendations by the Group CEO, exercises
ultimate supervision over management and appoints all GEB
members.
The Chairman leads all general meetings and BoD meetings
and works with the committee chairpersons to coordinate their
work. Together with the Group CEO, the Chairman
is
responsible for effective communication with shareholders and
stakeholders, including clients, government officials, regulators
and public organizations. The Chairman works closely with the
Group CEO and other GEB members, providing advice and
support when appropriate, and continues to strengthen and
promote our culture through the three keys to success: our
Pillars, Principles and Behaviors.
The Chairman’s total compensation for the period from AGM
to AGM is contractually fixed without any variable component.
For the current period from the 2020 AGM to the 2021 AGM,
his total compensation was CHF 4.9 million, excluding benefits
total
and pension
fund contributions. The Chairman’s
compensation for the current period consisted of a cash
payment of CHF 3.5 million and a share component of CHF 1.4
million consisting of 101,375 UBS shares at CHF 13.810 per
share. The share component aligns the Chairman’s pay with the
Group’s long-term performance.
Thus, his total reward, including benefits and pension fund
contributions, for his service as Chairman for the current period,
was CHF 5,243,283.
The Chairman’s employment agreement does not provide for
severance terms or supplementary contributions to pension
plans. The benefits for the Chairman are in line with local
practices for UBS employees. The Chair of the Compensation
Committee proposes and
the Compensation Committee
approves the Chairman’s compensation annually for the
upcoming AGM-to-AGM period, taking into consideration fee or
compensation levels for comparable roles based on our core
financial industry peers and other relevant leading Swiss
companies included in the Swiss Market Index.
› Refer to “Board of Directors” in the “Corporate governance”
section of our Annual Report 2020 for more information about
the responsibilities of the Chairman
Audited |
Compensation details and additional information for non-independent BoD members
CHF, except where indicated
Name, function1
Axel A. Weber, Chairman
FFoorr tthhee ppeerriioodd
AAGGMM ttoo AAGGMM
22002200//22002211
22001199//22002200
Base salary
3,500,000
3,500,000
Annual share
award2
1,400,000
1,400,000
Contributions
to retirement
benefit plans4
245,040
244,353
Benefits3
98,243
90,790
TToottaall55
55,,224433,,228833
55,,223355,,114433
USD
(for reference)
Total5,6
5,593,748
11 Axel A. Weber was the only non-independent member in office on 31 December 2020 and 31 December 2019. 22 These shares are blocked for four years. 33 Benefits are all valued at market price and are
estimates. For the period from the 2019 AGM to the 2020 AGM, the actual benefits amount was CHF 96,847. 44 Includes the portion related to UBS’s contribution to the statutory pension scheme. For the period
from the 2020 AGM to the 2021 AGM, contribution to retirement benefit plans amount is an estimate. 55 Excludes the portion related to the legally required social security contributions paid by UBS, which for the
period from the 2020 AGM to the 2021 AGM is estimated at grant at CHF 332,243 and for the period from the 2019 AGM to the 2020 AGM at CHF 323,677. The legally required social security contributions paid
by the non-independent BoD members are included in the amounts shown in this table, as appropriate. 66 Swiss franc amounts have been translated into US dollars for reference at the 2020 performance award
currency exchange rate of CHF / USD 1.0668.
244
244
Advisory vote
Corporate governance and compensation | Compensation
Compensation for the Board of Directors
Chairman of the BoD
compensation for the current period consisted of a cash
payment of CHF 3.5 million and a share component of CHF 1.4
Under the leadership of the Chairman, Axel Weber, the BoD
million consisting of 101,375 UBS shares at CHF 13.810 per
determines, among other things, the strategy for the Group,
share. The share component aligns the Chairman’s pay with the
based on recommendations by the Group CEO, exercises
Group’s long-term performance.
ultimate supervision over management and appoints all GEB
Thus, his total reward, including benefits and pension fund
members.
contributions, for his service as Chairman for the current period,
The Chairman leads all general meetings and BoD meetings
was CHF 5,243,283.
and works with the committee chairpersons to coordinate their
The Chairman’s employment agreement does not provide for
work. Together with the Group CEO, the Chairman
is
severance terms or supplementary contributions to pension
responsible for effective communication with shareholders and
plans. The benefits for the Chairman are in line with local
stakeholders, including clients, government officials, regulators
practices for UBS employees. The Chair of the Compensation
and public organizations. The Chairman works closely with the
Committee proposes and
the Compensation Committee
Group CEO and other GEB members, providing advice and
approves the Chairman’s compensation annually for the
support when appropriate, and continues to strengthen and
upcoming AGM-to-AGM period, taking into consideration fee or
promote our culture through the three keys to success: our
compensation levels for comparable roles based on our core
Pillars, Principles and Behaviors.
financial industry peers and other relevant leading Swiss
The Chairman’s total compensation for the period from AGM
companies included in the Swiss Market Index.
to AGM is contractually fixed without any variable component.
For the current period from the 2020 AGM to the 2021 AGM,
his total compensation was CHF 4.9 million, excluding benefits
and pension
fund contributions. The Chairman’s
total
› Refer to “Board of Directors” in the “Corporate governance”
section of our Annual Report 2020 for more information about
the responsibilities of the Chairman
Audited |
CHF, except where indicated
Name, function1
Axel A. Weber, Chairman
Compensation details and additional information for non-independent BoD members
FFoorr tthhee ppeerriioodd
AAGGMM ttoo AAGGMM
22002200//22002211
22001199//22002200
Base salary
3,500,000
3,500,000
Annual share
award2
1,400,000
1,400,000
Contributions
to retirement
benefit plans4
245,040
244,353
Benefits3
98,243
90,790
TToottaall55
55,,224433,,228833
55,,223355,,114433
11 Axel A. Weber was the only non-independent member in office on 31 December 2020 and 31 December 2019. 22 These shares are blocked for four years. 33 Benefits are all valued at market price and are
estimates. For the period from the 2019 AGM to the 2020 AGM, the actual benefits amount was CHF 96,847. 44 Includes the portion related to UBS’s contribution to the statutory pension scheme. For the period
from the 2020 AGM to the 2021 AGM, contribution to retirement benefit plans amount is an estimate. 55 Excludes the portion related to the legally required social security contributions paid by UBS, which for the
period from the 2020 AGM to the 2021 AGM is estimated at grant at CHF 332,243 and for the period from the 2019 AGM to the 2020 AGM at CHF 323,677. The legally required social security contributions paid
by the non-independent BoD members are included in the amounts shown in this table, as appropriate. 66 Swiss franc amounts have been translated into US dollars for reference at the 2020 performance award
currency exchange rate of CHF / USD 1.0668.
USD
(for reference)
Total5,6
5,593,748
Independent BoD members
As outlined in the table below, all BoD members, except the
Chairman, are deemed independent and receive fixed fees for
their services on the BoD and its committees. Independent BoD
members do not receive performance awards, severance
payments, benefits or pension contributions.
In the current period, the roles of Senior Independent Director
and Vice Chairman are both held by one BoD member, but the
additional fee is only paid once. Independent BoD members
must use a minimum of 50% of their fees to purchase UBS
shares, which are blocked for four years, and they may elect to
use up to 100% of their fees to purchase blocked UBS shares. In
all cases, the number of shares is calculated based on the
average closing price of the 10 trading days leading up to and
including the grant date.
Remuneration framework for independent BoD members
amount
At each AGM, shareholders are invited to approve the
aggregate
including
BoD
compensation for the Chairman, which applies until the next
AGM. The tables on the following page provide details on the
fee structure for the independent BoD members.
remuneration,
of
in
to
the Chairman’s proposal
The fee structure for independent BoD members is reviewed
the
annually based on
Compensation Committee, which
submits a
recommendation to the BoD for approval. In our regular review
of the BoD fee structure, and following several adjustments to
the framework to simplify, rebalance and, in certain cases,
reduce the BoD fee structure effective from the 2020 AGM
onward, we concluded
for
independent BoD member compensation remains appropriate
and thus unchanged.
that our overall approach
turn
CHF
Fixed base fee
Additional fees
Senior Independent Director / Vice Chairman
Additional committee fees
Audit Committee
Compensation Committee
Governance and Nominating Committee
Corporate Culture and Responsibility Committee
Risk Committee
2020 AGM to 2021 AGM1
Pay mix
Delivery
300,000
150,000
Chair
Member
300,000
200,000
200,000
100,000
100,000
50,000
350,000
200,000
Blocked
shares
At least
50%
Cash
AGM-
to-AGM
period
Up to
50%
grant
year
year 1
year 2
year 3
year 4
1 At least 50% of the total amounts must be used to purchase UBS shares, which are blocked for four years. Independent BoD members can elect to use 100% of their remuneration to purchase blocked UBS shares.
244
245
245
Corporate governance and compensation Advisory vote
Corporate governance and compensation | Compensation
Audited |
Total payments to BoD members
CHF, except where indicated
Aggregate of all BoD members
FFoorr tthhee ppeerriioodd AAGGMM ttoo AAGGMM
22002200//22002211
22001199//22002200
TToottaall11
1111,,884433,,228833
1122,,551100,,114433
USD (for reference)
Total1,2
12,634,898
11 Includes social security contributions paid by the BoD members but excludes the portion related to the legally required social security contributions paid by UBS, which for the period from the 2020 AGM to the
2021 AGM is estimated at grant at CHF 719,763 and for the period from the 2019 AGM to the 2020 AGM at CHF 662,357. 22 Swiss franc amounts have been translated into US dollars for reference at the 2020
performance award currency exchange rate of CHF / USD 1.0668.
Audited |
Remuneration details and additional information for independent BoD members
CHF, except where indicated
e
e
t
t
i
m
m
o
C
y
t
i
l
i
b
i
s
n
o
p
s
e
R
d
n
a
e
r
u
t
l
u
C
e
t
a
r
o
p
r
o
C
M
M
M
M
M
M
M
n
o
i
t
a
s
n
e
p
m
o
C
e
e
t
t
i
m
m
o
C
e
e
t
t
i
m
m
o
C
t
i
d
u
A
C
C
M
M
M
C
C
M
M
M
M
M
M
M
M
M
M
Name, function1
Jeremy Anderson,
Vice Chairman and Senior
Independent Director
David Sidwell,
former Vice Chairman and Senior
Independent Director
William C. Dudley,
member
Reto Francioni,
member
Fred Hu,
member
Mark Hughes, member
Nathalie Rachou, member
Julie G. Richardson,
member
Isabelle Romy,
former member
Robert W. Scully,
former member
Beatrice Weder di Mauro,
member
Dieter Wemmer,
member
Jeanette Wong,
member
e
e
t
t
i
m
m
o
C
g
n
i
t
a
n
m
o
N
i
d
n
a
e
c
n
a
n
r
e
v
o
G
M
M
M
M
M
M
M
M
M
e
e
t
t
i
m
m
o
C
k
s
i
R
C
M
M
M
M
M
C
M
M
M
M
FFoorr tthhee ppeerriioodd
AAGGMM ttoo AAGGMM
22002200//22002211
Base fee
300,000
Committee
fee(s)
400,000
Additional
payments2
150,000
22001199//22002200
325,000
450,000
250,000
22002200//22002211
22001199//22002200
22002200//22002211
22001199//22002200
22002200//22002211
22001199//22002200
22002200//22002211
22001199//22002200
22002200//22002211
22001199//22002200
22002200//22002211
22001199//22002200
22002200//22002211
22001199//22002200
22002200//22002211
22001199//22002200
22002200//22002211
22001199//22002200
22002200//22002211
22001199//22002200
22002200//22002211
22001199//22002200
22002200//22002211
22001199//22002200
-
-
325,000
300,000
325,000
300,000
325,000
300,000
325,000
300,000
-
300,000
-
300,000
325,000
-
325,000
-
325,000
300,000
325,000
300,000
325,000
300,000
325,000
500,000
350,000
250,000
300,000
300,000
300,000
100,000
400,000
200,000
500,000
600,000
-
300,000
-
200,000
250,000
250,000
400,000
300,000
350,000
200,000
TToottaall 22002200//22002211
Total 2020/2021 in USD
(for reference)7
TToottaall 22001199//22002200
Legend: C = Chairperson of the respective Committee, M = Member of the respective Committee
Number of
shares5,6
30,774
35,288
-
48,948
23,533
26,181
21,723
28,458
32,053
27,283
25,343
-
18,102
-
28,964
42,118
-
28,458
-
23,904
19,913
26,181
25,343
28,458
34,730
33,772
Share
percentage4
50
50
-
50
50
50
50
50
100
100
50
-
50
-
50
50
-
50
-
50
50
50
50
50
100
100
TToottaall33
885500,,000000
777755,,000000
--
11,,007755,,000000
665500,,000000
557755,,000000
660000,,000000
662255,,000000
660000,,000000
442255,,000000
770000,,000000
--
550000,,000000
--
880000,,000000
992255,,000000
--
662255,,000000
--
552255,,000000
555500,,000000
557755,,000000
770000,,000000
662255,,000000
665500,,000000
552255,,000000
66,,660000,,000000
7,041,151
77,,227755,,000000
11 Ten independent BoD members were in office on 31 December 2020. At the 2020 AGM, Mark Hughes and Nathalie Rachou were newly elected and David Sidwell, Isabelle Romy and Robert W. Scully did not
stand for re-election. Eleven independent BoD members were in office on 31 December 2019. 22 These payments are associated with the Vice Chairman and the Senior Independent Director function. 33 Excludes
UBS’s portion related to the legally required social security contributions, which for the period from the 2020 AGM to the 2021 AGM is estimated at grant at CHF 387,520 and which for the period from the 2019
AGM to the 2020 AGM was estimated at grant at CHF 338,680. The legally required social security contributions paid by the independent BoD members are included in the amounts shown in this table, as
appropriate. 44 Fees are paid 50% in cash and 50% in blocked UBS shares. However, independent BoD members may elect to have 100% of their remuneration paid in blocked UBS shares. 55 For 2020, UBS
shares were valued at CHF 13.810 (average closing price of UBS shares over the last 10 trading days leading up to and including the grant date). For 2019, UBS shares, valued at CHF 12.919 (average closing price
of UBS shares over the last 10 trading days leading up to and including the grant date), were granted with a price discount of 15%. These shares are blocked for four years. 66 Number of shares is reduced in case
of the 100% election to deduct legally required contributions. All remuneration payments are, where applicable, subject to social security contributions and / or withholding tax. 77 Swiss franc amounts have been
translated into US dollars for reference at the 2020 performance award currency exchange rate of CHF / USD 1.0668.
246
246
Advisory vote
Corporate governance and compensation | Compensation
Supplemental information
Fixed and variable compensation for GEB members
Fixed and variable compensation for GEB members1,2,3
CHF million, except where indicated
AAmmoouunntt
%%
AAmmoouunntt
TToottaall ffoorr 22002200
NNoott ddeeffeerrrreedd
TToottaall ccoommppeennssaattiioonn
Amount5
Number of beneficiaries
FFiixxeedd ccoommppeennssaattiioonn55,,66
Cash-based
Equity-based
VVaarriiaabbllee ccoommppeennssaattiioonn
Cash7
111122
110000
1166
2277
2244
44
8855
1177
2244
2211
44
7766
1155
4444
2277
2244
44
1177
1177
%%
3399
110000
2200
DDeeffeerrrreedd44
AAmmoouunntt
6688
00
00
00
6688
00
%%
6611
00
8800
Total for 2019
Amount
98
16
28
24
4
70
14
4433
2266
Long-Term Incentive Plan (LTIP)8
Deferred Contingent Capital Plan (DCCP)8
11 The figures include all GEB members in office during the respective years. 22 Includes compensation paid under the employment contract during the notice period for GEB members who stepped down during the
respective years. 33 Includes compensation for newly appointed GEB members for their time in office as a GEB member during the respective years. 44 Based on the specific plan vesting and reflecting the total
award value at grant, which may differ from the expense recognized in the income statement in accordance with IFRS. 55 Excludes benefits and employer’s contributions to retirement benefit plans. Includes social
security contributions paid by GEB members but excludes the portion related to the legally required social security contributions paid by UBS. For 2020, Ralph A.J.G. Hamers received a one-time replacement award
of CHF 0.2 million. This replacement award is not included in the above table; including this, the 2020 total aggregate compensation of all GEB members is CHF 113 million. For 2019, Iqbal Khan received a one-
time replacement award of CHF 8 million. This replacement payment is not included in the above table; including this, the 2019 total compensation of GEB members is CHF 106 million. 66 Includes base salary and
role-based allowances, rounded to the nearest million. 77 Includes allocation of vested but blocked shares, in line with the remuneration section of the UK Prudential Regulation Authority Rulebook. 88 For the
GEB members who are also MRTs (or SMFs), the awards do not include dividend and interest payments. Accordingly, the amounts reflect for the LTIP the fair value of the non-dividend-bearing awards and for the
DCCP the fair value of the granted non-interest-bearing awards.
3388
2233
4433
2266
35
21
00
00
Audited |
Total payments to BoD members
CHF, except where indicated
Aggregate of all BoD members
11 Includes social security contributions paid by the BoD members but excludes the portion related to the legally required social security contributions paid by UBS, which for the period from the 2020 AGM to the
2021 AGM is estimated at grant at CHF 719,763 and for the period from the 2019 AGM to the 2020 AGM at CHF 662,357. 22 Swiss franc amounts have been translated into US dollars for reference at the 2020
performance award currency exchange rate of CHF / USD 1.0668.
Remuneration details and additional information for independent BoD members
Audited |
CHF, except where indicated
FFoorr tthhee ppeerriioodd AAGGMM ttoo AAGGMM
22002200//22002211
22001199//22002200
TToottaall11
1111,,884433,,228833
1122,,551100,,114433
USD (for reference)
Total1,2
12,634,898
FFoorr tthhee ppeerriioodd
AAGGMM ttoo AAGGMM
22002200//22002211
Base fee
300,000
Committee
fee(s)
400,000
Additional
payments2
150,000
22001199//22002200
325,000
450,000
Share
Number of
TToottaall33
percentage4
250,000
11,,007755,,000000
e
e
t
t
i
m
m
o
C
y
t
i
l
i
b
i
s
n
o
p
s
e
R
d
n
a
e
r
u
t
l
u
C
e
t
a
r
o
p
r
o
C
e
e
t
t
i
m
m
o
C
g
n
i
t
a
n
i
m
o
N
d
n
a
e
c
n
a
n
r
e
v
o
G
n
o
i
t
a
s
n
e
p
m
o
C
e
e
t
t
i
m
m
o
C
e
e
t
t
i
m
m
o
C
t
i
d
u
A
C
C
Name, function1
Jeremy Anderson,
Vice Chairman and Senior
Independent Director
David Sidwell,
former Vice Chairman and Senior
Independent Director
William C. Dudley,
Reto Francioni,
member
member
Fred Hu,
member
Mark Hughes, member
Nathalie Rachou, member
Beatrice Weder di Mauro,
Julie G. Richardson,
member
Isabelle Romy,
former member
Robert W. Scully,
former member
member
Dieter Wemmer,
member
Jeanette Wong,
member
TToottaall 22002200//22002211
Total 2020/2021 in USD
(for reference)7
TToottaall 22001199//22002200
M
M
M
C
C
M
M
M
M
M
M
M
M
M
M
M
M
M
M
M
M
M
e
e
t
t
i
m
m
o
C
k
s
i
R
C
M
M
M
M
M
C
M
M
M
M
M
M
M
M
M
M
M
M
M
22002200//22002211
22001199//22002200
22002200//22002211
22001199//22002200
22002200//22002211
22001199//22002200
22002200//22002211
22001199//22002200
22002200//22002211
22001199//22002200
22002200//22002211
22001199//22002200
22002200//22002211
22001199//22002200
22002200//22002211
22001199//22002200
22002200//22002211
22001199//22002200
22002200//22002211
22001199//22002200
22002200//22002211
22001199//22002200
22002200//22002211
22001199//22002200
-
-
-
-
-
-
-
-
325,000
300,000
325,000
300,000
325,000
300,000
325,000
300,000
500,000
350,000
250,000
300,000
300,000
300,000
100,000
400,000
300,000
200,000
300,000
325,000
500,000
600,000
325,000
300,000
325,000
300,000
325,000
300,000
325,000
300,000
325,000
200,000
250,000
250,000
400,000
300,000
350,000
200,000
100
100
50
50
50
-
50
50
50
50
50
-
-
-
-
50
50
50
50
50
50
50
50
50
100
100
shares5,6
30,774
35,288
-
-
-
-
-
48,948
23,533
26,181
21,723
28,458
32,053
27,283
25,343
18,102
28,964
42,118
28,458
23,904
19,913
26,181
25,343
28,458
34,730
33,772
885500,,000000
777755,,000000
--
--
--
--
--
665500,,000000
557755,,000000
660000,,000000
662255,,000000
660000,,000000
442255,,000000
770000,,000000
550000,,000000
880000,,000000
992255,,000000
662255,,000000
552255,,000000
555500,,000000
557755,,000000
770000,,000000
662255,,000000
665500,,000000
552255,,000000
66,,660000,,000000
7,041,151
77,,227755,,000000
Legend: C = Chairperson of the respective Committee, M = Member of the respective Committee
11 Ten independent BoD members were in office on 31 December 2020. At the 2020 AGM, Mark Hughes and Nathalie Rachou were newly elected and David Sidwell, Isabelle Romy and Robert W. Scully did not
stand for re-election. Eleven independent BoD members were in office on 31 December 2019. 22 These payments are associated with the Vice Chairman and the Senior Independent Director function. 33 Excludes
UBS’s portion related to the legally required social security contributions, which for the period from the 2020 AGM to the 2021 AGM is estimated at grant at CHF 387,520 and which for the period from the 2019
AGM to the 2020 AGM was estimated at grant at CHF 338,680. The legally required social security contributions paid by the independent BoD members are included in the amounts shown in this table, as
appropriate. 44 Fees are paid 50% in cash and 50% in blocked UBS shares. However, independent BoD members may elect to have 100% of their remuneration paid in blocked UBS shares. 55 For 2020, UBS
shares were valued at CHF 13.810 (average closing price of UBS shares over the last 10 trading days leading up to and including the grant date). For 2019, UBS shares, valued at CHF 12.919 (average closing price
of UBS shares over the last 10 trading days leading up to and including the grant date), were granted with a price discount of 15%. These shares are blocked for four years. 66 Number of shares is reduced in case
of the 100% election to deduct legally required contributions. All remuneration payments are, where applicable, subject to social security contributions and / or withholding tax. 77 Swiss franc amounts have been
translated into US dollars for reference at the 2020 performance award currency exchange rate of CHF / USD 1.0668.
246
247
247
Corporate governance and compensation
Advisory vote
Corporate governance and compensation | Compensation
Regulated staff
Key Risk Takers
KRTs are defined as those employees who, by the nature of their
roles, have been determined to materially set, commit or control
significant amounts of the firm’s resources and / or exert
significant influence over its risk profile. This includes employees
that work in front-office roles, logistics and control functions.
Identifying KRTs globally is part of our risk control framework
and an important element in ensuring we incentivize only
appropriate risk-taking. For 2020, in addition to GEB members,
647 employees were classified as KRTs throughout the UBS
Group globally, including all GMDs and all employees with a
total compensation exceeding USD / CHF 2.5 million (Highly Paid
Employees), who may not have been identified as KRTs during
the performance year.
functions.
the control
In line with regulatory requirements, the performance of
employees identified as KRTs during the performance year is
evaluated by
In addition, KRTs’
performance awards are subject to a mandatory deferral rate of
at least 50%, regardless of whether the deferral threshold has
been met (excluding KRTs with de minimis performance awards
below a pre-determined threshold where standard deferral rates
apply). A KRT’s deferred compensation award will only vest if
the Group performance conditions are met. Consistent with all
other employees, the deferred portion of a KRT’s compensation
is also subject to forfeiture or reduction if the KRT commits
harmful acts.
Fixed and variable compensation for Key Risk Takers1
USD million, except where indicated
TToottaall ffoorr 22002200
AAmmoouunntt
NNoott ddeeffeerrrreedd
%%
AAmmoouunntt
TToottaall ccoommppeennssaattiioonn
Amount
Number of beneficiaries
FFiixxeedd ccoommppeennssaattiioonn33,,44
Cash-based
Equity-based
VVaarriiaabbllee ccoommppeennssaattiioonn
11,,440000
110000
664477
441177
441177
11
998833
3300
3300
00
7700
778833
441177
441177
11
336655
%%
5566
110000
3377
DDeeffeerrrreedd22
AAmmoouunntt
661177
00
00
00
661177
Total for 2019
Amount
1,056
661
388
383
6
667
%%
4444
00
6633
336655
Cash5
Long-Term Incentive Plan (LTIP) / Equity Ownership
Plan (EOP)6
Deferred Contingent Capital Plan (DCCP)6
11 Includes employees with a total compensation exceeding USD / CHF 2.5 million (Highly Paid Employees), excluding GEB members who were in office during the performance year, except the new GEB member
appointed during 2019, who is included for compensation received in their role as a KRT prior to being appointed to the GEB. 22 Based on the specific plan vesting and reflecting the total value at grant, which may
differ from the expense recognized in the income statement in accordance with IFRS. 33 Excludes benefits and employer's contributions to retirement benefits plan. Includes social security contributions paid by KRTs
but excludes the legally required social security contributions paid by UBS. 44 Includes base salary and role-based allowances. 55 Includes allocation of vested but blocked shares, in line with regulatory requirements
where applicable. 66 KRTs who are also MRTs do not receive dividend and interest payments. Accordingly, the amounts for the EOP / LTIP reflect the fair value of the non-dividend-bearing awards and for the DCCP
the fair value of the granted non-interest-bearing awards.
230
155
440044
221133
440044
221133
2299
1155
00
00
282
336655
2266
00
248
248
Regulated staff
Key Risk Takers
In line with regulatory requirements, the performance of
employees identified as KRTs during the performance year is
KRTs are defined as those employees who, by the nature of their
evaluated by
the control
functions.
In addition, KRTs’
roles, have been determined to materially set, commit or control
performance awards are subject to a mandatory deferral rate of
significant amounts of the firm’s resources and / or exert
at least 50%, regardless of whether the deferral threshold has
significant influence over its risk profile. This includes employees
been met (excluding KRTs with de minimis performance awards
that work in front-office roles, logistics and control functions.
below a pre-determined threshold where standard deferral rates
Identifying KRTs globally is part of our risk control framework
apply). A KRT’s deferred compensation award will only vest if
and an important element in ensuring we incentivize only
the Group performance conditions are met. Consistent with all
appropriate risk-taking. For 2020, in addition to GEB members,
other employees, the deferred portion of a KRT’s compensation
647 employees were classified as KRTs throughout the UBS
is also subject to forfeiture or reduction if the KRT commits
Group globally, including all GMDs and all employees with a
harmful acts.
total compensation exceeding USD / CHF 2.5 million (Highly Paid
Employees), who may not have been identified as KRTs during
the performance year.
Fixed and variable compensation for Key Risk Takers1
USD million, except where indicated
TToottaall ffoorr 22002200
AAmmoouunntt
NNoott ddeeffeerrrreedd
%%
AAmmoouunntt
DDeeffeerrrreedd22
AAmmoouunntt
Total for 2019
Amount
TToottaall ccoommppeennssaattiioonn
Amount
Number of beneficiaries
FFiixxeedd ccoommppeennssaattiioonn33,,44
VVaarriiaabbllee ccoommppeennssaattiioonn
Cash-based
Equity-based
Cash5
Plan (EOP)6
Long-Term Incentive Plan (LTIP) / Equity Ownership
Deferred Contingent Capital Plan (DCCP)6
11,,440000
110000
664477
441177
441177
11
998833
336655
440044
221133
3300
3300
00
7700
2266
2299
1155
778833
441177
441177
11
336655
336655
00
00
%%
5566
110000
3377
%%
4444
00
6633
1,056
661
388
383
6
667
282
230
155
661177
00
00
00
00
661177
440044
221133
11 Includes employees with a total compensation exceeding USD / CHF 2.5 million (Highly Paid Employees), excluding GEB members who were in office during the performance year, except the new GEB member
appointed during 2019, who is included for compensation received in their role as a KRT prior to being appointed to the GEB. 22 Based on the specific plan vesting and reflecting the total value at grant, which may
differ from the expense recognized in the income statement in accordance with IFRS. 33 Excludes benefits and employer's contributions to retirement benefits plan. Includes social security contributions paid by KRTs
but excludes the legally required social security contributions paid by UBS. 44 Includes base salary and role-based allowances. 55 Includes allocation of vested but blocked shares, in line with regulatory requirements
where applicable. 66 KRTs who are also MRTs do not receive dividend and interest payments. Accordingly, the amounts for the EOP / LTIP reflect the fair value of the non-dividend-bearing awards and for the DCCP
the fair value of the granted non-interest-bearing awards.
Advisory vote
Corporate governance and compensation | Compensation
GEB and KRTs deferred compensation
The table below shows the current economic value of unvested
outstanding deferred variable compensation awards subject to
ex-post adjustments. For share-based plans, the economic value
is determined based on the closing share price on 31 December
2020. For notional funds, it is determined using the latest
available market price for the underlying funds at year-end
2020, and for deferred cash plans, it is determined based on the
outstanding amount of cash owed to award recipients.
GEB and KRTs deferred compensation1,2,3
USD million, except where indicated
GGEEBB
Deferred Contingent Capital Plan
Equity Ownership Plan (including notional
funds)
Long-Term Incentive Plan
KKRRTTss
Deferred Contingent Capital Plan
Equity Ownership Plan (including notional
funds)
Long-Term Incentive Plan
RReellaattiinngg ttoo aawwaarrddss
ffoorr 2200220044
Relating to
awards for prior
years5
2277
00
4466
221133
334466
5588
99
102
39
787
713
50
Total
126
102
85
1,000
1,059
109
of which: exposed to
ex-post explicit and /
or implicit adjustments
Total deferred
compensation
year-end 2019
Total amount of
deferred compensation
paid out in 20206
100%
100%
100%
100%
100%
100%
120
129
35
989
880
48
11
22
0
123
188
0
TToottaall GGEEBB aanndd KKRRTTss
11 Based on the specific plan vesting and reflecting the economic value of the outstanding awards, which may differ from the expense recognized in the income statement in accordance with IFRS. Year-to-year
reconciliations would also need to consider the impacts of additional items including off-cycle awards, FX movements, population changes, and dividend equivalent reinvestments. 22 Refer to “Note 27 Employee
benefits: variable compensation” in the “Consolidated financial statements” section of the Annual Report 2020 for more information. 33 GEB members and KRTs who are also MRTs do not receive dividend and
interest payments. Accordingly, the amounts for the EOP / LTIP reflect the fair value of the non-dividend-bearing awards and for the DCCP the fair value of the granted non-interest-bearing awards. 44 Where
applicable, amounts are translated into US dollars at the performance award currency exchange rate. LTIP values reflect the fair value awarded at grant. 55 Takes into account the ex-post implicit adjustments, given
the share price movements since grant. Where applicable, amounts are translated from award currency into US dollars using FX rates as of 31 December 2020. LTIP values reflect the fair value awarded at grant. 66
Valued at distribution price and FX rate for all awards distributed in 2020.
2,202
2,480
1,790
344
669900
The table below shows the value of actual ex-post explicit and
implicit adjustments to outstanding deferred compensation in
the 2020 financial year for GEB members and KRTs.
Ex-post adjustments occur after an award has been granted.
Explicit adjustments occur when we adjust compensation by
forfeiting deferred awards. Implicit adjustments are unrelated to
any action taken by the firm and occur as a result of price
movements that affect the value of an award.
The total value of ex-post explicit adjustments made to UBS
share awards in 2020, based on the approximately 6.3 million
shares forfeited during 2020, is a reduction of USD 88.5 million.
GEB and KRTs ex-post explicit and implicit adjustments to deferred compensation
USD million
GGEEBB
Deferred Contingent Capital Plan
Equity Ownership Plan (including notional funds, if applicable)
Long-Term Incentive Plan
KKRRTTss
Deferred Contingent Capital Plan
Equity Ownership Plan (including notional funds)
Long-Term Incentive Plan
EExx--ppoosstt eexxpplliicciitt aaddjjuussttmmeennttss
ttoo uunnvveesstteedd aawwaarrddss11
3311..1122..2200
31.12.19
EExx--ppoosstt iimmpplliicciitt aaddjjuussttmmeennttss
ttoo uunnvveesstteedd aawwaarrddss22
3311..1122..2200
31.12.19
00
00
00
((33))
((33))
00
0
0
0
(3)
(3)
0
00
1133
55
00
9988
66
0
(11)
0
0
(44)
0
TToottaall GGEEBB aanndd KKRRTTss
(55)
11 For notional share awards, ex-post explicit adjustments are calculated as units forfeited during the year, valued at the share price on 31 December 2020 (USD 14.13) for 2020 (which may differ from the expense
recognized in the income statement in accordance with IFRS). The 2019 data is valued using the share price on 31 December 2019 (USD 12.58). For LTIP the forfeited units reflect the fair value awarded at grant. For
the notional funds awarded to Asset Management employees under the EOP, this represents the forfeiture credits recognized in 2020 and 2019. For the DCCP, the fair value at grant of the forfeited awards during
the year is reflected. 22 Ex-post implicit adjustments for UBS shares are calculated based on the difference between the weighted average grant date fair value and the share price at year-end. The amount for
notional funds is calculated using the mark-to-market change during 2020 and 2019. For the GEB member who was appointed to the GEB during 2020, awards have been fully reflected in the GEB entries.
112222
((66))
(6)
248
249
249
Corporate governance and compensation Advisory vote
Corporate governance and compensation | Compensation
Material Risk Takers
UK Senior Managers and Certification Regime
For relevant EU-regulated entities, we identify individuals who
are deemed to be MRTs based on local regulatory requirements,
the respective EU Commission Delegated Regulation and the EU
Capital Requirements Directive of 2013 (CRD IV). This group
consists of senior management, risk takers, selected staff in
control or support functions and certain employees whose total
compensation is above a specified threshold. For 2020, UBS
identified 672 MRTs in relation to its EU / UK entities.
Variable compensation awarded to MRTs is subject to specific
requirements from local regulators, such as a maximum variable
to fixed compensation ratio. UBS has obtained approval as
appropriate through relevant shareholder votes to increase the
variable to fixed compensation ratio to 200%. Other applicable
regulatory requirements for this population include a minimum
deferral rate of 40–60% on performance awards and the
delivery of at least 50% of any upfront performance award in
UBS shares that vest immediately but are blocked for 12 months.
As for deferred awards, any instruments granted to MRTs
under UBS’s deferred compensation plans for their performance
in 2020 are subject to 6- or 12-month blocking periods post
vesting and do not pay out dividends or interest during the
deferral period.
For seven years after grant, performance awards granted to
MRTs are subject to clawback provisions, which allow the firm to
claim repayment of both the upfront and the vested deferred
element of any performance award if an individual is found to
have contributed substantially to significant financial losses for
the Group or corporate structure in scope, a material downward
restatement of disclosed results, or engaged in misconduct and /
or failed to take expected actions that contributed to significant
reputational harm.
Due to UK regulatory requirements LTIP awards granted to
UK MRTs and SMFs are subject to an additional non-financial
conduct-related metric.
The Senior Managers and Certification Regime (the SMCR) of
the UK Prudential Regulation Authority and Financial Conduct
Authority requires that individuals with specified responsibilities,
performing certain significant functions and / or those in certain
other identified categories be designated as SMFs.
SMFs are subject to specific compensation requirements,
including longer deferral, blocking and clawback periods. The
deferral period for SMFs is seven years, with the deferred
performance awards vesting no faster than pro rata from years 3
to 7. Such awards are also subject to a 12-month blocking
period post vesting. The clawback policy for SMFs permits
clawback for up to 10 years from the date of performance
award grants (applicable if an individual is subject to an
investigation at the end of the initial seven-year clawback
period). All SMFs are also identified as MRTs and, as such,
subject to the same prohibitions on dividend and interest
payments.
Control functions and Group Internal Audit
Our control functions must be independent in order to monitor
risk effectively. Therefore, their compensation is determined
separately from the revenue areas that they oversee, supervise or
monitor. Their performance award pool is based not on the
performance of these businesses, but on the performance of the
Group as a whole. We also consider other factors, such as how
effectively the function has performed, and our market position.
Decisions on individual compensation for the senior managers of
the control functions are made by the function heads and
approved by
individual
compensation for the members of Group Internal Audit (GIA)
are made by the Head GIA and approved by the Chairman.
Following a proposal by the Chairman, total compensation for
the Head GIA is approved by the Compensation Committee.
the Group CEO. Decisions on
250
250
Advisory vote
Corporate governance and compensation | Compensation
Material Risk Takers
UK Senior Managers and Certification Regime
2020 Group personnel expenses
For relevant EU-regulated entities, we identify individuals who
The Senior Managers and Certification Regime (the SMCR) of
are deemed to be MRTs based on local regulatory requirements,
the UK Prudential Regulation Authority and Financial Conduct
the respective EU Commission Delegated Regulation and the EU
Authority requires that individuals with specified responsibilities,
Capital Requirements Directive of 2013 (CRD IV). This group
performing certain significant functions and / or those in certain
consists of senior management, risk takers, selected staff in
other identified categories be designated as SMFs.
control or support functions and certain employees whose total
SMFs are subject to specific compensation requirements,
compensation is above a specified threshold. For 2020, UBS
including longer deferral, blocking and clawback periods. The
identified 672 MRTs in relation to its EU / UK entities.
deferral period for SMFs is seven years, with the deferred
Variable compensation awarded to MRTs is subject to specific
performance awards vesting no faster than pro rata from years 3
requirements from local regulators, such as a maximum variable
to 7. Such awards are also subject to a 12-month blocking
to fixed compensation ratio. UBS has obtained approval as
period post vesting. The clawback policy for SMFs permits
appropriate through relevant shareholder votes to increase the
clawback for up to 10 years from the date of performance
variable to fixed compensation ratio to 200%. Other applicable
award grants (applicable if an individual is subject to an
regulatory requirements for this population include a minimum
investigation at the end of the initial seven-year clawback
deferral rate of 40–60% on performance awards and the
period). All SMFs are also identified as MRTs and, as such,
delivery of at least 50% of any upfront performance award in
subject to the same prohibitions on dividend and interest
UBS shares that vest immediately but are blocked for 12 months.
payments.
As for deferred awards, any instruments granted to MRTs
under UBS’s deferred compensation plans for their performance
Control functions and Group Internal Audit
in 2020 are subject to 6- or 12-month blocking periods post
vesting and do not pay out dividends or interest during the
Our control functions must be independent in order to monitor
deferral period.
risk effectively. Therefore, their compensation is determined
For seven years after grant, performance awards granted to
separately from the revenue areas that they oversee, supervise or
MRTs are subject to clawback provisions, which allow the firm to
monitor. Their performance award pool is based not on the
claim repayment of both the upfront and the vested deferred
performance of these businesses, but on the performance of the
element of any performance award if an individual is found to
Group as a whole. We also consider other factors, such as how
have contributed substantially to significant financial losses for
effectively the function has performed, and our market position.
the Group or corporate structure in scope, a material downward
Decisions on individual compensation for the senior managers of
restatement of disclosed results, or engaged in misconduct and /
the control functions are made by the function heads and
or failed to take expected actions that contributed to significant
approved by
the Group CEO. Decisions on
individual
reputational harm.
compensation for the members of Group Internal Audit (GIA)
Due to UK regulatory requirements LTIP awards granted to
are made by the Head GIA and approved by the Chairman.
UK MRTs and SMFs are subject to an additional non-financial
Following a proposal by the Chairman, total compensation for
conduct-related metric.
the Head GIA is approved by the Compensation Committee.
We employed 71,551 personnel (full-time equivalents) as of
31 December 2020, a net increase of 2,950 compared with
31 December 2019, mostly reflecting the insourcing of certain
activities from third-party vendors to our Business Solutions
Centers.
The table below shows our total personnel expenses for
2020, including salaries, pension expenses, social security
contributions, variable compensation and other personnel costs.
Variable compensation includes cash performance awards paid
in 2021 for the 2020 performance year, amortization of
unvested deferred awards granted in previous years and the cost
of deferred awards granted to employees that are eligible for
retirement in the context of the compensation framework at the
date of grant.
reflects
The performance award pool
the value of
performance awards granted relating to the 2020 performance
year, including awards that are paid out immediately and those
that are deferred. To determine our variable compensation
expenses, the following adjustments are required in order to
reconcile the performance award pool to the expenses
recognized in the Group’s financial statements prepared in
accordance with IFRS:
– reduction
for expenses deferred
future periods
(amortization of unvested awards granted in 2021 for the
2020 performance year) and accounting adjustments; and
– addition for 2020 amortization of unvested deferred awards
to
granted in prior years.
As a large part of compensation consists of deferred awards,
the amortization of unvested deferred awards granted in prior
years forms a significant part of the IFRS expenses in both 2020
and 2021. During 2020, in order to provide additional career
flexibility during times of uncertainty, UBS modified the terms of
certain outstanding deferred compensation awards granted for
performance years 2015 through 2019 by removing the
requirement to provide future service for qualifying employees.
These awards remain subject to forfeiture if certain non-vesting
conditions are not satisfied. As a result, UBS recognized an
expense of USD 359 million in the third quarter of 2020. The full
year effect was an expense of approximately USD 280 million.
› Refer to “Note 1b Changes in accounting policies, comparability
and other adjustments,” “Note 6 Personnel expenses” and “Note
27 Employee benefits: variable compensation” in the
“Consolidated financial statements” section of our Annual
Report 2020 for more information
Personnel expenses
USD million
SSaallaarriieess11
Non-deferred cash
Deferred compensation awards
of which: Equity Ownership Plan
of which: Deferred Contingent Capital Plan
of which: Long-Term Incentive Plan
of which: Asset Management EOP
of which: Other performance awards
VVaarriiaabbllee ccoommppeennssaattiioonn –– ppeerrffoorrmmaannccee aawwaarrddss22
of which: guarantees for new hires
VVaarriiaabbllee ccoommppeennssaattiioonn –– ootthheerr22,,33
TToottaall vvaarriiaabbllee ccoommppeennssaattiioonn eexxcclluuddiinngg ffiinnaanncciiaall aaddvviissoorr vvaarriiaabbllee ccoommppeennssaattiioonn
CCoonnttrraaccttoorrss
SSoocciiaall sseeccuurriittyy
PPeennssiioonn aanndd ootthheerr ppoosstt--eemmppllooyymmeenntt bbeenneeffiitt ppllaannss44
FFiinnaanncciiaall aaddvviissoorr vvaarriiaabbllee ccoommppeennssaattiioonn22,,55
OOtthheerr ppeerrssoonnnneell eexxppeennsseess
TToottaall ppeerrssoonnnneell eexxppeennsseess
RReellaatteedd ttoo tthhee
ppeerrffoorrmmaannccee yyeeaarr 22002200
77,,002233
22,,116677
334411
113377
111122
4422
4499
00
22,,550088
1100
112266
22,,663344
337755
885500
884455
33,,337788
551199
1155,,662255
Expenses recognized in the IFRS income statement
RReellaatteedd ttoo pprriioorr
ppeerrffoorrmmaannccee yyeeaarrss
00
((2266))
772277
332277
335511
1111
3399
00
770011
1155
9944
779955
00
4499
00
771133
4422
11,,559999
TToottaall eexxppeennsseess
rreeccooggnniizzeedd iinn
22002200
77,,002233
Total expenses
recognized in
2019
6,518
Total expenses
recognized in
2018
6,448
22,,114411
11,,006688
446633
446633
5544
8888
00
33,,220099
2255
222200
33,,442299
337755
889999
884455
44,,009911
556611
1177,,222244
1,868
2,057
887
422
375
39
51
0
2,755
29
246
3,001
381
799
787
4,043
555
16,084
938
526
357
0
53
2
2,995
43
243
3,238
489
791
457
4,054
654
16,132
11 Includes role-based allowances. 22 Refer to “Note 27 Employee benefits: variable compensation” in the “Consolidated financial statements” section of our Annual Report 2020 for more information.
33 Comprised of replacement payments, forfeiture credits, severance payments, retention plan payments and interest expense related to the Deferred Contingent Capital Plan. 44 Refer to “Note 26 Post-employment
benefit plans” in the “Consolidated financial statements” section of our Annual Report 2020 for more information. 55 Consists of formulaic compensation based directly on compensable revenues generated by
financial advisors and supplemental compensation calculated based on financial advisor productivity, firm tenure, new assets and other variables. It also includes expenses related to compensation commitments
with financial advisors entered into at the time of recruitment that are subject to vesting requirements.
250
251
251
Corporate governance and compensation Advisory vote
Corporate governance and compensation | Compensation
Deferred compensation
Vesting of outstanding awards granted in prior years subject to performance conditions
The tables below show the extent to which the performance conditions for awards granted in prior years have been met and the
percentage of the installment that will vest in 2021.
Equity Ownership Plan (EOP) 2015 / 2016, EOP 2016 / 2017, EOP 2017 / 2018 and EOP 2018 / 2019
Performance conditions
Performance achieved1
Return on common equity tier 1 capital
(RoCET1) and divisional return on
attributed equity
The Group and divisional performance conditions have been satisfied. For EOP
2015 / 2016, the third and final installment for the Group Executive Board (GEB)
members vests in full. For EOP 2016 / 2017, the second installment for the GEB
members vests in full. For EOP 2017 / 2018, the first installment for the GEB
members and the second installment for all other employees covered under the
plan vest in full. For EOP 2018 / 2019, the first installment for all other employees
covered under the plan vests in full.
% of installment vesting
100%
Deferred Contingent Capital Plan (DCCP) 2015 / 2016
Performance conditions
Performance achieved1
% of installment vesting
Common equity tier 1 (CET1) capital
ratio, viability event and, additionally for
GEB, Group profit before tax
The performance conditions have been satisfied. DCCP 2015 / 2016 vests in full.
100%
11 Performance may be adjusted for disclosed items generally not representative of underlying business performance.
252
252
Advisory vote
Corporate governance and compensation | Compensation
Deferred compensation
Vesting of outstanding awards granted in prior years subject to performance conditions
The tables below show the extent to which the performance conditions for awards granted in prior years have been met and the
percentage of the installment that will vest in 2021.
Equity Ownership Plan (EOP) 2015 / 2016, EOP 2016 / 2017, EOP 2017 / 2018 and EOP 2018 / 2019
Performance conditions
Performance achieved1
% of installment vesting
Return on common equity tier 1 capital
The Group and divisional performance conditions have been satisfied. For EOP
100%
(RoCET1) and divisional return on
2015 / 2016, the third and final installment for the Group Executive Board (GEB)
attributed equity
members vests in full. For EOP 2016 / 2017, the second installment for the GEB
members vests in full. For EOP 2017 / 2018, the first installment for the GEB
members and the second installment for all other employees covered under the
plan vest in full. For EOP 2018 / 2019, the first installment for all other employees
covered under the plan vests in full.
Deferred Contingent Capital Plan (DCCP) 2015 / 2016
Performance conditions
Performance achieved1
% of installment vesting
Common equity tier 1 (CET1) capital
The performance conditions have been satisfied. DCCP 2015 / 2016 vests in full.
100%
ratio, viability event and, additionally for
GEB, Group profit before tax
11 Performance may be adjusted for disclosed items generally not representative of underlying business performance.
List of tables
Share ownership / entitlements of GEB members
Total of all vested and unvested shares of GEB members
Number of shares of BoD members
Total of all blocked and unblocked shares of BoD members
Loans granted to GEB members
Loans granted to BoD members
Compensation paid to former BoD and GEB members
Page
254
254
255
255
256
256
256
252
253
253
Corporate governance and compensation Advisory vote
Corporate governance and compensation | Compensation
Audited |
Share ownership / entitlements of GEB members1
Name, function
Ralph A.J.G. Hamers, Group Chief Executive Officer
Sergio P. Ermotti, former Group Chief Executive Officer
Christian Bluhm, Group Chief Risk Officer
Markus U. Diethelm, Group General Counsel
Kirt Gardner, Group Chief Financial Officer
Suni Harford, President Asset Management
Robert Karofsky, Co-President Investment Bank
Sabine Keller-Busse, Group Chief Operating Officer and President UBS EMEA
Iqbal Khan, Co-President Global Wealth Management
Edmund Koh, President Asia Pacific
Axel P. Lehmann, President Personal & Corporate Banking and President UBS Switzerland
Tom Naratil, Co-President Global Wealth Management and President UBS Americas
Piero Novelli, Co-President Investment Bank
Markus Ronner, Group Chief Compliance and Governance Officer
TToottaall
oonn
3311 DDeecceemmbbeerr
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
Number of
vested shares
0
TToottaall nnuummbbeerr
ooff sshhaarreess
1144,,884411
Potentially
conferred
voting
rights in %
0.001
Number of
unvested
shares / at
risk2
14,841
-
-
-
-
1,862,480
582,787
2,150,003
218
440,953
706,845
698,402
696,500
532,643
352,329
63,211
627,748
577,606
639,087
423,778
742,546
712,342
421,930
380,340
690,537
522,202
1,383,854
1,307,554
660,240
599,156
302,584
214,850
0
617,858
458,426
165,223
129,807
0
0
357,621
492,476
349,834
315,922
68,253
0
337,062
183,104
331,677
277,978
770,780
609,477
408,897
429,652
130,097
68,097
--
--
44,,001122,,448833
558833,,000055
444400,,995533
11,,332244,,770033
11,,115566,,882288
886611,,772233
666622,,445500
335522,,332299
6633,,221111
998855,,336699
11,,007700,,008822
998888,,992211
773399,,770000
881100,,779999
771122,,334422
775588,,999922
556633,,444444
11,,002222,,221144
880000,,118800
22,,115544,,663344
11,,991177,,003311
11,,006699,,113377
11,,002288,,880088
443322,,668811
228822,,994477
-
0.227
0.035
0.025
0.079
0.065
0.051
0.037
0.021
0.004
0.059
0.061
0.059
0.042
0.048
0.040
0.045
0.032
0.061
0.045
0.128
0.108
0.064
0.058
0.026
0.016
0.675
7,821,828
3,537,520
1111,,335599,,334488
0.761
11 Includes all vested and unvested shares of GEB members, including those held by related parties. No options were held in 2020 and 2019 by any GEB member or any of its related parties. Refer to “Note 27
Employee benefits: variable compensation” in the “Consolidated financial statements” section of our Annual Report 2020 for more information. 22 Includes shares granted under variable compensation plans with
forfeiture provisions. LTIP values reflect the fair value awarded at grant. The actual number of shares vesting in the future will be calculated under the terms of the plans. Refer to the “Group compensation” section
of this report for more information about the plans.
1133,,445500,,445599
5,114,942
8,335,517
22001199
Audited |
Total of all vested and unvested shares of GEB members1,2
SShhaarreess oonn 3311 DDeecceemmbbeerr 22002200
1111,,335599,,334488
3,537,520
1,424,063
1,854,660
2,070,158
1,656,600
774,416
TToottaall of which: vested
of which: vesting
2021
2022
2023
2024
2025
SShhaarreess oonn 3311 DDeecceemmbbeerr 22001199
1133,,445500,,445599
5,114,942
1,798,389
1,811,721
2,199,926
1,517,110
1,008,371
2020
2021
2022
2023
2024
2026
41,931
2025
0
11 Includes shares held by related parties. 22 Includes shares granted under variable compensation plans with forfeiture provisions. The actual number of shares vesting in the future will be calculated under the
terms of the plans. Refer to the “Group compensation” section of this report for more information.
254
254
Advisory vote
Audited |
Number of shares of BoD members1
Name, function
Axel A. Weber, Chairman
David Sidwell, former Vice Chairman and Senior Independent Director2
Jeremy Anderson, Vice Chairman and Senior Independent Director
William C. Dudley, member
Reto Francioni, member
Fred Hu, member
Mark Hughes, member2
Nathalie Rachou, member2
Julie G. Richardson, member
Isabelle Romy, former member2
Robert W. Scully, former member2
Beatrice Weder di Mauro, member
Dieter Wemmer, member
Jeanette Wong, member
TToottaall
oonn 3311 DDeecceemmbbeerr
22002200
NNuummbbeerr ooff sshhaarreess hheelldd
11,,004466,,999944
Voting rights in %
0.062
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
993388,,662277
--
116677,,559955
6666,,774444
3311,,445566
2266,,118811
00
115544,,008866
112255,,662288
4422,,442288
1155,,114455
44,,992200
--
00
--
8888,,440011
4466,,228833
--
114433,,992288
--
7711,,554400
119988,,557788
117722,,339977
8888,,774433
6600,,228855
3333,,772222
00
11,,775500,,779977
0.053
0.009
0.004
0.002
0.002
0.000
0.009
0.007
0.003
0.001
0.000
0.000
0.005
0.003
0.008
0.004
0.012
0.010
0.005
0.003
0.002
0.000
0.104
0.100
11 Includes blocked and unblocked shares held by BoD members, including those held by related parties. No options were granted in 2020 and 2019. 22 At the 2020 AGM, Mark Hughes and Nathalie Rachou were
newly elected and David Sidwell, Isabelle Romy and Robert W. Scully did not stand for re-election.
11,,777722,,888844
22001199
Audited |
Total of all blocked and unblocked shares of BoD members1
TToottaall
of which:
unblocked
of which: blocked until
2021
2022
2023
2024
SShhaarreess oonn 3311 DDeecceemmbbeerr 22002200
11,,775500,,779977
658,642
205,961
197,395
332,743
356,056
SShhaarreess oonn 3311 DDeecceemmbbeerr 22001199
11 Includes shares held by related parties.
11,,777722,,888844
502,095
264,889
299,357
270,111
436,432
2020
2021
2022
2023
255
255
Corporate governance and compensation | Compensation
Audited |
Share ownership / entitlements of GEB members1
Name, function
Ralph A.J.G. Hamers, Group Chief Executive Officer
Sergio P. Ermotti, former Group Chief Executive Officer
Christian Bluhm, Group Chief Risk Officer
Markus U. Diethelm, Group General Counsel
Kirt Gardner, Group Chief Financial Officer
Suni Harford, President Asset Management
Robert Karofsky, Co-President Investment Bank
Sabine Keller-Busse, Group Chief Operating Officer and President UBS EMEA
Iqbal Khan, Co-President Global Wealth Management
Edmund Koh, President Asia Pacific
Axel P. Lehmann, President Personal & Corporate Banking and President UBS Switzerland
Tom Naratil, Co-President Global Wealth Management and President UBS Americas
Piero Novelli, Co-President Investment Bank
Markus Ronner, Group Chief Compliance and Governance Officer
3311 DDeecceemmbbeerr
risk2
vested shares
Number of
TToottaall nnuummbbeerr
Potentially
conferred
voting
ooff sshhaarreess
rights in %
1144,,884411
0.001
1,862,480
2,150,003
44,,001122,,448833
Number of
unvested
shares / at
14,841
-
-
582,787
440,953
706,845
698,402
696,500
532,643
352,329
63,211
627,748
577,606
639,087
423,778
742,546
712,342
421,930
380,340
690,537
522,202
1,383,854
1,307,554
660,240
599,156
302,584
214,850
oonn
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
0
-
-
0
0
218
0
617,858
458,426
165,223
129,807
357,621
492,476
349,834
315,922
68,253
0
337,062
183,104
331,677
277,978
770,780
609,477
408,897
429,652
130,097
68,097
--
--
558833,,000055
444400,,995533
11,,332244,,770033
11,,115566,,882288
11,,007700,,008822
886611,,772233
666622,,445500
335522,,332299
6633,,221111
998855,,336699
998888,,992211
773399,,770000
881100,,779999
771122,,334422
775588,,999922
556633,,444444
11,,002222,,221144
880000,,118800
22,,115544,,663344
11,,991177,,003311
11,,006699,,113377
11,,002288,,880088
443322,,668811
228822,,994477
-
0.227
0.035
0.025
0.079
0.065
0.051
0.037
0.021
0.004
0.059
0.061
0.059
0.042
0.048
0.040
0.045
0.032
0.061
0.045
0.128
0.108
0.064
0.058
0.026
0.016
0.675
0.761
2026
41,931
2025
0
11 Includes all vested and unvested shares of GEB members, including those held by related parties. No options were held in 2020 and 2019 by any GEB member or any of its related parties. Refer to “Note 27
Employee benefits: variable compensation” in the “Consolidated financial statements” section of our Annual Report 2020 for more information. 22 Includes shares granted under variable compensation plans with
forfeiture provisions. LTIP values reflect the fair value awarded at grant. The actual number of shares vesting in the future will be calculated under the terms of the plans. Refer to the “Group compensation” section
of this report for more information about the plans.
7,821,828
3,537,520
1111,,335599,,334488
8,335,517
5,114,942
1133,,445500,,445599
Total of all vested and unvested shares of GEB members1,2
SShhaarreess oonn 3311 DDeecceemmbbeerr 22002200
1111,,335599,,334488
3,537,520
1,424,063
1,854,660
2,070,158
1,656,600
774,416
TToottaall of which: vested
of which: vesting
2021
2022
2023
2024
2025
SShhaarreess oonn 3311 DDeecceemmbbeerr 22001199
1133,,445500,,445599
5,114,942
1,798,389
1,811,721
2,199,926
1,517,110
1,008,371
11 Includes shares held by related parties. 22 Includes shares granted under variable compensation plans with forfeiture provisions. The actual number of shares vesting in the future will be calculated under the
terms of the plans. Refer to the “Group compensation” section of this report for more information.
2020
2021
2022
2023
2024
TToottaall
Audited |
254
Corporate governance and compensation Advisory vote
Corporate governance and compensation | Compensation
Audited |
Loans granted to GEB members1
In line with article 38 of the Articles of Association of UBS Group
AG, GEB members may be granted loans. Such loans are made
in the ordinary course of business on substantially the same
terms as those granted to other employees, including interest
rates and collateral, and neither involve more than the normal
risk of collectability nor contain any other unfavorable features
for the firm. The total amount of such loans must not exceed
CHF 20 million per GEB member.
CHF, except where indicated2
Name, function
Markus U. Diethelm, Group General Counsel (highest loan in 2020)
Axel P. Lehmann, President Personal & Corporate Banking and President UBS Switzerland (highest loan in 2019)
Aggregate of all GEB members4
oonn 3311 DDeecceemmbbeerr
22002200
22001199
22002200
22001199
USD
(for reference)
Loans3
6,924,058
LLooaannss33
66,,113311,,550000
99,,114400,,000000
3311,,883300,,339944
35,944,791
3300,,770000,,335544
11 No loans have been granted to related parties of the GEB members at conditions not customary in the market. 22 Swiss franc and US dollar amounts disclosed represent local currency amounts translated at the
relevant year-end closing exchange rate. 33 All loans granted are secured loans. 44 No unused uncommitted credit facilities in 2020 and 2019.
Audited |
Loans granted to BoD members1
In line with article 33 of the Articles of Association of UBS Group
AG, loans to independent BoD members are made in the
ordinary course of business at general market conditions. The
Chairman, as a non-independent member, may be granted loans
in the ordinary course of business on substantially the same
terms as those granted to employees, including interest rates
and collateral, and neither involve more than the normal risk of
collectability nor contain any other unfavorable features for the
firm. The total amount of such loans must not exceed CHF 20
million per BoD member.
CHF, except where indicated2
Aggregate of all BoD members
oonn 3311 DDeecceemmbbeerr
22002200
22001199
LLooaannss33,,44
22,,110000,,000000
889900,,443399
USD
(for reference)
Loans3,4
2,371,446
11 No loans have been granted to related parties of the BoD members at conditions not customary in the market. 22 Swiss franc and US dollar amounts disclosed represent local currency amounts translated at the
relevant year-end closing exchange rate. 33 All loans granted are secured loans. 44 CHF 600,000 for Reto Francioni and CHF 1,500,000 for Beatrice Weder di Mauro in 2020 and CHF 600,000 for Reto Francioni
and CHF 290,439 for Dieter Wemmer in 2019.
Audited |
Compensation paid to former BoD and GEB members1
CHF, except where indicated2
Former BoD members
Aggregate of all former GEB members3
Aggregate of all former BoD and GEB members
FFoorr tthhee yyeeaarr
Compensation
Benefits
22002200
22001199
22002200
22001199
22002200
22001199
0
0
0
0
0
0
0
0
206,048
51,912
206,048
51,912
TToottaall
00
00
220066,,004488
5511,,991122
220066,,004488
5511,,991122
USD
(for reference)
Total
0
232,682
232,682
11 Compensation or remuneration that is related to the former members’ activity on the BoD or GEB or that is not at market conditions. 22 Swiss franc and US dollar amounts disclosed represent local currency
amounts translated at the relevant year-end closing exchange rate. 33 Includes benefit payments in 2020 to two former GEB members, and for 2019 to one former GEB member.
256
256
Advisory vote
Corporate governance and compensation | Compensation
Audited |
Loans granted to GEB members1
Provisions of the Articles of Association related to compensation
In line with article 38 of the Articles of Association of UBS Group
rates and collateral, and neither involve more than the normal
AG, GEB members may be granted loans. Such loans are made
risk of collectability nor contain any other unfavorable features
in the ordinary course of business on substantially the same
for the firm. The total amount of such loans must not exceed
terms as those granted to other employees, including interest
CHF 20 million per GEB member.
CHF, except where indicated2
Name, function
Aggregate of all GEB members4
Markus U. Diethelm, Group General Counsel (highest loan in 2020)
Axel P. Lehmann, President Personal & Corporate Banking and President UBS Switzerland (highest loan in 2019)
USD
(for reference)
Loans3
6,924,058
oonn 3311 DDeecceemmbbeerr
LLooaannss33
66,,113311,,550000
99,,114400,,000000
3300,,770000,,335544
22002200
22001199
22002200
22001199
3311,,883300,,339944
35,944,791
11 No loans have been granted to related parties of the GEB members at conditions not customary in the market. 22 Swiss franc and US dollar amounts disclosed represent local currency amounts translated at the
relevant year-end closing exchange rate. 33 All loans granted are secured loans. 44 No unused uncommitted credit facilities in 2020 and 2019.
Audited |
Loans granted to BoD members1
In line with article 33 of the Articles of Association of UBS Group
terms as those granted to employees, including interest rates
AG, loans to independent BoD members are made in the
and collateral, and neither involve more than the normal risk of
ordinary course of business at general market conditions. The
collectability nor contain any other unfavorable features for the
Chairman, as a non-independent member, may be granted loans
firm. The total amount of such loans must not exceed CHF 20
in the ordinary course of business on substantially the same
million per BoD member.
CHF, except where indicated2
Aggregate of all BoD members
oonn 3311 DDeecceemmbbeerr
LLooaannss33,,44
22,,110000,,000000
889900,,443399
22002200
22001199
USD
(for reference)
Loans3,4
2,371,446
11 No loans have been granted to related parties of the BoD members at conditions not customary in the market. 22 Swiss franc and US dollar amounts disclosed represent local currency amounts translated at the
relevant year-end closing exchange rate. 33 All loans granted are secured loans. 44 CHF 600,000 for Reto Francioni and CHF 1,500,000 for Beatrice Weder di Mauro in 2020 and CHF 600,000 for Reto Francioni
and CHF 290,439 for Dieter Wemmer in 2019.
Audited |
Compensation paid to former BoD and GEB members1
CHF, except where indicated2
Former BoD members
Aggregate of all former GEB members3
Aggregate of all former BoD and GEB members
FFoorr tthhee yyeeaarr
Compensation
Benefits
22002200
22001199
22002200
22001199
22002200
22001199
0
0
0
0
0
0
0
0
206,048
51,912
206,048
51,912
USD
(for reference)
Total
0
232,682
232,682
TToottaall
00
00
220066,,004488
5511,,991122
220066,,004488
5511,,991122
11 Compensation or remuneration that is related to the former members’ activity on the BoD or GEB or that is not at market conditions. 22 Swiss franc and US dollar amounts disclosed represent local currency
amounts translated at the relevant year-end closing exchange rate. 33 Includes benefit payments in 2020 to two former GEB members, and for 2019 to one former GEB member.
Swiss say-on-pay provisions give
shareholders of companies listed in
Switzerland significant influence over
board and management compensation.
At UBS, this is achieved by means of an
annual binding say-on-pay vote in
accordance with the following provisions
of the Articles of Association (the AoA).
Say on pay
In line with article 43 of the AoA of UBS
Group AG, the General Meeting approves
proposals from the BoD in relation to:
a) the maximum aggregate amount of
compensation of the BoD for the period
until the next AGM;
b) the maximum aggregate amount of
fixed compensation of the GEB for the
following financial year; and
c) the aggregate amount of variable
compensation of the GEB for the
preceding financial year.
The BoD may submit for approval by the
General Meeting deviating or additional
proposals relating to the same or different
periods. If the General Meeting does not
approve a proposal from the BoD, the
BoD will determine, taking into account
all relevant factors, the respective
(maximum) aggregate amount or
(maximum) partial amounts and submit
the amount(s) so determined for approval
by the General Meeting. UBS Group AG
or companies controlled by it may pay or
grant compensation prior to approval by
the General Meeting, subject to
subsequent approval.
Principles of compensation
In line with articles 45 and 46 of the AoA
of UBS Group AG, compensation of the
members of the BoD includes base
remuneration and may include other
compensation elements and benefits.
Compensation of the members of the
BoD is intended to recognize the
responsibility and governance nature of
their role, to attract and retain qualified
individuals, and to ensure alignment with
shareholders’ interests.
Compensation of the members of the
GEB includes fixed and variable
compensation elements. Fixed
compensation includes the base salary
and may include other compensation
elements and benefits. Variable
compensation elements are governed by
financial and non-financial performance
measures that take into account the
performance of UBS Group AG and / or
parts thereof, targets in relation to the
market, other companies or comparable
benchmarks, short- and long-term
strategic objectives, and / or individual
targets. The BoD or, where delegated to
it, the Compensation Committee
determines the respective performance
measures, the overall and individual
performance targets, and their
achievements. The BoD or, where
delegated to it, the Compensation
Committee aims to ensure alignment with
sustainable performance and appropriate
risk-taking through adequate deferrals,
forfeiture conditions, caps on
compensation, harmful acts provisions
and similar means with regard to parts of
or all of the compensation. Parts of
variable compensation are subject to a
multi-year vesting period.
Additional amount for GEB members
appointed after the vote on the
aggregate amount of compensation by
the AGM
In line with article 46 of the AoA of UBS
Group AG, if the maximum aggregate
amount of compensation already
approved by the General Meeting is not
sufficient to also cover the compensation
of a person who becomes a member of or
is being promoted within the GEB after
the General Meeting has approved the
compensation, UBS Group AG, or
companies controlled by it, is authorized
to pay or grant each such GEB member a
supplementary amount during the
compensation period(s) already approved.
The aggregate pool for such
supplementary amounts per
compensation period cannot exceed 40%
of the average of total annual
compensation paid or granted to the GEB
during the previous three years.
› Refer to ubs.com/governance for more
information
256
257
257
Corporate governance and compensation
Advisory vote
Corporate governance and compensation | Compensation
Ernst & Young Ltd
Aeschengraben 27
P.O. Box
CH-4002 Basel
Phone
Fax
www.ey.com/ch
+41 58 286 86 86
+41 58 286 86 00
To the General Meeting of
UBS Group AG, Zurich
Basel, 4 March 2021
Report of the statutory auditor on the compensation report
We have audited the compensation report dated 4 March 2021 of UBS Group AG for the year ended
31 December 2020. The audit was limited to the information according to articles 14 – 16 of the Ordinance
against Excessive Compensation in Stock Exchange Listed Companies (Ordinance) contained in the following
tables labeled “audited” of the compensation report: Total compensation for GEB members, Compensation
details and additional information for non-independent BoD members, Total payments to BoD members,
Remuneration details and additional information for independent BoD members, Loans granted to GEB
members, Loans granted to BoD members and Compensation paid to former BoD and GEB members.
Board of Directors’ responsibility
The Board of Directors is responsible for the preparation and overall fair presentation of the compensation
report in accordance with Swiss law and the Ordinance. The Board of Directors is also responsible for
designing the compensation system and defining individual compensation packages.
Auditor’s responsibility
Our responsibility is to express an opinion on the compensation report. We conducted our audit in accordance
with Swiss Auditing Standards. Those standards require that we comply with ethical requirements and plan
and perform the audit to obtain reasonable assurance about whether the compensation report complies with
Swiss law and articles 14 – 16 of the Ordinance.
An audit involves performing procedures to obtain audit evidence on the disclosures made in the compensation
report with regard to compensation, loans and credits in accordance with articles 14 – 16 of the Ordinance.
The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material
misstatements in the compensation report, whether due to fraud or error. This audit also includes evaluating
the reasonableness of the methods applied to value components of compensation, as well as assessing the
overall presentation of the compensation report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Opinion
In our opinion, the compensation report for the year ended 31 December 2020 of UBS Group AG complies
with Swiss law and articles 14 – 16 of the Ordinance.
Ernst & Young Ltd
Maurice McCormick
Licensed audit expert
(Auditor in charge)
Bruno Patusi
Licensed audit expert
258
258
Financial
statements
5
260
Consolidated
financial statements
Table of contents
262 Management’s report on internal control over financial
263
264
269
reporting
Report of the independent registered public accounting
firm on internal control over financial reporting
Report of the independent registered public accounting
firm on the consolidated financial statements
Statutory auditor’s report on the audit of the
consolidated financial statements
276 UBS Group AG consolidated financial statements
276
276
277
279
280
284
285
Primary financial statements and share information
Income statement
Statement of comprehensive income
Balance sheet
Statement of changes in equity
Share information and earnings per share
Statement of cash flows
287 Notes to the UBS Group AG consolidated financial
statements
1
Summary of significant accounting policies
Segment reporting
287
306
309
309
310
310
311
311
312
2
4
5
6
7
8
Income statement notes
3
Net interest income and other net income from
financial instruments measured at fair value through
profit or loss
Net fee and commission income
Other income
Personnel expenses
General and administrative expenses
Income taxes
Balance sheet notes
9
Financial assets at amortized cost and other
positions in scope of expected credit loss
measurement
Derivative instruments
Financial assets measured at fair value through
other comprehensive income
Property, equipment and software
Goodwill and intangible assets
Other assets
Amounts due to banks and customer deposits
Debt issued designated at fair value
Debt issued measured at amortized cost
Provisions and contingent liabilities
Other liabilities
337 Additional information
337
20
Expected credit loss measurement
Fair value measurement
Offsetting financial assets and financial liabilities
Restricted and transferred financial assets
23
24 Maturity analysis of financial liabilities
25
Hedge accounting
Post-employment benefit plans
Employee benefits: variable compensation
Interests in subsidiaries and other entities
Changes in organization and acquisitions and
disposals of subsidiaries and businesses
Finance lease receivables
Related parties
Invested assets and net new money
Currency translation rates
Events after the reporting period
34
35 Main differences between IFRS and Swiss GAAP
315
315
320
322
322
323
326
326
327
328
330
336
348
364
366
369
370
374
385
390
396
397
398
400
401
401
402
10
11
12
13
14
15
16
17
18
19
21
22
26
27
28
29
30
31
32
33
260
261
Management’s assessment of internal control over financial
reporting as of 31 December 2020
UBS management has assessed the effectiveness of UBS’s
internal control over financial reporting as of 31 December 2020
based on the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal
Control – Integrated Framework (2013 Framework). Based on
this assessment, management believes that, as of 31 December
2020, UBS’s internal control over financial reporting was
effective.
The effectiveness of UBS’s internal control over financial
reporting as of 31 December 2020 has been audited by Ernst &
Young Ltd, UBS’s independent registered public accounting firm,
as stated in their report appearing on page 263, which expresses
an unqualified opinion on the effectiveness of UBS’s internal
control over financial reporting as of 31 December 2020.
Reports of the statutory auditor / independent registered
public accounting firm
The accompanying reports of the independent registered public
accounting firm on the consolidated financial statements (refer
to pages 264 to 268) and internal control over financial
reporting (refer to page 263) of UBS Group AG are included in
our filing on 5 March 2021 with the Securities and Exchange
Commission on Form 20-F pursuant to US reporting obligations.
The accompanying statutory auditor’s report on the audit of
the consolidated financial statements (refer to pages 269 to 275)
of UBS Group AG, in addition to the aforementioned reports, is
included in our Annual Report 2020 available on our website
and filed on 5 March 2021 with all other relevant non-US
exchanges.
Management’s report on internal control over financial
reporting
Management’s responsibility for internal control over financial
reporting
The Board of Directors and management of UBS Group AG
(UBS) are responsible for establishing and maintaining adequate
internal control over financial reporting. UBS’s internal control
over financial reporting is designed to provide reasonable
assurance regarding the preparation and fair presentation of
published financial statements in accordance with International
Financial Reporting Standards
the
International Accounting Standards Board (IASB).
issued by
(IFRS), as
UBS’s internal control over financial reporting includes those
policies and procedures that:
– pertain to the maintenance of records that, in reasonable
transactions and
fairly
reflect
detail, accurately and
dispositions of assets;
– provide reasonable assurance that transactions are recorded
as necessary to permit preparation and fair presentation of
financial statements, and that receipts and expenditures of
the company are being made only in accordance with
authorizations of UBS management; and
– provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of
the company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
262
262
Management’s report on internal control over financial
Management’s assessment of internal control over financial
reporting
reporting
reporting as of 31 December 2020
UBS management has assessed the effectiveness of UBS’s
Management’s responsibility for internal control over financial
internal control over financial reporting as of 31 December 2020
based on the criteria set forth by the Committee of Sponsoring
The Board of Directors and management of UBS Group AG
Organizations of the Treadway Commission (COSO) in Internal
(UBS) are responsible for establishing and maintaining adequate
Control – Integrated Framework (2013 Framework). Based on
internal control over financial reporting. UBS’s internal control
this assessment, management believes that, as of 31 December
over financial reporting is designed to provide reasonable
2020, UBS’s internal control over financial reporting was
assurance regarding the preparation and fair presentation of
effective.
published financial statements in accordance with International
The effectiveness of UBS’s internal control over financial
Financial Reporting Standards
(IFRS), as
issued by
the
reporting as of 31 December 2020 has been audited by Ernst &
International Accounting Standards Board (IASB).
Young Ltd, UBS’s independent registered public accounting firm,
UBS’s internal control over financial reporting includes those
as stated in their report appearing on page 263, which expresses
policies and procedures that:
an unqualified opinion on the effectiveness of UBS’s internal
– pertain to the maintenance of records that, in reasonable
control over financial reporting as of 31 December 2020.
detail, accurately and
fairly
reflect
transactions and
dispositions of assets;
Reports of the statutory auditor / independent registered
– provide reasonable assurance that transactions are recorded
public accounting firm
as necessary to permit preparation and fair presentation of
financial statements, and that receipts and expenditures of
The accompanying reports of the independent registered public
the company are being made only in accordance with
accounting firm on the consolidated financial statements (refer
authorizations of UBS management; and
to pages 264 to 268) and internal control over financial
– provide reasonable assurance regarding prevention or timely
reporting (refer to page 263) of UBS Group AG are included in
detection of unauthorized acquisition, use or disposition of
our filing on 5 March 2021 with the Securities and Exchange
the company’s assets that could have a material effect on the
Commission on Form 20-F pursuant to US reporting obligations.
financial statements.
The accompanying statutory auditor’s report on the audit of
the consolidated financial statements (refer to pages 269 to 275)
Because of its inherent limitations, internal control over
of UBS Group AG, in addition to the aforementioned reports, is
financial reporting may not prevent or detect misstatements.
included in our Annual Report 2020 available on our website
Also, projections of any evaluation of effectiveness to future
and filed on 5 March 2021 with all other relevant non-US
periods are subject to the risk that controls may become
exchanges.
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
Ernst & Young Ltd
Aeschengraben 9
P.O. Box
4002 Basel
Phone: +41 58 286 86 86
Fax: +41 58 286 86 00
www.ey.com/ch
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of UBS Group AG
Opinion on Internal Control over Financial Reporting
We have audited UBS Group AG and subsidiaries’ internal control over financial reporting as of 31 December
2020, based on criteria established in Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion,
UBS Group AG and subsidiaries (“the Group”) maintained, in all material respects, effective internal control
over financial reporting as of 31 December 2020, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the consolidated balance sheets of the Group as of 31 December 2020 and 2019,
the related consolidated income statements, statements of comprehensive income, statements of changes in
equity and statements of cash flows for each of the three years in the period ended 31 December 2020, and
the related notes and our report dated 4 March 2021 expressed an unqualified opinion thereon.
Basis for Opinion
The Group’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion
on the Group’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Group in accordance with
the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective internal control over financial
reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk, and performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures
of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Ernst & Young Ltd
Basel, 4 March 2021
262
263
Financial statements Ernst & Young Ltd
Aeschengraben 9
P.O. Box
4002 Basel
Phone: +41 58 286 86 86
Fax: +41 58 286 86 00
www.ey.com/ch
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of UBS Group AG
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of UBS Group AG and subsidiaries (“the
Group”) as of 31 December 2020 and 2019, the related consolidated income statements, statements of
comprehensive income, statements of changes in equity and statements of cash flows for each of the three
years in the period ended 31 December 2020, and the related notes to the consolidated financial statements,
including the information identified as “audited” as described in Note 1 (collectively referred to as the
“consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all
material respects, the financial position of the Group at 31 December 2020 and 2019, and the results of its
operations and its cash flows for each of the three years in the period ended 31 December 2020, in conformity
with the International Financial Reporting Standards as issued by the International Accounting Standards
Board.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the Group’s internal control over financial reporting as of 31 December 2020, based
on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework) and our report dated 4 March 2021 expressed
an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Group’s Board of Directors. Our responsibility is to
express an opinion on the Group’s financial statements based on our audits. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Group in accordance with
the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free
of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess
the risks of material misstatement of the financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial
statements that were communicated or required to be communicated to the audit committee and that: (1)
relate to accounts or disclosures that are material to the financial statements and (2) involved our especially
challenging, subjective or complex judgments. The communication of critical audit matters does not alter in
any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matters below, providing separate opinions on the critical audit matters or on
the accounts or disclosures to which they relate.
264
2
Valuation of complex or illiquid instruments at fair value in accordance with IFRS 9 and IFRS 13
Description of
the Matter
At 31 December 2020, as explained in Notes 1 and 21 to the consolidated financial statements,
the Group held financial assets and liabilities measured at fair value of USD 404,805 million
and USD 325,069 million, including financial instruments that did not trade in active markets.
These instruments are reported within the following accounts: financial assets and liabilities at
fair value held for trading, derivative financial instruments, financial assets and liabilities at fair
value not held for trading, other financial liabilities designated at fair value and debt issued
designated at fair value. In determining the fair value of these financial instruments, the Group
used valuation techniques, modelling assumptions, and estimates of unobservable market
inputs which required significant management judgment.
Auditing management’s judgments and assumptions used in the estimation of the fair value of
these instruments was complex due to the highly judgmental nature of valuation techniques,
modelling assumptions and significant unobservable inputs. This included consideration of any
incremental risk arising from the impact of COVID-19 on valuation techniques and supporting
external marks. The valuation techniques that required judgement were comprised of
discounted cash flow and earnings-based valuation techniques. Judgmental modelling
assumptions result from a range of different models or model calibrations used by market
participants. Valuation inputs which were particularly complex and subjective included those
with a limited degree of observability and the extrapolation, interpolation or calibration of curves
using limited and proxy data points. Examples of such inputs included unobservable credit
spreads and bond prices, volatility, and correlation.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness
of the controls over management’s financial instruments valuation processes, including
controls over market data inputs, model and methodology governance, and valuation
adjustments.
We tested the valuation techniques, models and methodologies, and the inputs used in those
models, as outlined above, by performing an independent revaluation of certain complex or
illiquid financial assets and liabilities with the support of specialists, using independent models
and inputs, and comparing inputs to available market data among other procedures.
In addition, we evaluated the methodology and inputs used by management in determining
valuation adjustments, including funding and credit fair value adjustments, on uncollateralized
derivatives and fair value option liabilities.
We also assessed management’s disclosures regarding fair value measurement (within Notes
1 and 21 to the consolidated financial statements).
Recognition of deferred tax assets
Description of
the Matter
At 31 December 2020, the Group’s deferred tax assets (“DTA”) were USD 9,212 million (see
Note 8 to the consolidated financial statements). DTAs are recognized to the extent it is
probable that taxable profits will be available, against which, the deductible temporary
differences or the carryforward of unused tax losses within the loss carryforward period can
be utilized. There is significant judgment exercised when estimating the future taxable income
that is not based on the reversal of taxable temporary differences. Management’s estimate of
future taxable profits is based on the strategic plans and is sensitive to the assumptions made
265
Financial statements How We
Addressed the
Matter in Our
Audit
3
in estimating future taxable income. Additionally, management supports a portion of the DTA
with tax planning strategies.
Auditing management’s assessment of the realizability of the Group’s DTAs was complex due
to the highly judgmental nature of estimating future taxable profits over the life of the
underlying tax loss carryforwards. Estimating future profitability is inherently subjective as it is
sensitive to future economic, market and other conditions, which are difficult to predict.
Specifically, some of the more subjective key macro-economic assumptions used included
gross domestic product growth rates, equity market performance, and interest rates. The
subjectivity of these assumptions has increased due to the uncertain projected impact of
COVID-19. Additionally, auditing tax planning strategies requires specific tax knowledge and
understanding of the applicable tax laws, which are complex and require judgment in the
interpretation of such laws and the related application.
We obtained an understanding, evaluated the design, and tested the operating effectiveness
of management’s controls over DTA valuation, which included the assumptions used in
developing the strategic plans, tax planning strategies and estimating future taxable income.
We assessed the completeness and accuracy of the data used for the estimations of future
taxable income. This included recalculating the outputs of the models applied to the
recognition process for DTAs.
We involved specialists to assist in assessing the key economic assumptions embedded in
the strategic plans. We compared key assumptions used to forecast future taxable income to
externally available historical and prospective data and assumptions, and assessed the
sensitivity of the outcomes using reasonably possible changes in assumptions.
In addition, we assessed the appropriateness and impact of management’s tax planning
strategies by evaluating whether these strategies were available, feasible, and prudent. This
evaluation was based on applicable tax laws and an assessment of management’s
interpretations of such tax laws, our understanding of the Group’s business and industry, and
the Group’s ability to implement the strategies.
We also assessed management’s disclosure regarding recognized and unrecognized
deferred tax assets (within Note 8 to the consolidated financial statements).
Legal provisions & contingent liabilities
Description of
the Matter
At 31 December 2020, the Group’s provisions for litigation, regulatory and similar matters
(legal provisions) were USD 2,135 million. As explained in Note 18 to the consolidated
financial statements, the Group operates in a legal and regulatory environment that is exposed
to significant litigation and similar risks arising from disputes and regulatory proceedings. Such
matters are subject to many uncertainties and the outcomes may be difficult to predict. These
uncertainties inherently affect the amount and timing of potential outflows with respect to the
legal provisions which have been established and contingent liabilities.
266
4
Auditing management’s assessment of legal provisions and contingent liabilities was complex
and judgmental due to the significant estimation required to evaluate management’s estimate
of the amount and the probability that an outflow of resources will be required for existing legal
matters. In particular, these legal provisions are based on management’s estimation of the
likelihood of the occurrence of certain scenarios and related impact on the Group’s financial
position.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operational effectiveness
of management’s controls over the legal provision and contingencies process. Our procedures
included testing management’s review of the accuracy of the inputs to the estimation of the
likelihood of the occurrence of certain scenarios and related impact on the Group’s financial
position.
We assessed the methodologies on which the provision amounts were based with the
involvement of specialists, recalculated the provisions, and tested the underlying information.
We inspected legal analyses of the matters supporting the judgmental aspects impacted by
legal interpretations. We obtained correspondence directly from external legal counsel to
assess the information provided by management and performed inquiries with external
counsel as necessary.
We also assessed management’s disclosure regarding legal provisions and contingent
liabilities (within Note 18 to the consolidated financial statements).
Expected credit losses
Description of
the Matter
At 31 December 2020, the Group’s allowances and provisions for expected credit losses
(“ECL”) was USD 1,468 million. As explained in Note 1, Note 9 and Note 20 to the consolidated
financial statements, ECL is recognized for financial assets measured at amortized cost,
financial assets measured at fair value through other comprehensive income, fee and lease
receivables, financial guarantees and irrevocable loan commitments. ECL is also recognized
on the undrawn portion of revolving revocable credit lines, which include the Group’s credit
card limits and master credit facilities. The allowances and provisions for ECL consists of
exposures that are in default which are individually evaluated for impairment (stage 3), as well
as losses inherent in the loan portfolio that are not specifically identified (stage 1 and stage 2).
Management’s ECL estimates represent the difference between contractual cash flows and
those the Group expects to receive, discounted at the effective interest rate. The method used
to calculate ECL is based on a combination of the following principal factors: probability of
default (“PD”), loss given default (“LGD”) and exposure at default (“EAD”).
Auditing management’s estimate of the allowances and provisions for ECL was complex due
to the highly judgmental nature of forward-looking economic scenarios, their probability
weightings, and the credit risk models used to estimate stage 1 and stage 2 ECL. In the current
unprecedented economic environment resulting from the COVID-19 pandemic, ECL
estimation requires higher management judgement, specifically within the following two areas:
(i) scenario selection, including assumptions about the scenario severity, the form and shape
of the recovery pattern, and the number of scenarios necessary to sufficiently cover the
bandwidth of potential outcomes, as well as related scenario weights; and, (ii) the impact on
267
Financial statements 5
the ECL models, including related model overlays implemented by management, since the
output from historic data based ECL models may be less appropriate.
Additionally, auditing the measurement of individual ECL for stage 3 was complex due to the
high degree of judgment involved in management’s process for estimating ECL based on LGD
assumptions. These LGD assumptions take into account expected future cash flows from
collateral and other credit enhancements or expected payouts from bankruptcy proceedings
for unsecured claims and, where applicable, time to realization of collateral and the seniority
of claims.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness
of management’s controls over the ECL estimate, including management’s choice of, and the
probability weighting assigned to, the forward-looking economic scenarios used in measuring
ECL. We evaluated management’s methodologies and governance controls for developing
and monitoring the economic scenarios used and the probability weightings assigned to them,
and any related overlays. Supported by specialists, we assessed the key macroeconomic
variables used in the forward-looking scenarios, such as real gross domestic product growth,
unemployment rate, interest rates and house price indices.
We obtained an understanding, evaluated the design and tested the operating effectiveness
of controls over credit risk models used in the ECL estimate, including controls over the
completeness and accuracy of model input data, calculation logic, output data used in the
overall ECL calculation, and any related overlays. With the support of specialists, we
performed an evaluation of management’s models and tested the model outcomes by
inspecting model documentation, reperforming model calculations, and comparing data used
as inputs to management’s forecast to external sources, among other procedures.
For the measurement of stage 3, we obtained an understanding, evaluated the design and
tested the operating effectiveness of controls over management’s process, including an
evaluation of the assumptions used by management regarding the future cash flows from the
debtors’ continuing operations and/or the liquidation of collateral. Supported by specialists in
certain areas, we additionally tested collateral valuation, cash flow assumptions and exit
strategies by performing inquiries of management, inspecting underlying documents, such as
loan contracts, financial statements, covenants, budgets and business plans, and by re-
performing discounted cash flow calculations among other procedures.
We also assessed management’s disclosures regarding financial assets at amortized cost and
other positions in scope of expected credit loss measurement (Note 1, Note 9 and Note 20 to
the consolidated financial statements).
Ernst & Young Ltd
We have served as the Group’s auditor since 1998.
Basel, Switzerland
4 March 2021
268
Ernst & Young Ltd
Aeschengraben 9
P.O. Box
CH-4002 Basel
Phone:
Fax:
www.ey.com/ch
+41 58 286 86 86
+41 58 286 86 00
To the General Meeting of
UBS Group AG, Zurich
Basel, 4 March 2021
Statutory auditor’s report on the audit of the consolidated financial statements
Opinion
We have audited the consolidated financial statements of UBS Group AG and its subsidiaries (“the Group”),
which comprise the consolidated balance sheets as of 31 December 2020 and 31 December 2019, and the
consolidated income statements, statements of comprehensive income, statements of changes in equity
and statements of cash flows for each of the three years in the period ended 31 December 2020, and the
related notes to the consolidated financial statements, including the information identified as “audited” as
described in Note 1 (collectively referred to as the “consolidated financial statements”).
In our opinion, the accompanying consolidated financial statements give a true and fair view of the
consolidated financial position of the Group as at 31 December 2020 and 31 December 2019, and the
consolidated financial performance and its consolidated cash flows for each of the three years in the period
ended 31 December 2020 in accordance with International Financial Reporting Standards (IFRS) and
comply with Swiss law.
Basis for opinion
We conducted our audit in accordance with Swiss law, International Standards on Auditing (ISAs) and Swiss
Auditing Standards. Our responsibilities under those provisions and standards are further described in the
Auditor’s responsibilities for the audit of the consolidated financial statements section of our report.
We are independent of the Group in accordance with the provisions of Swiss law and the requirements of
the Swiss audit profession, as well as the International Code of Ethics for Professional Accountants
(including International Independence Standards) of the International Ethics Standards Board for
Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these
requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements of the current period. These matters were addressed in the
context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters. For each matter below, our description of how
our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the
consolidated financial statements section of our report, including in relation to these matters. Accordingly,
our audit included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the consolidated financial statements. The results of our audit procedures,
including the procedures performed to address the matters below, provide the basis for our audit opinion on
the accompanying consolidated financial statements.
269
Financial statements 2
Valuation of complex or illiquid instruments at fair value in accordance with IFRS 9 and IFRS 13
Area of focus At 31 December 2020, as explained in Notes 1 and 21 to the consolidated financial
statements, the Group held financial assets and liabilities measured at fair value of USD
404,805 million and USD 325,069 million, including financial instruments that did not trade
in active markets. These instruments are reported within the following accounts: financial
assets and liabilities at fair value held for trading, derivative financial instruments, financial
assets and liabilities at fair value not held for trading, other financial liabilities designated
at fair value and debt issued designated at fair value. In determining the fair value of these
financial instruments, the Group used valuation techniques, modelling assumptions, and
estimates of unobservable market inputs which required significant management judgment.
Auditing management’s judgments and assumptions used in the estimation of the fair value
of these instruments was complex due to the highly judgmental nature of valuation
techniques, modelling assumptions and significant unobservable inputs. This included
consideration of any incremental risk arising from the impact of COVID-19 on valuation
techniques and supporting external marks. The valuation techniques that required
judgement were comprised of discounted cash flow and earnings-based valuation
techniques. Judgmental modelling assumptions result from a range of different models or
model calibrations used by market participants. Valuation inputs which were particularly
complex and subjective included those with a limited degree of observability and the
extrapolation, interpolation or calibration of curves using limited and proxy data points.
Examples of such inputs included unobservable credit spreads and bond prices, volatility,
and correlation.
Our audit
response
We obtained an understanding, evaluated the design and tested the operating effective-
ness of the controls over management’s financial instruments valuation processes,
including controls over market data inputs, model and methodology governance, and
valuation adjustments.
We tested the valuation techniques, models and methodologies, and the inputs used in
those models, as outlined above, by performing an independent revaluation of certain
complex or illiquid financial assets and liabilities with the support of specialists, using
independent models and inputs, and comparing inputs to available market data among
other procedures.
In addition, we evaluated the methodology and inputs used by management in determining
valuation adjustments,
fair value adjustments, on
funding and credit
uncollateralized derivatives and fair value option liabilities.
including
We also assessed management’s disclosures regarding fair value measurement (within
Notes 1 and 21 to the consolidated financial statements).
Recognition of deferred tax assets
Area of focus At 31 December 2020, the Group’s deferred tax assets (“DTA”) were USD 9,212 million
(see Note 8 to the consolidated financial statements). DTAs are recognized to the extent it
is probable that taxable profits will be available, against which, the deductible temporary
differences or the carryforward of unused tax losses within the loss carryforward period
can be utilized. There is significant judgment exercised when estimating the future taxable
income that is not based on the reversal of taxable temporary differences. Management’s
270
3
estimate of future taxable profits is based on the strategic plans and is sensitive to the
assumptions made in estimating future taxable income. Additionally, management
supports a portion of the DTA with tax planning strategies.
Auditing management’s assessment of the realizability of the Group’s DTAs was complex
due to the highly judgmental nature of estimating future taxable profits over the life of the
underlying tax loss carryforwards. Estimating future profitability is inherently subjective as
it is sensitive to future economic, market and other conditions, which are difficult to predict.
Specifically, some of the more subjective key macro-economic assumptions used included
gross domestic product growth rates, equity market performance, and interest rates. The
subjectivity of these assumptions has increased due to the uncertain projected impact of
COVID-19. Additionally, auditing tax planning strategies requires specific tax knowledge
and understanding of the applicable tax laws, which are complex and require judgment in
the interpretation of such laws and the related application.
Our audit
response
We obtained an understanding, evaluated the design, and tested the operating
effectiveness of management’s controls over DTA valuation, which included the
assumptions used in developing the strategic plans, tax planning strategies and estimating
future taxable income.
We assessed the completeness and accuracy of the data used for the estimations of future
taxable income. This included recalculating the outputs of the models applied to the
recognition process for DTAs.
We involved specialists to assist in assessing the key economic assumptions embedded
in the strategic plans. We compared key assumptions used to forecast future taxable
income to externally available historical and prospective data and assumptions, and
assessed the sensitivity of the outcomes using reasonably possible changes in
assumptions.
In addition, we assessed the appropriateness and impact of management’s tax planning
strategies by evaluating whether these strategies were available, feasible, and prudent.
This evaluation was based on applicable tax laws and an assessment of management’s
interpretations of such tax laws, our understanding of the Group’s business and industry,
and the Group’s ability to implement the strategies.
We also assessed management’s disclosure regarding recognized and unrecognized
deferred tax assets (within Note 8 to the consolidated financial statements).
Legal provisions & contingent liabilities
Area of focus At 31 December 2020, the Group’s provisions for litigation, regulatory and similar matters
(legal provisions) were USD 2,135 million. As explained in Note 18 to the consolidated
financial statements, the Group operates in a legal and regulatory environment that is
exposed to significant litigation and similar risks arising from disputes and regulatory
proceedings. Such matters are subject to many uncertainties and the outcomes may be
difficult to predict. These uncertainties inherently affect the amount and timing of potential
outflows with respect to the legal provisions which have been established and contingent
liabilities.
271
Financial statements 4
Auditing management’s assessment of legal provisions and contingent liabilities was
complex and judgmental due to the significant estimation required to evaluate
management’s estimate of the amount and the probability that an outflow of resources will
be required for existing legal matters. In particular, these legal provisions are based on
management’s estimation of the likelihood of the occurrence of certain scenarios and
related impact on the Group’s financial position.
Our audit
response
We obtained an understanding, evaluated the design and tested the operational
effectiveness of management’s controls over the legal provision and contingencies
process. Our procedures included testing management’s review of the accuracy of the
inputs to the estimation of the likelihood of the occurrence of certain scenarios and related
impact on the Group’s financial position.
We assessed the methodologies on which the provision amounts were based with the
involvement of specialists, recalculated the provisions, and tested the underlying
information. We inspected legal analyses of the matters supporting the judgmental aspects
impacted by legal interpretations. We obtained correspondence directly from external legal
counsel to assess the information provided by management and performed inquiries with
external counsel as necessary.
We also assessed management’s disclosure regarding legal provisions and contingent
liabilities (within Note 18 to the consolidated financial statements).
Expected credit losses
Area of focus At 31 December 2020, the Group’s allowances and provisions for expected credit losses
(“ECL”) was USD 1,468 million. As explained in Note 1, Note 9 and Note 20 to the
consolidated financial statements, ECL is recognized for financial assets measured at
amortized cost, financial assets measured at fair value through other comprehensive
income, fee and lease receivables, financial guarantees and irrevocable loan commitments.
ECL is also recognized on the undrawn portion of revolving revocable credit lines, which
include the Group’s credit card limits and master credit facilities. The allowances and
provisions for ECL consists of exposures that are in default which are individually evaluated
for impairment (stage 3), as well as losses inherent in the loan portfolio that are not
specifically identified (stage 1 and stage 2). Management’s ECL estimates represent the
difference between contractual cash flows and those the Group expects to receive,
discounted at the effective interest rate. The method used to calculate ECL is based on a
combination of the following principal factors: probability of default (“PD”), loss given default
(“LGD”) and exposure at default (“EAD”).
Auditing management’s estimate of the allowances and provisions for ECL was complex
due to the highly judgmental nature of forward-looking economic scenarios, their probability
weightings, and the credit risk models used to estimate stage 1 and stage 2 ECL. In the
current unprecedented economic environment resulting from the COVID-19 pandemic,
ECL estimation requires higher management judgement, specifically within the following
two areas: (i) scenario selection, including assumptions about the scenario severity, the
form and shape of the recovery pattern, and the number of scenarios necessary to
sufficiently cover the bandwidth of potential outcomes, as well as related scenario weights;
and, (ii) the impact on the ECL models, including related model overlays implemented by
272
Our audit
response
5
management, since the output from historic data based ECL models may be less
appropriate.
Additionally, auditing the measurement of individual ECL for stage 3 was complex due to
the high degree of judgment involved in management’s process for estimating ECL based
on LGD assumptions. These LGD assumptions take into account expected future cash
flows from collateral and other credit enhancements or expected payouts from bankruptcy
proceedings for unsecured claims and, where applicable, time to realization of collateral
and the seniority of claims.
We obtained an understanding, evaluated the design and tested the operating
effectiveness of management’s controls over the ECL estimate, including management’s
choice of, and the probability weighting assigned to, the forward-looking economic
scenarios used in measuring ECL. We evaluated management’s methodologies and
governance controls for developing and monitoring the economic scenarios used and the
probability weightings assigned to them, and any related overlays. Supported by
specialists, we assessed the key macroeconomic variables used in the forward-looking
scenarios, such as real gross domestic product growth, unemployment rate, interest rates
and house price indices.
We obtained an understanding, evaluated the design and tested the operating
effectiveness of controls over credit risk models used in the ECL estimate, including
controls over the completeness and accuracy of model input data, calculation logic, output
data used in the overall ECL calculation, and any related overlays. With the support of
specialists, we performed an evaluation of management’s models and tested the model
outcomes by inspecting model documentation, reperforming model calculations, and
comparing data used as inputs to management’s forecast to external sources, among other
procedures.
For the measurement of stage 3, we obtained an understanding, evaluated the design and
tested the operating effectiveness of controls over management’s process, including an
evaluation of the assumptions used by management regarding the future cash flows from
the debtors’ continuing operations and/or the liquidation of collateral. Supported by
specialists in certain areas, we additionally tested collateral valuation, cash flow
assumptions and exit strategies by performing inquiries of management, inspecting
underlying documents, such as loan contracts, financial statements, covenants, budgets
and business plans, and by re-performing discounted cash flow calculations among other
procedures.
We also assessed management’s disclosures regarding financial assets at amortized cost
and other positions in scope of expected credit loss measurement (Note 1, Note 9 and Note
20 to the consolidated financial statements).
IT logical access and change management controls relevant to financial reporting
Area of focus The Group’s business and financial accounting and reporting processes are highly
dependent on its information technology (“IT”) systems. This dependency increased during
the 2020 COVID-19 pandemic when the Group shifted to a remote working environment,
with the bulk of its workforce working outside the office. The Group continues to invest in
273
Financial statements 6
its IT systems to meet client needs and business requirements including the effectiveness
of its IT general controls (“ITGCs”) relevant to IT logical access and change management.
Auditing management’s ITGCs relevant to IT logical access and change management was
complex as the Group is a multi-location organization and in addition has a significant
number of IT systems and applications relevant to financial reporting.
Our audit
response
In assessing the effectiveness of management’s ITGCs related to IT logical access and
change management, we utilized IT auditors as part of our audit team. Our audit procedures
focused on the IT infrastructure and applications relevant to financial reporting. We
obtained an understanding and evaluated the design, and tested the operating
effectiveness of key IT logical access and change management controls.
Our audit procedures related to IT logical access included tests of user access manage-
ment, privileged user access, periodic access right recertifications, and user authentication
controls.
Our audit procedures related to IT change management included tests of management’s
program change test approach, approval of change requests, as well as segregation of
duties.
Other information in the annual report
The Board of Directors is responsible for the other information in the annual report. The other information
comprises all
information included in the annual report, but does not include the consolidated financial
statements, the stand-alone financial statements of UBS Group AG, the compensation report (pages
254-255), and our auditor’s reports thereon.
Our opinions on the consolidated financial statements, the standalone financial statements of UBS Group
AG and the compensation report do not cover the other information in the annual report and we do not
express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information in the annual report and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise
appears to be materially misstated. If, based on the work we have performed, we conclude that there is a
material misstatement of this other information, we are required to report that fact. We have nothing to report
in this regard.
Responsibility of the Board of Directors for the consolidated financial statements
The Board of Directors is responsible for the preparation of the consolidated financial statements that give
a true and fair view in accordance with IFRS and the provisions of Swiss law, and for such internal control
as the Board of Directors determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Board of Directors is responsible for assessing the
Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless the Board of Directors either intends to liquidate
the Group or to cease operations, or has no realistic alternative but to do so.
274
7
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with Swiss law, ISAs and Swiss Auditing Standards will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated financial statements.
A further description of our responsibilities for the audit of the consolidated financial statements is located
at the website of EXPERTsuisse: http://www.expertsuisse.ch/en/audit-report-for-public-companies. This
description forms part of our auditor’s report.
Report on other legal and regulatory requirements
In accordance with article 728a para. 1 item 3 CO and the Swiss Auditing Standard 890, we confirm that an
internal control system exists, which has been designed for the preparation of consolidated financial
statements according to the instructions of the Board of Directors.
We recommend that the consolidated financial statements submitted to you be approved.
Ernst & Young Ltd
Maurice McCormick
Licensed audit expert
(Auditor in charge)
Robert E. Jacob, Jr.
Certified Public Accountant (U.S.)
275
Financial statements Consolidated financial statements
UBS Group AG consolidated financial
statements
Primary financial statements and share information
Audited |
Income statement
USD million
Interest income from financial instruments measured at amortized cost and fair value through
other comprehensive income
Interest expense from financial instruments measured at amortized cost
Net interest income from financial instruments measured at fair value through profit or loss
Net interest income
Other net income from financial instruments measured at fair value through profit or loss
Credit loss (expense) / release
Fee and commission income
Fee and commission expense
Net fee and commission income
Other income
Total operating income
Personnel expenses
General and administrative expenses
Depreciation and impairment of property, equipment and software
Amortization and impairment of goodwill and intangible assets
Total operating expenses
Operating profit / (loss) before tax
Tax expense / (benefit)
Net profit / (loss)
Net profit / (loss) attributable to non-controlling interests
NNeett pprrooffiitt // ((lloossss)) aattttrriibbuuttaabbllee ttoo sshhaarreehhoollddeerrss
Earnings per share (USD)
Basic
Diluted
Note
3311..1122..2200
31.12.19
31.12.18
For the year ended
3
3
3
3
3
20
4
4
4
5
6
7
12
13
8
88,,881100
((44,,224477))
11,,229999
55,,886622
66,,996600
((669944))
2200,,996611
((11,,777755))
1199,,118866
11,,007766
3322,,339900
1177,,222244
44,,888855
22,,006699
5577
2244,,223355
88,,115555
11,,558833
66,,557722
1155
66,,555577
10,684
(7,194)
1,011
4,501
6,842
(78)
19,110
(1,696)
17,413
212
28,889
16,084
5,288
1,765
175
23,312
5,577
1,267
4,310
6
4,304
10,100
(6,391)
1,338
5,048
6,960
(118)
19,598
(1,703)
17,895
428
30,213
16,132
6,797
1,228
65
24,222
5,991
1,468
4,522
7
4,516
11..8833
11..7777
1.17
1.14
1.21
1.18
276
276
Consolidated financial statements
UBS Group AG consolidated financial
statements
Primary financial statements and share information
Interest income from financial instruments measured at amortized cost and fair value through
Interest expense from financial instruments measured at amortized cost
Net interest income from financial instruments measured at fair value through profit or loss
Other net income from financial instruments measured at fair value through profit or loss
Audited |
Income statement
USD million
other comprehensive income
Net interest income
Credit loss (expense) / release
Fee and commission income
Fee and commission expense
Net fee and commission income
Other income
Total operating income
Personnel expenses
General and administrative expenses
Depreciation and impairment of property, equipment and software
Amortization and impairment of goodwill and intangible assets
Total operating expenses
Operating profit / (loss) before tax
Tax expense / (benefit)
Net profit / (loss)
Net profit / (loss) attributable to non-controlling interests
NNeett pprrooffiitt // ((lloossss)) aattttrriibbuuttaabbllee ttoo sshhaarreehhoollddeerrss
Earnings per share (USD)
Basic
Diluted
20
3
3
3
3
3
4
4
4
5
6
7
8
12
13
For the year ended
88,,881100
((44,,224477))
11,,229999
55,,886622
66,,996600
((669944))
2200,,996611
((11,,777755))
1199,,118866
11,,007766
3322,,339900
1177,,222244
44,,888855
22,,006699
5577
2244,,223355
88,,115555
11,,558833
66,,557722
1155
66,,555577
10,684
(7,194)
1,011
4,501
6,842
(78)
19,110
(1,696)
17,413
212
28,889
16,084
5,288
1,765
175
23,312
5,577
1,267
4,310
6
4,304
10,100
(6,391)
1,338
5,048
6,960
(118)
19,598
(1,703)
17,895
428
30,213
16,132
6,797
1,228
65
24,222
5,991
1,468
4,522
7
4,516
11..8833
11..7777
1.17
1.14
1.21
1.18
Statement of comprehensive income
USD million
Comprehensive income attributable to shareholders
NNeett pprrooffiitt // ((lloossss))
OOtthheerr ccoommpprreehheennssiivvee iinnccoommee tthhaatt mmaayy bbee rreeccllaassssiiffiieedd ttoo tthhee iinnccoommee ssttaatteemmeenntt
FFoorreeiiggnn ccuurrrreennccyy ttrraannssllaattiioonn
Foreign currency translation movements related to net assets of foreign operations, before tax
Effective portion of changes in fair value of hedging instruments designated as net investment hedges, before tax
Foreign currency translation differences on foreign operations reclassified to the income statement
Effective portion of changes in fair value of hedging instruments designated as net investment hedges reclassified to
the income statement
Income tax relating to foreign currency translations, including the effect of net investment hedges
Note
3311..1122..2200
31.12.19
31.12.18
Subtotal foreign currency translation, net of tax
FFiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt ffaaiirr vvaalluuee tthhrroouugghh ootthheerr ccoommpprreehheennssiivvee iinnccoommee
Net unrealized gains / (losses), before tax
Realized gains reclassified to the income statement from equity
Realized losses reclassified to the income statement from equity
Income tax relating to net unrealized gains / (losses)
Subtotal financial assets measured at fair value through other comprehensive income, net of tax
CCaasshh ffllooww hheeddggeess ooff iinntteerreesstt rraattee rriisskk
Effective portion of changes in fair value of derivative instruments designated as cash flow hedges, before tax
Net (gains) / losses reclassified to the income statement from equity
Income tax relating to cash flow hedges
Subtotal cash flow hedges, net of tax
CCoosstt ooff hheeddggiinngg
Change in fair value of cost of hedging, before tax
Amortization of initial cost of hedging to the income statement
Income tax relating to cost of hedging
Subtotal cost of hedging, net of tax
TToottaall ootthheerr ccoommpprreehheennssiivvee iinnccoommee tthhaatt mmaayy bbee rreeccllaassssiiffiieedd ttoo tthhee iinnccoommee ssttaatteemmeenntt,, nneett ooff ttaaxx
OOtthheerr ccoommpprreehheennssiivvee iinnccoommee tthhaatt wwiillll nnoott bbee rreeccllaassssiiffiieedd ttoo tthhee iinnccoommee ssttaatteemmeenntt
DDeeffiinneedd bbeenneeffiitt ppllaannss
Gains / (losses) on defined benefit plans, before tax
Income tax relating to defined benefit plans
Subtotal defined benefit plans, net of tax
OOwwnn ccrreeddiitt oonn ffiinnaanncciiaall lliiaabbiilliittiieess ddeessiiggnnaatteedd aatt ffaaiirr vvaalluuee
Gains / (losses) from own credit on financial liabilities designated at fair value, before tax
Income tax relating to own credit on financial liabilities designated at fair value
Subtotal own credit on financial liabilities designated at fair value, net of tax
TToottaall ootthheerr ccoommpprreehheennssiivvee iinnccoommee tthhaatt wwiillll nnoott bbee rreeccllaassssiiffiieedd ttoo tthhee iinnccoommee ssttaatteemmeenntt,, nneett ooff ttaaxx
TToottaall ootthheerr ccoommpprreehheennssiivvee iinnccoommee
TToottaall ccoommpprreehheennssiivvee iinnccoommee aattttrriibbuuttaabbllee ttoo sshhaarreehhoollddeerrss
Table continues on the next page.
For the year ended
Note
3311..1122..2200
31.12.19
31.12.18
66,,555577
4,304
4,516
11
25
25
26
21
200
(134)
52
(14)
0
104
189
(33)
2
(41)
117
1,571
(175)
(253)
1,143
(725)
181
3
2
(2)
(541)
(56)
0
0
12
(45)
(42)
(294)
67
(269)
22,,110033
((993366))
((77))
22
((6677))
11,,00995511
222233
((4400))
00
((4488))
113366
22,,001122
((777700))
((223311))
11,,00111122
((4466))
3333
00
((1133))
22,,223300
1,363
(855)
((332277))33
110099
((221188))
((229933))
00
((229933))
((551111))
(146)
(41)
(186)
(400)
8
(392)
(578)
(220)
276
56
517
(8)
509
565
11,,771199
88,,227766
785
5,089
(290)
4,225
276
277
277
Financial statements Consolidated financial statements
Statement of comprehensive income (continued)
Table continued from previous page.
USD million
Comprehensive income attributable to non-controlling interests
NNeett pprrooffiitt // ((lloossss))
OOtthheerr ccoommpprreehheennssiivvee iinnccoommee tthhaatt wwiillll nnoott bbee rreeccllaassssiiffiieedd ttoo tthhee iinnccoommee ssttaatteemmeenntt
Foreign currency translation movements, before tax
Income tax relating to foreign currency translation movements
Subtotal foreign currency translation, net of tax
TToottaall ootthheerr ccoommpprreehheennssiivvee iinnccoommee tthhaatt wwiillll nnoott bbee rreeccllaassssiiffiieedd ttoo tthhee iinnccoommee ssttaatteemmeenntt,, nneett ooff ttaaxx
TToottaall ccoommpprreehheennssiivvee iinnccoommee aattttrriibbuuttaabbllee ttoo nnoonn--ccoonnttrroolllliinngg iinntteerreessttss
Total comprehensive income
NNeett pprrooffiitt // ((lloossss))
OOtthheerr ccoommpprreehheennssiivvee iinnccoommee
of which: other comprehensive income that may be reclassified to the income statement
of which: other comprehensive income that will not be reclassified to the income statement
TToottaall ccoommpprreehheennssiivvee iinnccoommee
For the year ended
Note
3311..1122..2200
31.12.19
31.12.18
1155
2211
00
2211
2211
3366
6
7
(4)
0
(4)
(4)
2
(1)
0
(1)
(1)
5
66,,557722
11,,774400
22,,223300
4,310
781
1,363
((449900))
(582)
4,522
(292)
(855)
563
88,,331122
5,091
4,231
11 Mainly driven by the strengthening of the Swiss franc (9%) and the euro (9%) against the US dollar. 22 Mainly reflects an increase in net unrealized gains on US dollar hedging derivatives resulting from decreases
in the relevant long-term US dollar interest rates, partly offset by the reclassification of net gains on hedging instruments from OCI to the income statement as the hedged forecast cash flows affected profit or loss.
33 Mainly includes a net pre-tax OCI loss of USD 276 million related to the Swiss pension plan (primarily driven by an extraordinary employer contribution of USD 235 million that increased the gross plan assets, but
led to an OCI loss as no net pension asset could be recognized on the balance sheet as of 31 December 2020 due to the asset ceiling) and a net pre-tax OCI loss of USD 61 million related to the UK pension plan
(driven by an increase in the defined benefit obligation, mainly resulting from a lower discount rate). Refer to Note 26 for more information.
278
278
Consolidated financial statements
Statement of comprehensive income (continued)
Table continued from previous page.
USD million
NNeett pprrooffiitt // ((lloossss))
Comprehensive income attributable to non-controlling interests
OOtthheerr ccoommpprreehheennssiivvee iinnccoommee tthhaatt wwiillll nnoott bbee rreeccllaassssiiffiieedd ttoo tthhee iinnccoommee ssttaatteemmeenntt
Foreign currency translation movements, before tax
Income tax relating to foreign currency translation movements
Subtotal foreign currency translation, net of tax
TToottaall ootthheerr ccoommpprreehheennssiivvee iinnccoommee tthhaatt wwiillll nnoott bbee rreeccllaassssiiffiieedd ttoo tthhee iinnccoommee ssttaatteemmeenntt,, nneett ooff ttaaxx
TToottaall ccoommpprreehheennssiivvee iinnccoommee aattttrriibbuuttaabbllee ttoo nnoonn--ccoonnttrroolllliinngg iinntteerreessttss
Total comprehensive income
NNeett pprrooffiitt // ((lloossss))
OOtthheerr ccoommpprreehheennssiivvee iinnccoommee
of which: other comprehensive income that may be reclassified to the income statement
of which: other comprehensive income that will not be reclassified to the income statement
TToottaall ccoommpprreehheennssiivvee iinnccoommee
For the year ended
Note
3311..1122..2200
31.12.19
31.12.18
1155
2211
00
2211
2211
3366
6
7
(4)
0
(4)
(4)
2
(1)
0
(1)
(1)
5
66,,557722
11,,774400
22,,223300
4,310
781
1,363
((449900))
(582)
4,522
(292)
(855)
563
88,,331122
5,091
4,231
11 Mainly driven by the strengthening of the Swiss franc (9%) and the euro (9%) against the US dollar. 22 Mainly reflects an increase in net unrealized gains on US dollar hedging derivatives resulting from decreases
in the relevant long-term US dollar interest rates, partly offset by the reclassification of net gains on hedging instruments from OCI to the income statement as the hedged forecast cash flows affected profit or loss.
33 Mainly includes a net pre-tax OCI loss of USD 276 million related to the Swiss pension plan (primarily driven by an extraordinary employer contribution of USD 235 million that increased the gross plan assets, but
led to an OCI loss as no net pension asset could be recognized on the balance sheet as of 31 December 2020 due to the asset ceiling) and a net pre-tax OCI loss of USD 61 million related to the UK pension plan
(driven by an increase in the defined benefit obligation, mainly resulting from a lower discount rate). Refer to Note 26 for more information.
278
Balance sheet
USD million
Assets
Cash and balances at central banks
Loans and advances to banks
Receivables from securities financing transactions
Cash collateral receivables on derivative instruments
Loans and advances to customers
Other financial assets measured at amortized cost
TToottaall ffiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt aammoorrttiizzeedd ccoosstt
Financial assets at fair value held for trading
of which: assets pledged as collateral that may be sold or repledged by counterparties
Derivative financial instruments
Brokerage receivables
Financial assets at fair value not held for trading
TToottaall ffiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt ffaaiirr vvaalluuee tthhrroouugghh pprrooffiitt oorr lloossss
FFiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt ffaaiirr vvaalluuee tthhrroouugghh ootthheerr ccoommpprreehheennssiivvee iinnccoommee
Investments in associates
Property, equipment and software
Goodwill and intangible assets
Deferred tax assets
Other non-financial assets
TToottaall aasssseettss
Liabilities
Amounts due to banks
Payables from securities financing transactions
Cash collateral payables on derivative instruments
Customer deposits
Debt issued measured at amortized cost
Other financial liabilities measured at amortized cost
TToottaall ffiinnaanncciiaall lliiaabbiilliittiieess mmeeaassuurreedd aatt aammoorrttiizzeedd ccoosstt
Financial liabilities at fair value held for trading
Derivative financial instruments
Brokerage payables designated at fair value
Debt issued designated at fair value
Other financial liabilities designated at fair value
TToottaall ffiinnaanncciiaall lliiaabbiilliittiieess mmeeaassuurreedd aatt ffaaiirr vvaalluuee tthhrroouugghh pprrooffiitt oorr lloossss
Provisions
Other non-financial liabilities
TToottaall lliiaabbiilliittiieess
Equity
Share capital
Share premium
Treasury shares
Retained earnings
Other comprehensive income recognized directly in equity, net of tax
EEqquuiittyy aattttrriibbuuttaabbllee ttoo sshhaarreehhoollddeerrss
Equity attributable to non-controlling interests
TToottaall eeqquuiittyy
TToottaall lliiaabbiilliittiieess aanndd eeqquuiittyy
Note
3311..1122..2200
31.12.19
9
9, 22
9, 22
9
9, 14a
21
10, 21, 22
21
21
11, 21
28b
12
13
8
14b
15
22
22
15
17
19a
21
10, 21, 22
21
16, 21
19b, 21
18a
19c
115588,,223311
1155,,444444
7744,,221100
3322,,773377
337799,,552288
2277,,119944
668877,,334455
112255,,339977
4477,,009988
115599,,661177
2244,,665599
8800,,336644
339900,,003377
88,,225588
11,,555577
1133,,110099
66,,448800
99,,221122
99,,776688
11,,112255,,776655
1111,,005500
66,,332211
3377,,331122
552244,,660055
113399,,223322
99,,772299
772288,,225500
3333,,559955
116611,,110022
3388,,774422
6611,,224433
3300,,338877
332255,,006699
22,,882288
99,,885544
11,,006666,,000000
333388
1166,,775533
((44,,006688))
3388,,777766
77,,664477
5599,,444455
331199
5599,,776655
11,,112255,,776655
107,068
12,447
84,245
23,289
326,786
22,980
576,815
127,514
41,285
121,841
18,007
83,944
351,307
6,345
1,051
12,804
6,469
9,548
7,856
972,194
6,570
7,778
31,415
448,284
110,497
9,712
614,256
30,591
120,880
37,233
66,809
35,940
291,452
2,974
8,837
917,519
338
18,064
(3,326)
34,122
5,303
54,501
174
54,675
972,194
279
279
Financial statements Consolidated financial statements
Statement of changes in equity
USD million
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22001177
Effect of adoption of IFRS 9
Effect of adoption of IFRS 15
Effect of retained earnings restatement2
BBaallaannccee aass ooff 11 JJaannuuaarryy 22001188 aafftteerr tthhee aaddooppttiioonn ooff IIFFRRSS 99 aanndd IIFFRRSS 1155 aanndd rreessttaatteemmeenntt ooff rreettaaiinneedd eeaarrnniinnggss
Issuance of share capital
Acquisition of treasury shares
Delivery of treasury shares under share-based compensation plans
Other disposal of treasury shares
Premium on shares issued and warrants exercised
Share-based compensation expensed in the income statement
Tax (expense) / benefit
Dividends
Translation effects recognized directly in retained earnings
New consolidations / (deconsolidations) and other increases / (decreases)
Total comprehensive income for the year
of which: net profit / (loss)
of which: other comprehensive income (OCI) that may be reclassified to the income statement, net of tax
of which: OCI that will not be reclassified to the income statement, net of tax – defined benefit plans
of which: OCI that will not be reclassified to the income statement, net of tax – own credit
of which: OCI that will not be reclassified to the income statement, net of tax – foreign currency translation
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22001188
Effect of adoption of IFRIC 23
BBaallaannccee aass ooff 11 JJaannuuaarryy 22001199 aafftteerr tthhee aaddooppttiioonn ooff IIFFRRIICC 2233
Issuance of share capital
Acquisition of treasury shares
Delivery of treasury shares under share-based compensation plans
Other disposal of treasury shares
Premium on shares issued and warrants exercised
Share-based compensation expensed in the income statement
Tax (expense) / benefit
Dividends
Translation effects recognized directly in retained earnings
New consolidations / (deconsolidations) and other increases / (decreases)
Total comprehensive income for the year
of which: net profit / (loss)
of which: other comprehensive income (OCI) that may be reclassified to the income statement, net of tax
of which: OCI that will not be reclassified to the income statement, net of tax – defined benefit plans
of which: OCI that will not be reclassified to the income statement, net of tax – own credit
of which: OCI that will not be reclassified to the income statement, net of tax – foreign currency translation
Share
capital
333388
Share
premium Treasury shares
((22,,221100))
2233,,559988
Retained
earnings
2255,,993322
(518)
(25)
(32)
333388
0
2233,,559988
((22,,221100))
2255,,335577
(1,608)3
1,137
503
(1,009)
22
676
4
(2,440)4
(7)
(21)
5,080
4,516
56
509
333388
2200,,884433
((22,,663311))
3300,,441166
2200,,884433
((22,,663311))
3300,,440055
(11)
333388
0
(1,771)3
983
943
(886)
(2)
29
619
11
(2,544)4
(6)
(9)
3,726
4,304
(186)
(392)
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22001199
333388
1188,,006644
((33,,332266))
3344,,112222
280
280
Other comprehensive
income recognized
directly in equity,
net of tax1
44,,883388
(74)
of which:
foreign currency
translation
44,,446666
of which:
financial assets at
fair value through
other comprehensive
income
1133
(74)
BBaallaannccee aass ooff 11 JJaannuuaarryy 22001188 aafftteerr tthhee aaddooppttiioonn ooff IIFFRRSS 99 aanndd IIFFRRSS 1155 aanndd rreessttaatteemmeenntt ooff rreettaaiinneedd eeaarrnniinnggss
2233,,559988
((22,,221100))
2255,,335577
44,,776644
44,,446666
((6611))
336600
21
(855)
(855)
33,,993300
33,,993300
9
1,363
1,363
(541)
(541)
33,,992244
33,,992244
104
104
3
(45)
(45)
((110033))
((110033))
0
117
117
18
(269)
(269)
110099
110099
9
1,143
1,143
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22001199
333388
1188,,006644
((33,,332266))
3344,,112222
55,,330033
44,,002288
1144
11,,226600
of which: other comprehensive income (OCI) that may be reclassified to the income statement, net of tax
of which: OCI that will not be reclassified to the income statement, net of tax – defined benefit plans
of which: OCI that will not be reclassified to the income statement, net of tax – own credit
of which: OCI that will not be reclassified to the income statement, net of tax – foreign currency translation
BBaallaannccee aass ooff 11 JJaannuuaarryy 22001199 aafftteerr tthhee aaddooppttiioonn ooff IIFFRRIICC 2233
2200,,884433
((22,,663311))
3300,,440055
333388
2200,,884433
((22,,663311))
3300,,441166
Consolidated financial statements
Statement of changes in equity
USD million
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22001177
Effect of adoption of IFRS 9
Effect of adoption of IFRS 15
Effect of retained earnings restatement2
Issuance of share capital
Acquisition of treasury shares
Delivery of treasury shares under share-based compensation plans
Other disposal of treasury shares
Premium on shares issued and warrants exercised
Share-based compensation expensed in the income statement
Tax (expense) / benefit
Dividends
Translation effects recognized directly in retained earnings
New consolidations / (deconsolidations) and other increases / (decreases)
Total comprehensive income for the year
of which: net profit / (loss)
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22001188
Effect of adoption of IFRIC 23
Issuance of share capital
Acquisition of treasury shares
Delivery of treasury shares under share-based compensation plans
Other disposal of treasury shares
Premium on shares issued and warrants exercised
Share-based compensation expensed in the income statement
Tax (expense) / benefit
Dividends
Translation effects recognized directly in retained earnings
New consolidations / (deconsolidations) and other increases / (decreases)
Total comprehensive income for the year
of which: net profit / (loss)
280
of which: other comprehensive income (OCI) that may be reclassified to the income statement, net of tax
of which: OCI that will not be reclassified to the income statement, net of tax – defined benefit plans
of which: OCI that will not be reclassified to the income statement, net of tax – own credit
of which: OCI that will not be reclassified to the income statement, net of tax – foreign currency translation
Share
capital
333388
Share
premium Treasury shares
2233,,559988
((22,,221100))
333388
0
333388
0
(1,608)3
1,137
503
(1,771)3
983
943
(1,009)
22
676
4
(2,440)4
(7)
(886)
(2)
29
619
11
(6)
(2,544)4
Retained
earnings
2255,,993322
(518)
(25)
(32)
(21)
5,080
4,516
56
509
(11)
(9)
3,726
4,304
(186)
(392)
of which:
cash flow
hedges
336600
of which:
cost of hedging
Total equity
attributable to
shareholders
5522,,449955
Non-controlling
interests
5599
(591)
(25)
(32)
5511,,884477
0
(1,608)
128
50
22
676
4
(2,440)
0
(7)
4,225
4,516
(855)
56
509
0
5522,,889966
(11)
5522,,888855
0
(1,771)
97
92
29
619
11
(2,544)
0
(6)
5,089
4,304
1,363
(186)
(392)
0
5544,,550011
5599
(10)
122
5
7
(1)
117766
117766
(8)
5
2
6
(4)
117744
Total equity
5522,,555544
(591)
(25)
(32)
5511,,990066
0
(1,608)
128
50
22
676
4
(2,450)
0
115
4,231
4,522
(855)
56
509
(1)
5533,,007711
(11)
5533,,006600
0
(1,771)
97
92
29
619
11
(2,552)
0
(1)
5,091
4,310
1,363
(186)
(392)
(4)
5544,,667755
281
281
Financial statements Consolidated financial statements
Statement of changes in equity (continued)
USD million
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22001199
Issuance of share capital
Acquisition of treasury shares
Delivery of treasury shares under share-based compensation plans
Other disposal of treasury shares
Premium on shares issued and warrants exercised
Share-based compensation expensed in the income statement
Tax (expense) / benefit
Dividends
Translation effects recognized directly in retained earnings
Share of changes in retained earnings of associates and joint ventures
New consolidations / (deconsolidations) and other increases / (decreases)6
Total comprehensive income for the year
of which: net profit / (loss)
of which: other comprehensive income (OCI) that may be reclassified to the income statement, net of tax
of which: OCI that will not be reclassified to the income statement, net of tax – defined benefit plans
of which: OCI that will not be reclassified to the income statement, net of tax – own credit
of which: OCI that will not be reclassified to the income statement, net of tax – foreign currency translation
Share
capital
333388
Share
premium Treasury shares
((33,,332266))
1188,,006644
Retained
earnings
3344,,112222
((11,,558844))33
771199
11223333
((662288))
((1111))
66991155
1188
((11,,330044))44
((7766))
((11,,330044))44
((4499))
((4400))
66,,004466
66,,555577
((221188))
((229933))
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22002200
333388
1166,,775533
((44,,006688))
3388,,777766
11 Excludes other comprehensive income related to defined benefit plans and own credit, which is recorded directly in Retained earnings. 22 Opening retained earnings as of 1 January 2018 have been restated to
reflect a reduction of USD 32 million in connection with the retrospective recognition of a USD 43 million increase in compensation-related liabilities and an USD 11 million increase in deferred tax assets. Refer to
Note 1b for more information. 33 Includes treasury shares acquired and disposed of by the Investment Bank in its capacity as a market-maker with regard to UBS shares and related derivatives, and to hedge certain
issued structured debt instruments. These acquisitions and disposals are reported based on the sum of the net monthly movements. 44 Reflects the payment of an ordinary cash dividend of USD 0.73 (2019:
CHF 0.70, 2018: CHF 0.65) per dividend-bearing share. From 2020 onward, Swiss tax law effective 1 January 2020 requires that Switzerland-domiciled companies with shares listed on a stock exchange pay no
more than 50% of dividends from capital contribution reserves, with the remainder required to be paid from retained earnings. 55 During 2020, UBS modified the conditions for continued vesting of certain
outstanding deferred compensation awards for qualifying employees, resulting in an increase of approximately USD 110 million in share premium for equity-settled awards. Refer to Note 1b for more information.
66 Mainly relates to the establishment of a banking partnership with Banco do Brasil. Refer to Note 29 for more information.
282
282
Consolidated financial statements
Statement of changes in equity (continued)
USD million
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22001199
Issuance of share capital
Acquisition of treasury shares
Delivery of treasury shares under share-based compensation plans
Other disposal of treasury shares
Premium on shares issued and warrants exercised
Share-based compensation expensed in the income statement
Tax (expense) / benefit
Dividends
Translation effects recognized directly in retained earnings
Share of changes in retained earnings of associates and joint ventures
New consolidations / (deconsolidations) and other increases / (decreases)6
Total comprehensive income for the year
of which: net profit / (loss)
((11,,558844))33
771199
11223333
((662288))
((1111))
66991155
1188
((11,,330044))44
((7766))
((11,,330044))44
((4499))
((4400))
66,,004466
66,,555577
((221188))
((229933))
of which: other comprehensive income (OCI) that may be reclassified to the income statement, net of tax
of which: OCI that will not be reclassified to the income statement, net of tax – defined benefit plans
of which: OCI that will not be reclassified to the income statement, net of tax – own credit
of which: OCI that will not be reclassified to the income statement, net of tax – foreign currency translation
11 Excludes other comprehensive income related to defined benefit plans and own credit, which is recorded directly in Retained earnings. 22 Opening retained earnings as of 1 January 2018 have been restated to
reflect a reduction of USD 32 million in connection with the retrospective recognition of a USD 43 million increase in compensation-related liabilities and an USD 11 million increase in deferred tax assets. Refer to
Note 1b for more information. 33 Includes treasury shares acquired and disposed of by the Investment Bank in its capacity as a market-maker with regard to UBS shares and related derivatives, and to hedge certain
issued structured debt instruments. These acquisitions and disposals are reported based on the sum of the net monthly movements. 44 Reflects the payment of an ordinary cash dividend of USD 0.73 (2019:
CHF 0.70, 2018: CHF 0.65) per dividend-bearing share. From 2020 onward, Swiss tax law effective 1 January 2020 requires that Switzerland-domiciled companies with shares listed on a stock exchange pay no
more than 50% of dividends from capital contribution reserves, with the remainder required to be paid from retained earnings. 55 During 2020, UBS modified the conditions for continued vesting of certain
outstanding deferred compensation awards for qualifying employees, resulting in an increase of approximately USD 110 million in share premium for equity-settled awards. Refer to Note 1b for more information.
66 Mainly relates to the establishment of a banking partnership with Banco do Brasil. Refer to Note 29 for more information.
Share
capital
333388
Share
premium Treasury shares
1188,,006644
((33,,332266))
Retained
earnings
3344,,112222
Other comprehensive
income recognized
directly in equity,
net of tax1
55,,330033
of which:
foreign currency
translation
44,,002288
of which:
financial assets at
fair value through
other comprehensive
income
1144
of which:
cash flow
hedges
11,,226600
of which:
cost of hedging
Non-controlling
interests
117744
Total equity
attributable to
shareholders
5544,,550011
00
((11,,558844))
9900
111122
00
669911
1188
Total equity
5544,,667755
00
((11,,558844))
9900
111122
00
669911
1188
((22,,660077))
((66))
((22,,661133))
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22002200
333388
1166,,775533
((44,,006688))
3388,,777766
77,,664477
55,,118888
115511
22,,332211
((1133))
5599,,444455
4499
6655
22,,223300
6655
11,,009955
22,,223300
11,,009955
00
4499
113366
113366
11,,001111
11,,001111
((1133))
((1133))
00
((4400))
((1122))
88,,227766
66,,555577
22,,223300
((221188))
((229933))
00
00
((4400))
110033
88,,331122
66,,557722
22,,223300
((221188))
((229933))
2211
5599,,776655
111155
3366
1155
2211
331199
282
283
283
Financial statements Consolidated financial statements
Share information and earnings per share
Ordinary share capital
As of 31 December 2020, UBS Group AG had 3,859,055,395
issued shares with a nominal value of CHF 0.10 each, leading to
a share capital of CHF 385,905,539.50.
Conditional share capital
As of 31 December 2020, the following conditional share capital
was available to UBS Group AG’s Board of Directors (BoD):
– A maximum of CHF 38,000,000 represented by up to
380,000,000 fully paid registered shares with a nominal value
of CHF 0.10 each, to be issued through the voluntary or
mandatory exercise of conversion rights and / or warrants
granted in connection with the issuance of bonds or similar
financial instruments on national or international capital
markets. This conditional capital allowance was approved
at the Extraordinary General Meeting
(EGM) held on
26 November 2014, originally approved at the Annual
General Meeting (AGM) of UBS AG on 14 April 2010. The
BoD has not made use of such allowance.
Shares outstanding
SShhaarreess iissssuueedd
Balance at the beginning of the year
Shares issued
Balance at the end of the year
TTrreeaassuurryy sshhaarreess
Balance at the beginning of the year
Acquisitions
Disposals
Balance at the end of the year
SShhaarreess oouuttssttaannddiinngg
Basic and diluted earnings (USD million)
Net profit / (loss) attributable to shareholders for basic EPS
Less: (profit) / loss on own equity derivative contracts
Net profit / (loss) attributable to shareholders for diluted EPS
– A maximum of CHF 12,170,583 represented by 121,705,830
fully paid registered shares with a nominal value of CHF 0.10
each, to be issued upon exercise of employee options and
stock appreciation rights issued to employees and members
of the management and of the BoD of UBS Group AG and its
subsidiaries. This conditional capital allowance was approved
by the shareholders at the same EGM in 2014.
Authorized share capital
UBS Group AG had no authorized capital available to issue on
31 December 2020.
Share repurchase program
In March 2018, UBS initiated a share repurchase program of up
to CHF 2 billion over a three-year period. Under this program,
UBS repurchased 31 million shares totaling USD 364 million in
2020 (2019: 69 million shares totaling USD 806 million).
The program was completed on 2 February 2021 and the
shares repurchased under the program are expected to be
canceled by means of a capital reduction, to be proposed for
shareholder approval at the 2021 AGM.
In February 2021, UBS commenced a new three-year share
repurchase program of up to CHF 4 billion.
As of or for the year ended
3311..1122..2200
31.12.19
31.12.18
33,,885599,,005555,,339955
33,,885599,,005555,,339955
3,855,634,749
3,420,646
3,859,055,395
3,853,096,603
2,538,146
3,855,634,749
224433,,002211,,229966
112288,,337722,,225577
((6633,,991166,,555511))
330077,,447777,,000022
33,,555511,,557788,,339933
166,467,802
146,876,692
(70,323,198)
243,021,296
3,616,034,099
132,301,550
103,979,927
(69,813,675)
166,467,802
3,689,166,947
66,,555577
((11))
66,,555566
4,304
0
4,304
4,516
(2)
4,514
Weighted average shares outstanding
Weighted average shares outstanding for basic EPS1
Effect of dilutive potential shares resulting from notional employee shares, in-the-money options and warrants
outstanding2
Weighted average shares outstanding for diluted EPS
33,,558833,,117766,,118899
3,663,278,238
3,730,297,877
112233,,885522,,113377
33,,770077,,002288,,332266
103,881,600
3,767,159,838
111,271,269
3,841,569,146
Earnings per share (USD)
Basic
Diluted
11..8833
11..7777
1.17
1.14
1.21
1.18
Potentially dilutive instruments3
Employee share-based compensation awards
Other equity derivative contracts
TToottaall
11 The weighted average shares outstanding for basic EPS are calculated by taking the number of shares at the beginning of the period, adjusted by the number of shares acquired or issued during the period,
multiplied by a time-weighted factor for the period outstanding. As a result, balances are affected by the timing of acquisitions and issuances during the period. 22 The weighted average number of shares for
notional employee awards with performance conditions reflects all potentially dilutive shares that are expected to vest under the terms of the awards. 33 Reflects potential shares that could dilute basic earnings per
share in the future, but were not dilutive for the periods presented.
3,605,198
11,912,450
15,517,648
22,,553366,,778899
1111,,441144,,772288
1133,,995511,,551177
21,632,879
21,632,879
284
284
Consolidated financial statements
Share information and earnings per share
Ordinary share capital
As of 31 December 2020, UBS Group AG had 3,859,055,395
each, to be issued upon exercise of employee options and
issued shares with a nominal value of CHF 0.10 each, leading to
stock appreciation rights issued to employees and members
a share capital of CHF 385,905,539.50.
Conditional share capital
of the management and of the BoD of UBS Group AG and its
subsidiaries. This conditional capital allowance was approved
by the shareholders at the same EGM in 2014.
– A maximum of CHF 12,170,583 represented by 121,705,830
fully paid registered shares with a nominal value of CHF 0.10
As of 31 December 2020, the following conditional share capital
Authorized share capital
was available to UBS Group AG’s Board of Directors (BoD):
– A maximum of CHF 38,000,000 represented by up to
UBS Group AG had no authorized capital available to issue on
380,000,000 fully paid registered shares with a nominal value
31 December 2020.
of CHF 0.10 each, to be issued through the voluntary or
mandatory exercise of conversion rights and / or warrants
Share repurchase program
granted in connection with the issuance of bonds or similar
financial instruments on national or international capital
In March 2018, UBS initiated a share repurchase program of up
markets. This conditional capital allowance was approved
to CHF 2 billion over a three-year period. Under this program,
at the Extraordinary General Meeting
(EGM) held on
UBS repurchased 31 million shares totaling USD 364 million in
26 November 2014, originally approved at the Annual
2020 (2019: 69 million shares totaling USD 806 million).
General Meeting (AGM) of UBS AG on 14 April 2010. The
The program was completed on 2 February 2021 and the
BoD has not made use of such allowance.
shares repurchased under the program are expected to be
canceled by means of a capital reduction, to be proposed for
shareholder approval at the 2021 AGM.
In February 2021, UBS commenced a new three-year share
repurchase program of up to CHF 4 billion.
As of or for the year ended
3311..1122..2200
31.12.19
31.12.18
33,,885599,,005555,,339955
3,855,634,749
3,853,096,603
33,,885599,,005555,,339955
3,859,055,395
3,855,634,749
3,420,646
2,538,146
224433,,002211,,229966
112288,,337722,,225577
((6633,,991166,,555511))
330077,,447777,,000022
166,467,802
146,876,692
(70,323,198)
243,021,296
132,301,550
103,979,927
(69,813,675)
166,467,802
33,,555511,,557788,,339933
3,616,034,099
3,689,166,947
66,,555577
((11))
66,,555566
4,304
0
4,304
4,516
(2)
4,514
33,,558833,,117766,,118899
3,663,278,238
3,730,297,877
112233,,885522,,113377
33,,770077,,002288,,332266
103,881,600
3,767,159,838
111,271,269
3,841,569,146
11..8833
11..7777
1.17
1.14
1.21
1.18
22,,553366,,778899
1111,,441144,,772288
1133,,995511,,551177
21,632,879
21,632,879
3,605,198
11,912,450
15,517,648
Effect of dilutive potential shares resulting from notional employee shares, in-the-money options and warrants
Shares outstanding
SShhaarreess iissssuueedd
Balance at the beginning of the year
Shares issued
Balance at the end of the year
Balance at the beginning of the year
TTrreeaassuurryy sshhaarreess
Acquisitions
Disposals
Balance at the end of the year
SShhaarreess oouuttssttaannddiinngg
Basic and diluted earnings (USD million)
Net profit / (loss) attributable to shareholders for basic EPS
Less: (profit) / loss on own equity derivative contracts
Net profit / (loss) attributable to shareholders for diluted EPS
Weighted average shares outstanding
Weighted average shares outstanding for basic EPS1
outstanding2
Weighted average shares outstanding for diluted EPS
Earnings per share (USD)
Potentially dilutive instruments3
Employee share-based compensation awards
Other equity derivative contracts
Basic
Diluted
TToottaall
284
11 The weighted average shares outstanding for basic EPS are calculated by taking the number of shares at the beginning of the period, adjusted by the number of shares acquired or issued during the period,
multiplied by a time-weighted factor for the period outstanding. As a result, balances are affected by the timing of acquisitions and issuances during the period. 22 The weighted average number of shares for
notional employee awards with performance conditions reflects all potentially dilutive shares that are expected to vest under the terms of the awards. 33 Reflects potential shares that could dilute basic earnings per
share in the future, but were not dilutive for the periods presented.
Statement of cash flows
USD million
Cash flow from / (used in) operating activities
Net profit / (loss)
NNoonn--ccaasshh iitteemmss iinncclluuddeedd iinn nneett pprrooffiitt aanndd ootthheerr aaddjjuussttmmeennttss::
Depreciation and impairment of property, equipment and software
Amortization and impairment of goodwill and intangible assets
Credit loss expense / (release)
Share of net profits of associates / joint ventures and impairment of associates
Deferred tax expense / (benefit)
Net loss / (gain) from investing activities
Net loss / (gain) from financing activities
Other net adjustments
NNeett cchhaannggee iinn ooppeerraattiinngg aasssseettss aanndd lliiaabbiilliittiieess::
Loans and advances to banks / amounts due to banks
Securities financing transactions
Cash collateral on derivative instruments
Loans and advances to customers
Customer deposits
Financial assets and liabilities at fair value held for trading and derivative financial instruments
Brokerage receivables and payables
Financial assets at fair value not held for trading, other financial assets and liabilities
Provisions, other non-financial assets and liabilities
Income taxes paid, net of refunds
NNeett ccaasshh ffllooww ffrroomm // ((uusseedd iinn)) ooppeerraattiinngg aaccttiivviittiieess
Cash flow from / (used in) investing activities
Purchase of subsidiaries, associates and intangible assets
Disposal of subsidiaries, associates and intangible assets1
Purchase of property, equipment and software
Disposal of property, equipment and software
Purchase of financial assets measured at fair value through other comprehensive income
Disposal and redemption of financial assets measured at fair value through other comprehensive income
Net (purchase) / redemption of debt securities measured at amortized cost
NNeett ccaasshh ffllooww ffrroomm // ((uusseedd iinn)) iinnvveessttiinngg aaccttiivviittiieess
Table continues on the next page.
For the year ended
31.12.19
3311..1122..2200
31.12.18
66,,557722
4,310
4,522
22,,006699
1,765
1,228
5577
669944
((8844))
335522
((669988))
33,,224466
((88,,007766))
33,,558866
99,,558888
((33,,448877))
((3333,,665566))
5511,,880055
1111,,225599
((55,,119999))
332200
((338877))
((11,,000022))
3366,,995588
((4466))
667744
((11,,885544))
336666
((66,,229900))
44,,553300
((44,,116666))
((66,,778855))
175
78
(45)
477
220
6,493
854
(4,336)
8,678
2,839
(3,128)
23,217
(18,829)
(2,347)
33
55
(804)
19,705
(26)
114
(1,584)
11
(3,424)
3,913
(562)
(1,558)
65
118
(528)
425
(46)
(4,828)
(1,179)
3,504
(11,230)
(1,447)
(5,213)
9,138
11,107
11,432
11,115
1,682
(951)
28,913
(287)
137
(1,688)
114
(1,999)
1,361
(3,770)
(6,132)
285
285
Financial statements Consolidated financial statements
Statement of cash flows (continued)
Table continued from previous page.
USD million
Cash flow from / (used in) financing activities
Net short-term debt issued / (repaid)
Net movements in treasury shares and own equity derivative activity
Distributions paid on UBS shares
Repayment of lease liabilities
Issuance of long-term debt, including debt issued designated at fair value
Repayment of long-term debt, including debt issued designated at fair value
Net changes in non-controlling interests and preferred notes
NNeett ccaasshh ffllooww ffrroomm // ((uusseedd iinn)) ffiinnaanncciinngg aaccttiivviittiieess
Total cash flow
CCaasshh aanndd ccaasshh eeqquuiivvaalleennttss aatt tthhee bbeeggiinnnniinngg ooff tthhee yyeeaarr
Net cash flow from / (used in) operating, investing and financing activities
Effects of exchange rate differences on cash and cash equivalents
CCaasshh aanndd ccaasshh eeqquuiivvaalleennttss aatt tthhee eenndd ooff tthhee yyeeaarr22
of which: cash and balances at central banks 3
of which: loans and advances to banks
of which: money market paper 4
Additional information
Net cash flow from / (used in) operating activities includes:
Interest received in cash
For the year ended
31.12.19
3311..1122..2200
31.12.18
2233,,884455
((11,,338877))
((22,,660077))
((556699))
8800,,225555
((8877,,009988))
((66))
1122,,443322
111199,,887733
4422,,660055
1111,,005522
117733,,553311
115588,,008888
1144,,002288
11,,441155
(17,149)
(1,559)
(2,544)
(518)
65,047
(68,883)
(8)
(25,614)
126,079
(7,467)
1,261
119,873
106,957
11,386
1,530
(12,245)
(1,431)
(2,440)
60,682
(44,344)
(31)
190
104,834
22,971
(1,726)
126,079
108,268
15,678
2,133
1111,,991155
15,315
14,645
Interest paid in cash
Dividends on equity investments, investment funds and associates received in cash5
11 Includes cash proceeds from the sale of the majority stake in Fondcenter AG of USD 426 million for the year ended 31 December 2020. Refer to Note 29 for more information. Also includes dividends received
from associates. 22 USD 3,828 million, USD 3,192 million and USD 5,245 million of cash and cash equivalents (mainly reflected in Loans and advances to banks) were restricted as of 31 December 2020,
31 December 2019 and 31 December 2018, respectively. Refer to Note 23 for more information. 33 Includes only balances with an original maturity of three months or less. 44 Money market paper is included in
the balance sheet under Financial assets at fair value held for trading (31 December 2020: USD 117 million; 31 December 2019: USD 235 million; 31 December 2018: USD 366 million), Financial assets measured at
fair value through other comprehensive income (31 December 2020: USD 178 million; 31 December 2019: USD 24 million; 31 December 2018: USD 8 million), Financial assets at fair value not held for trading
(31 December 2020: USD 536 million; 31 December 2019: USD 920 million; 31 December 2018: USD 1,556 million) and Other financial assets measured at amortized cost (31 December 2020: USD 584 million;
31 December 2019: USD 351 million; 31 December 2018: USD 204 million). 55 Includes dividends received from associates reported within Net cash flow from / (used in) investing activities.
10,769
66,,332200
2,322
9,206
3,145
11,,990011
Changes in liabilities arising from financing activities
USD million
BBaallaannccee aass ooff 11 JJaannuuaarryy 22001199
Cash flows
Non-cash changes
of which: foreign currency translation
of which: fair value changes
of which: other 1
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22001199
Cash flows
Non-cash changes
of which: foreign currency translation
of which: fair value changes
of which: other 1
Debt issued
measured at
amortized
cost
132,271
(22,704)
930
(476)
1,406
110,497
22,428
6,308
4,980
of which:
short-term
39,025
(17,149)
(39)
(39)
of which:
long-term
93,246
(5,555)
969
(438)
21,837
23,845
984
984
1,406
88,660
(1,417)
5,324
3,995
Debt issued
designated at fair
value
57,031
2,144
7,634
212
7,421
Over-the-
counter debt
instruments2
2,450
(425)
(3)
(6)
3
66,809
(5,420)
(146)
1,764
(1,909)
2,022
(6)
44
81
(37)
1,328
113399,,223322
1,328
9922,,556666
Total
191,752
(20,985)
8,560
(270)
7,424
1,406
179,327
17,002
6,207
6,824
(1,946)
1,328
220022,,553355
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22002200
11 Includes the effect of fair value hedges on long-term debt. Refer to Note 1a item 2j and Note 17 for more information. 22 Included in balance sheet line Other financial liabilities designated at fair value.
4466,,666666
6611,,224433
22,,006600
286
286
Notes to the UBS Group AG consolidated financial statements
Note 1 Summary of significant accounting policies
The following table provides an overview of information included in this Note.
288
288
288
289
289
289
293
293
293
293
294
297
297
298
a) Significant accounting policies
Basis of accounting
1) Consolidation
2) Financial instruments
a. Recognition
b. Classification, measurement and presentation
c. Loan commitments and financial guarantees
d.
e. Derecognition
f.
g. Allowances and provisions for expected
Fair value of financial instruments
Interest income and expense
credit losses
h. Restructured and modified financial assets
i. Offsetting
j. Hedge accounting
298
299
299
299
300
301
301
301
302
302
303
Income taxes
Investments in associates
3) Fee and commission income and expenses
4) Cash and cash equivalents
5) Share-based and other deferred compensation plans
6) Post-employment benefit plans
7)
8)
9) Property, equipment and software
10) Goodwill and intangible assets
11) Provisions and contingent liabilities
12) Foreign currency translation
13) Equity, treasury shares and contracts
on UBS Group AG shares
303
14) Leasing
304
b) Changes in accounting policies, comparability
and other adjustments
305
c)
International Financial Reporting Standards and
Interpretations to be adopted in 2021 and later
and other changes
Consolidated financial statements
Statement of cash flows (continued)
Table continued from previous page.
USD million
Cash flow from / (used in) financing activities
Net short-term debt issued / (repaid)
Net movements in treasury shares and own equity derivative activity
Distributions paid on UBS shares
Repayment of lease liabilities
Issuance of long-term debt, including debt issued designated at fair value
Repayment of long-term debt, including debt issued designated at fair value
Net changes in non-controlling interests and preferred notes
NNeett ccaasshh ffllooww ffrroomm // ((uusseedd iinn)) ffiinnaanncciinngg aaccttiivviittiieess
Total cash flow
CCaasshh aanndd ccaasshh eeqquuiivvaalleennttss aatt tthhee bbeeggiinnnniinngg ooff tthhee yyeeaarr
Net cash flow from / (used in) operating, investing and financing activities
Effects of exchange rate differences on cash and cash equivalents
CCaasshh aanndd ccaasshh eeqquuiivvaalleennttss aatt tthhee eenndd ooff tthhee yyeeaarr22
of which: cash and balances at central banks 3
of which: loans and advances to banks
of which: money market paper 4
Additional information
Net cash flow from / (used in) operating activities includes:
Interest received in cash
Interest paid in cash
For the year ended
3311..1122..2200
31.12.19
31.12.18
1122,,443322
(25,614)
2233,,884455
((11,,338877))
((22,,660077))
((556699))
8800,,225555
((8877,,009988))
((66))
111199,,887733
4422,,660055
1111,,005522
117733,,553311
115588,,008888
1144,,002288
11,,441155
(17,149)
(1,559)
(2,544)
(518)
65,047
(68,883)
(8)
126,079
(7,467)
1,261
119,873
106,957
11,386
1,530
(12,245)
(1,431)
(2,440)
60,682
(44,344)
(31)
190
104,834
22,971
(1,726)
126,079
108,268
15,678
2,133
1111,,991155
66,,332200
11,,990011
15,315
10,769
3,145
14,645
9,206
2,322
Dividends on equity investments, investment funds and associates received in cash5
11 Includes cash proceeds from the sale of the majority stake in Fondcenter AG of USD 426 million for the year ended 31 December 2020. Refer to Note 29 for more information. Also includes dividends received
from associates. 22 USD 3,828 million, USD 3,192 million and USD 5,245 million of cash and cash equivalents (mainly reflected in Loans and advances to banks) were restricted as of 31 December 2020,
31 December 2019 and 31 December 2018, respectively. Refer to Note 23 for more information. 33 Includes only balances with an original maturity of three months or less. 44 Money market paper is included in
the balance sheet under Financial assets at fair value held for trading (31 December 2020: USD 117 million; 31 December 2019: USD 235 million; 31 December 2018: USD 366 million), Financial assets measured at
fair value through other comprehensive income (31 December 2020: USD 178 million; 31 December 2019: USD 24 million; 31 December 2018: USD 8 million), Financial assets at fair value not held for trading
(31 December 2020: USD 536 million; 31 December 2019: USD 920 million; 31 December 2018: USD 1,556 million) and Other financial assets measured at amortized cost (31 December 2020: USD 584 million;
31 December 2019: USD 351 million; 31 December 2018: USD 204 million). 55 Includes dividends received from associates reported within Net cash flow from / (used in) investing activities.
Changes in liabilities arising from financing activities
USD million
BBaallaannccee aass ooff 11 JJaannuuaarryy 22001199
Cash flows
Non-cash changes
of which: foreign currency translation
of which: fair value changes
of which: other 1
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22001199
Cash flows
Non-cash changes
of which: foreign currency translation
of which: fair value changes
of which: other 1
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22002200
Debt issued
measured at
amortized
cost
132,271
(22,704)
930
(476)
1,406
110,497
22,428
6,308
4,980
1,328
113399,,223322
of which:
short-term
39,025
(17,149)
(39)
(39)
21,837
23,845
984
984
long-term
93,246
(5,555)
969
(438)
1,406
88,660
(1,417)
5,324
3,995
1,328
9922,,556666
of which:
designated at fair
Debt issued
Over-the-
value
57,031
2,144
7,634
212
7,421
66,809
(5,420)
(146)
1,764
(1,909)
counter debt
instruments2
Total
2,450
191,752
(425)
(20,985)
(3)
(6)
3
2,022
(6)
44
81
(37)
8,560
(270)
7,424
1,406
179,327
17,002
6,207
6,824
(1,946)
1,328
11 Includes the effect of fair value hedges on long-term debt. Refer to Note 1a item 2j and Note 17 for more information. 22 Included in balance sheet line Other financial liabilities designated at fair value.
4466,,666666
6611,,224433
22,,006600
220022,,553355
286
287
287
Financial statements
Consolidated financial statements
Note 1 Summary of significant accounting policies (continued)
1) Consolidation
single economic entity;
The Financial Statements comprise the financial statements of
the parent company (UBS Group AG) and its subsidiaries,
intercompany
presented as a
transactions and balances have been eliminated. UBS
consolidates all entities that it controls, including structured
entities (SEs), which is the case when it has: (i) power over the
relevant activities of the entity; (ii) exposure to an entity‘s
variable returns; and (iii) the ability to use its power to affect its
own returns.
Consideration is given to all facts and circumstances to
determine whether the Group has power over another entity,
i.e., the current ability to direct the relevant activities of an entity
when decisions about those activities need to be made.
Subsidiaries, including SEs, are consolidated from the date
when control is gained and deconsolidated from the date when
control ceases. Control, or the lack thereof, is reassessed if facts
and circumstances indicate that there is a change to one or
more elements required to establish that control is present.
for using
the
acquisition method. The amount of non-controlling interest is
measured at the non-controlling interest’s proportionate share
of the acquiree’s identifiable net assets.
› Refer to Note 28 for more information
Business combinations are accounted
Critical accounting estimates and judgments
Each individual entity is assessed for consolidation in line with the
aforementioned consolidation principles. The assessment of control can
be complex and requires the use of significant judgment, in particular in
determining whether UBS has power over the entity. As the nature and
extent of UBS’s involvement is unique for each entity, there is no uniform
consolidation outcome by entity. Certain entities within a class may be
consolidated while others may not. When carrying out the consolidation
assessment, judgment is exercised considering all the relevant facts and
circumstances, including the nature and activities of the investee, as well
as the substance of voting and similar rights.
› Refer to Note 28 for more information
a) Significant accounting policies
This Note describes the significant accounting policies applied in
the preparation of the consolidated financial statements (the
Financial Statements) of UBS Group AG and its subsidiaries (UBS
or the Group). On 25 February 2021, the Financial Statements
were authorized for issue by the Board of Directors.
Basis of accounting
The Financial Statements have been prepared in accordance with
International Financial Reporting Standards (IFRS), as issued by
the International Accounting Standards Board (the IASB), and
are presented in US dollars (USD).
Disclosures marked as audited in the “Risk, capital, liquidity
and funding, and balance sheet” section of this report form an
integral part of the Financial Statements. These disclosures relate
to requirements under IFRS 7, Financial Instruments: Disclosures,
and IAS 1, Presentation of Financial Statements, and are not
repeated in this section.
The accounting policies described in this Note have been
applied consistently in all years presented unless otherwise
stated in Note 1b. In addition, effective from 1 January 2019,
the Group applies IFRS 16, Leases, which sets out the principles
for the recognition, measurement, presentation and disclosure
of leases. Within this Note, policies applied for periods that differ
from those applied to the financial year ended 31 December
2020 are identified as “Comparative policy.”
Critical accounting estimates and judgments
Preparation of these Financial Statements under IFRS requires management
to apply judgment and make estimates and assumptions that affect
reported amounts of assets, liabilities, income and expenses and disclosure
of contingent assets and liabilities, and may involve significant uncertainty at
the time they are made. Such estimates and assumptions are based on the
best available information. UBS regularly reassesses such estimates and
assumptions, which encompass historical experience, expectations of the
future and other pertinent factors, to determine their continuing relevance
based on current conditions, updating them as necessary. Changes in those
estimates and assumptions may have a significant effect on the Financial
Statements. Furthermore, actual results may differ significantly from UBS’s
estimates, which could result in significant losses to the Group, beyond what
was anticipated or provided for.
The following areas contain estimation uncertainty or require critical
judgment and have a significant effect on amounts recognized in the
Financial Statements:
–
expected credit loss measurement (refer to item 2g in this Note and to
Note 20);
fair value measurement (refer to item 2f in this Note and to Note 21);
income taxes (refer to item 7 in this Note and to Note 8);
–
–
– provisions and contingent liabilities (refer to item 11 in this Note and
to Note 18);
– post-employment benefit plans (refer to item 6 in this Note and to
Note 26);
– goodwill (refer to item 10 in this Note and to Note 13); and
–
consolidation of structured entities (refer to item 1 in this Note and to
Note 28).
288
288
Consolidated financial statements
Note 1 Summary of significant accounting policies (continued)
Note 1 Summary of significant accounting policies (continued)
a) Significant accounting policies
2) Financial instruments
a. Recognition
UBS recognizes financial instruments when it becomes a party to
contractual provisions of an instrument. UBS applies settlement
date accounting to all standard purchases and sales of non-
derivative financial instruments.
In transactions where UBS acts as a transferee, to the extent
such financial asset transfer does not qualify for derecognition
by the transferor, UBS does not recognize the transferred
instrument as its asset.
UBS also acts in a fiduciary capacity, which results in it
holding or placing assets on behalf of individuals, trusts,
retirement benefit plans and other institutions. Unless these
items meet the definition of an asset and the recognition criteria
are satisfied, such assets are not recognized on UBS’s balance
sheet and the related income is excluded from the Financial
Statements.
Client cash balances associated with derivatives clearing and
execution services are not recognized on the balance sheet if,
through contractual agreement, regulation or practice, UBS
neither obtains benefits from nor controls such cash balances.
b. Classification, measurement and presentation
This Note describes the significant accounting policies applied in
1) Consolidation
the preparation of the consolidated financial statements (the
Financial Statements) of UBS Group AG and its subsidiaries (UBS
The Financial Statements comprise the financial statements of
or the Group). On 25 February 2021, the Financial Statements
the parent company (UBS Group AG) and its subsidiaries,
were authorized for issue by the Board of Directors.
Basis of accounting
presented as a
single economic entity;
intercompany
transactions and balances have been eliminated. UBS
consolidates all entities that it controls, including structured
entities (SEs), which is the case when it has: (i) power over the
The Financial Statements have been prepared in accordance with
relevant activities of the entity; (ii) exposure to an entity‘s
International Financial Reporting Standards (IFRS), as issued by
variable returns; and (iii) the ability to use its power to affect its
the International Accounting Standards Board (the IASB), and
own returns.
are presented in US dollars (USD).
Consideration is given to all facts and circumstances to
Disclosures marked as audited in the “Risk, capital, liquidity
determine whether the Group has power over another entity,
and funding, and balance sheet” section of this report form an
i.e., the current ability to direct the relevant activities of an entity
integral part of the Financial Statements. These disclosures relate
when decisions about those activities need to be made.
to requirements under IFRS 7, Financial Instruments: Disclosures,
Subsidiaries, including SEs, are consolidated from the date
and IAS 1, Presentation of Financial Statements, and are not
when control is gained and deconsolidated from the date when
repeated in this section.
control ceases. Control, or the lack thereof, is reassessed if facts
The accounting policies described in this Note have been
and circumstances indicate that there is a change to one or
applied consistently in all years presented unless otherwise
more elements required to establish that control is present.
stated in Note 1b. In addition, effective from 1 January 2019,
Business combinations are accounted
for using
the
the Group applies IFRS 16, Leases, which sets out the principles
acquisition method. The amount of non-controlling interest is
for the recognition, measurement, presentation and disclosure
measured at the non-controlling interest’s proportionate share
of leases. Within this Note, policies applied for periods that differ
of the acquiree’s identifiable net assets.
from those applied to the financial year ended 31 December
› Refer to Note 28 for more information
2020 are identified as “Comparative policy.”
Critical accounting estimates and judgments
Each individual entity is assessed for consolidation in line with the
aforementioned consolidation principles. The assessment of control can
be complex and requires the use of significant judgment, in particular in
determining whether UBS has power over the entity. As the nature and
extent of UBS’s involvement is unique for each entity, there is no uniform
consolidation outcome by entity. Certain entities within a class may be
consolidated while others may not. When carrying out the consolidation
assessment, judgment is exercised considering all the relevant facts and
circumstances, including the nature and activities of the investee, as well
as the substance of voting and similar rights.
› Refer to Note 28 for more information
Critical accounting estimates and judgments
Preparation of these Financial Statements under IFRS requires management
to apply judgment and make estimates and assumptions that affect
reported amounts of assets, liabilities, income and expenses and disclosure
of contingent assets and liabilities, and may involve significant uncertainty at
the time they are made. Such estimates and assumptions are based on the
best available information. UBS regularly reassesses such estimates and
assumptions, which encompass historical experience, expectations of the
future and other pertinent factors, to determine their continuing relevance
based on current conditions, updating them as necessary. Changes in those
estimates and assumptions may have a significant effect on the Financial
Statements. Furthermore, actual results may differ significantly from UBS’s
estimates, which could result in significant losses to the Group, beyond what
was anticipated or provided for.
The following areas contain estimation uncertainty or require critical
judgment and have a significant effect on amounts recognized in the
expected credit loss measurement (refer to item 2g in this Note and to
Financial Statements:
Note 20);
–
–
–
to Note 18);
Note 26);
Note 28).
fair value measurement (refer to item 2f in this Note and to Note 21);
income taxes (refer to item 7 in this Note and to Note 8);
– provisions and contingent liabilities (refer to item 11 in this Note and
– post-employment benefit plans (refer to item 6 in this Note and to
– goodwill (refer to item 10 in this Note and to Note 13); and
–
consolidation of structured entities (refer to item 1 in this Note and to
Where the contractual terms of a debt instrument result in
cash flows that are solely payments of principal and interest
(SPPI) on the principal amount outstanding, the debt instrument
is classified as measured at amortized cost if it is held within a
business model that has an objective to hold financial assets to
collect contractual cash flows, or at FVOCI if it is held within a
business model with the objective being achieved by both
collecting contractual cash flows and selling financial assets.
All other financial assets are measured at FVTPL, including
those held for trading or those managed on a fair value basis,
except for derivatives designated in a hedge relationship, in
which case hedge accounting requirements apply (refer to item
2j in this Note for more information).
Business model assessment and contractual cash flow
characteristics
UBS determines the nature of a business model by considering
Financial assets
All financial instruments are on initial recognition measured at
fair value and classified as measured at amortized cost, fair value
through other comprehensive income (FVOCI) or fair value
through profit or
instruments
subsequently measured at amortized cost or FVOCI, the initial
fair value is adjusted for directly attributable transaction costs.
(FVTPL). For financial
loss
the way financial assets are managed to achieve a particular
business objective.
In assessing whether the contractual cash flows are SPPI, the
Group considers whether the contractual terms of the financial
asset contain a term that could change the timing or amount of
contractual cash flows arising over the life of the instrument.
Financial liabilities
Financial liabilities measured at amortized cost
Debt issued measured at amortized cost includes contingent
capital instruments containing contractual provisions under
which the principal amounts would be written down or
converted into equity upon either a specified common equity
tier 1 (CET1) ratio breach or a determination by the Swiss
Financial Market Supervisory Authority (FINMA) that a viability
event has occurred. Such contractual provisions are not
derivatives, as the underlying is deemed to be a non-financial
variable specific to a party to the contract.
Where there is a legal bail-in mechanism for write-down or
conversion into equity (as is the case, for instance, with senior
unsecured debt issued by the Group that is subject to write-
down or conversion under resolution authority granted to
FINMA under Swiss
law), the amortized cost accounting
treatment applied to these instruments is not affected.
If the debt were to be written down or converted into equity
in a future period, it would be partially or fully derecognized,
with the difference between its carrying amount and the fair
value of any equity issued recognized in the income statement.
A gain or loss is recognized in Other income when debt
issued is subsequently repurchased for market-making or other
activities. A subsequent sale of own bonds in the market is
treated as a reissuance of debt.
Financial liabilities measured at fair value through profit or loss
UBS designates certain issued debt instruments as financial
liabilities at fair value through profit or loss, on the basis that
such financial instruments include embedded derivatives and / or
are managed on a fair value basis (refer to the table below for
more information), in which case bifurcation of the embedded
derivative component is not required. Financial instruments
including embedded derivatives arise predominantly from the
issuance of certain structured debt instruments.
Measurement and presentation
After initial recognition, UBS classifies, measures and presents its
financial assets and liabilities in accordance with IFRS 9, as
described in the table on the following pages.
288
289
289
Financial statements Consolidated financial statements
Note 1 Summary of significant accounting policies (continued)
Classification, measurement and presentation of financial assets
Financial assets classification
Significant items included
Measurement and presentation
Measured at
amortized cost
This classification includes:
– cash and balances at central banks;
– loans and advances to banks;
– cash collateral receivables on securities borrowed;
– receivables on reverse repurchase agreements;
– cash collateral receivables on derivative instruments;
– residential and commercial mortgages;
– corporate loans;
Measured at amortized cost using the effective interest
method less allowances for expected credit losses (ECL)
(refer to items 2d and 2g in this Note for more information).
The following items are recognized in the income
statement:
– interest income, which is accounted for in accordance
with item 2d in this Note;
– ECL and reversals; and
– secured loans, including Lombard loans, and
– foreign exchange translation gains and losses.
unsecured loans;
– loans to financial advisors; and
– debt securities held as high-quality liquid assets
(HQLA).
Measured
at FVOCI
Debt instruments
measured at
FVOCI
This classification primarily includes debt securities and
certain asset-backed securities held as HQLA.
When the financial asset at amortized cost is derecognized,
the gain or loss is recognized in the income statement.
For amounts arising from settlement of certain derivatives,
refer to the next page.
Measured at fair value, with unrealized gains and losses
reported in Other comprehensive income, net of applicable
income taxes, until such investments are derecognized.
Upon derecognition, any accumulated balances in Other
comprehensive income are reclassified to the income
statement and reported within Other income.
The following items, which are determined on the same
basis as for financial assets measured at amortized cost, are
recognized in the income statement:
– interest income, which is accounted for in accordance
with item 2d in this Note;
– ECL and reversals; and
– foreign exchange translation gains and losses.
290
290
Consolidated financial statements
Note 1 Summary of significant accounting policies (continued)
Note 1 Summary of significant accounting policies (continued)
Classification, measurement and presentation of financial assets
Classification, measurement and presentation of financial assets
Financial assets classification
Significant items included
Measurement and presentation
Financial assets classification
Significant items included
Measurement and presentation
This classification includes:
– cash and balances at central banks;
– loans and advances to banks;
– cash collateral receivables on securities borrowed;
– receivables on reverse repurchase agreements;
– cash collateral receivables on derivative instruments;
– residential and commercial mortgages;
– corporate loans;
unsecured loans;
– loans to financial advisors; and
– debt securities held as high-quality liquid assets
(HQLA).
– secured loans, including Lombard loans, and
– foreign exchange translation gains and losses.
The following items are recognized in the income
statement:
– interest income, which is accounted for in accordance
with item 2d in this Note;
– ECL and reversals; and
When the financial asset at amortized cost is derecognized,
the gain or loss is recognized in the income statement.
For amounts arising from settlement of certain derivatives,
refer to the next page.
income taxes, until such investments are derecognized.
Upon derecognition, any accumulated balances in Other
comprehensive income are reclassified to the income
statement and reported within Other income.
The following items, which are determined on the same
basis as for financial assets measured at amortized cost, are
recognized in the income statement:
– interest income, which is accounted for in accordance
with item 2d in this Note;
– ECL and reversals; and
– foreign exchange translation gains and losses.
Measured
at FVOCI
Debt instruments
This classification primarily includes debt securities and
Measured at fair value, with unrealized gains and losses
measured at
certain asset-backed securities held as HQLA.
reported in Other comprehensive income, net of applicable
FVOCI
Measured at
amortized cost
Measured at amortized cost using the effective interest
method less allowances for expected credit losses (ECL)
(refer to items 2d and 2g in this Note for more information).
Measured at
FVTPL
Held for
trading
Financial assets held for trading include:
– all derivatives with a positive replacement value, except
those that are designated and effective hedging
instruments; and
– other financial assets acquired principally for the
purpose of selling or repurchasing in the near term, or
that are part of a portfolio of identified financial
instruments that are managed together and for which
there is evidence of a recent actual pattern of short-
term profit taking. Included in this category are debt
instruments (including those in the form of securities,
money market paper, and traded corporate and bank
loans) and equity instruments.
Mandatorily
measured at
FVTPL – Other
This classification includes financial assets mandatorily
measured at FVTPL that are not held for trading, as
follows:
– certain structured loans, certain commercial loans,
receivables under reverse repurchase and cash collateral
on securities borrowing agreements that are managed
on a fair value basis;
– loans managed on a fair value basis, including those
hedged with credit derivatives;
– certain debt securities held as HQLA and managed on a
fair value basis;
– certain investment fund holdings and assets held to
hedge delivery obligations related to cash-settled
employee compensation plans;
– brokerage receivables, for which contractual cash flows
do not meet the SPPI criterion because the aggregate
balance is accounted for as a single unit of account,
with interest being calculated on the individual
components;
– auction rate securities, for which contractual cash flows
do not meet the SPPI criterion because interest may be
reset at rates that contain leverage;
– equity instruments; and
– assets held under unit-linked investment contracts.
Measured at fair value, with changes recognized in the
income statement.
Derivative assets (including derivatives that are designated
and effective hedging instruments) are generally
presented as Derivative financial instruments, except those
exchange-traded and OTC-cleared derivatives that are
considered to be settled on a daily basis or in substance
net settled on a daily basis, which are presented within
Cash collateral receivables on derivative instruments.
Changes in fair value, initial transaction costs, dividends
and gains and losses arising on disposal or redemption are
recognized in Other net income from financial
instruments measured at fair value through profit or loss,1
except interest income on instruments other than
derivatives (refer to item 2d in this Note), interest on
derivatives designated as hedging instruments in hedges
of interest rate risk and forward points on certain short-
and long-duration foreign exchange contracts acting as
economic hedges, which are reported in Net interest
income.
Changes in the fair value of derivatives that are
designated and effective hedging instruments are
presented either in the income statement or Other
comprehensive income, depending on the type of hedge
relationship (refer to item 2j in this Note for more
information).
11 Effective from 1 January 2019, this line item includes dividends (prior to 1 January 2019, dividends were included within Net interest income), intermediation income arising from certain client-driven Global Wealth
Management and Personal & Corporate Banking financial transactions, foreign currency translation effects and income and expenses from exposures to precious metals.
290
291
291
Financial statements Consolidated financial statements
Note 1 Summary of significant accounting policies (continued)
Classification, measurement and presentation of financial liabilities
Financial liabilities classification
Significant items included
Measurement and presentation
Measured at amortized cost using the effective interest
method.
When the financial liability at amortized cost is
derecognized, the gain or loss is recognized in the income
statement.
Measurement and presentation of financial liabilities
classified at FVTPL follow the same principles as for
financial assets classified at FVTPL, except that the amount
of change in the fair value of the financial liability
designated at FVTPL that is attributable to changes in
UBS’s own credit risk is presented in Other comprehensive
income directly within Retained earnings and is never
reclassified to the income statement.
Derivative liabilities (including derivatives that are
designated and effective hedging instruments) are
generally presented as Derivative financial instruments,
except those exchange-traded and OTC-cleared
derivatives that are considered to be settled on a daily
basis or in substance net settled on a daily basis, which
are presented within Cash collateral payables on derivative
instruments.
Measured at amortized cost
This classification includes:
– demand and time deposits;
– retail savings / deposits;
– amounts payable under repurchase agreements;
– cash collateral on securities lent;
– non-structured fixed-rate bonds;
– subordinated debt;
– certificates of deposit and covered bonds; and
– cash collateral payables on derivative instruments.
Measured at
fair value
through
profit or loss
Held for trading
Financial liabilities held for trading include:
– all derivatives with a negative replacement value
(including certain loan commitments), except those
that are designated and effective hedging
instruments; and
– obligations to deliver financial instruments, such as
debt and equity instruments, that UBS has sold to
third parties but does not own (short positions).
Designated at
FVTPL
UBS designates at FVTPL the following financial
liabilities:
– issued hybrid debt instruments that primarily include
equity-linked, credit-linked and rates-linked bonds or
notes;
– issued debt instruments managed on a fair value
basis;
– certain payables under repurchase agreements and
cash collateral on securities lending agreements that
are managed in conjunction with associated reverse
repurchase agreements and cash collateral on
securities borrowed;
– amounts due under unit-linked investment contracts
whose cash flows are linked to financial assets
measured at FVTPL and eliminate an accounting
mismatch; and
– brokerage payables, which arise in conjunction with
brokerage receivables and are measured at FVTPL to
achieve measurement consistency.
292
292
Consolidated financial statements
Measured at
Held for trading
Financial liabilities held for trading include:
fair value
through
profit or loss
Designated at
UBS designates at FVTPL the following financial
FVTPL
liabilities:
– demand and time deposits;
– retail savings / deposits;
– cash collateral on securities lent;
– non-structured fixed-rate bonds;
– subordinated debt;
– certificates of deposit and covered bonds; and
– cash collateral payables on derivative instruments.
– all derivatives with a negative replacement value
(including certain loan commitments), except those
that are designated and effective hedging
instruments; and
– obligations to deliver financial instruments, such as
debt and equity instruments, that UBS has sold to
third parties but does not own (short positions).
– issued hybrid debt instruments that primarily include
equity-linked, credit-linked and rates-linked bonds or
– issued debt instruments managed on a fair value
notes;
basis;
– certain payables under repurchase agreements and
cash collateral on securities lending agreements that
are managed in conjunction with associated reverse
repurchase agreements and cash collateral on
securities borrowed;
– amounts due under unit-linked investment contracts
whose cash flows are linked to financial assets
measured at FVTPL and eliminate an accounting
mismatch; and
– brokerage payables, which arise in conjunction with
brokerage receivables and are measured at FVTPL to
achieve measurement consistency.
Measurement and presentation of financial liabilities
classified at FVTPL follow the same principles as for
financial assets classified at FVTPL, except that the amount
of change in the fair value of the financial liability
designated at FVTPL that is attributable to changes in
UBS’s own credit risk is presented in Other comprehensive
income directly within Retained earnings and is never
reclassified to the income statement.
Derivative liabilities (including derivatives that are
designated and effective hedging instruments) are
generally presented as Derivative financial instruments,
except those exchange-traded and OTC-cleared
derivatives that are considered to be settled on a daily
basis or in substance net settled on a daily basis, which
are presented within Cash collateral payables on derivative
instruments.
Note 1 Summary of significant accounting policies (continued)
Note 1 Summary of significant accounting policies (continued)
Classification, measurement and presentation of financial liabilities
Financial liabilities classification
Significant items included
Measurement and presentation
Measured at amortized cost
This classification includes:
Measured at amortized cost using the effective interest
– amounts payable under repurchase agreements;
When the financial liability at amortized cost is
derecognized, the gain or loss is recognized in the income
method.
statement.
c. Loan commitments and financial guarantees
Loan commitments are arrangements to provide credit under
defined terms and conditions. Irrevocable loan commitments are
classified as: (i) derivative loan commitments measured at fair
value through profit or loss; (ii) loan commitments designated at
fair value through profit or loss; or (iii) loan commitments not
measured at fair value. Financial guarantee contracts are
contracts that require UBS to make specified payments to
reimburse the holder for an incurred loss because a specified
debtor fails to make payments when due in accordance with the
terms of a specified debt instrument.
for
rate
(EIR)
the effective
d. Interest income and expense
Interest income and expense are recognized in the income
statement based on the effective interest method. When
financial
interest
calculating
instruments (other than credit-impaired financial instruments),
UBS estimates future cash flows considering all contractual
terms of the instrument, but not expected credit losses, with the
EIR applied to the gross carrying amount of the financial asset or
the amortized cost of a financial liability. However, when a
financial asset becomes credit-impaired after initial recognition,
interest income is determined by applying the EIR to the
amortized cost of the instrument, which represents the gross
carrying amount adjusted for any credit loss allowance.
Upfront fees, including fees on loan commitments not
measured at fair value where a loan is expected to be issued,
and direct costs are included within the initial measurement of a
financial instrument measured at amortized cost or FVOCI and
recognized over the expected life of the instrument as part of its
EIR.
Fees related to loan commitments where no loan is expected
to be issued, as well as loan syndication fees where UBS does
not retain a portion of the syndicated loan or where UBS does
retain a portion of the syndicated loan at the same effective
yield for comparable risk as other participants, are included in
Net fee and commission income and either recognized over the
life of the commitment or when syndication occurs.
› Refer to item 3 in this Note for more information
Interest income on financial assets, excluding derivatives, is
included in interest income when positive and in interest
expense when negative. Similarly, interest expense on financial
liabilities, excluding derivatives, is included in interest expense,
except when interest rates are negative, in which case it is
included in interest income.
› Refer to item 2b in this Note and Note 3 for more information
e. Derecognition
Financial assets
UBS derecognizes a financial asset, or a portion of a financial
asset, when the contractual rights to the cash flows from the
financial asset expire, or UBS has either (i) transferred the
contractual rights to receive the cash flows from the asset, or (ii)
retained the contractual rights to receive the cash flows of that
asset, but assumed a contractual obligation to pay the cash
flows to one or more entities, subject to certain criteria.
Transferred financial assets are derecognized if the purchaser
has received substantially all the risks and rewards of the asset or
a significant part of the risks and rewards combined with a
practical ability to sell or pledge the asset.
Where financial assets have been pledged as collateral or in
similar arrangements, they are considered to have been
transferred if the counterparty has received the contractual
rights to the cash flows of the pledged assets, as may be
evidenced by, for example, the counterparty’s right to sell or
repledge the assets. In transfers where control over the financial
asset is retained, UBS continues to recognize the asset to the
extent of its continuing involvement, determined by the extent
to which it is exposed to changes in the value of the transferred
asset following the transfer.
Certain over-the-counter (OTC) derivative contracts and most
exchange-traded futures and option contracts cleared through
central clearing counterparties and exchanges are considered to
be settled on a daily basis, as the payment or receipt of variation
margin on a daily basis represents legal or economic settlement,
which results in derecognition of the associated derivatives.
› Refer to item 2i in this Note, Note 22 and Note 23 for more
information
Financial liabilities
UBS derecognizes a financial liability from its balance sheet
when it is extinguished; i.e., when the obligation specified in the
contract is discharged, canceled or expires. When an existing
financial liability is exchanged for a new one from the same
lender on substantially different terms, or the terms of an
existing liability are substantially modified, the original liability is
derecognized and a new liability recognized with any difference
in the respective carrying amounts recognized in the income
statement.
f. Fair value of financial instruments
UBS accounts for a significant portion of its assets and liabilities
at fair value. Fair value is the price on the measurement date
that would be received for the sale of an asset or paid to
transfer a liability in an orderly transaction between market
participants in the principal market, or in the most advantageous
market in the absence of a principal market.
› Refer to Note 21 for more information
292
293
293
Financial statements Consolidated financial statements
Note 1 Summary of significant accounting policies (continued)
Critical accounting estimates and judgments
The use of valuation techniques, modeling assumptions and estimates of
unobservable market inputs in the fair valuation of financial instruments
requires significant judgment and could affect the amount of gain or loss
recorded for a particular position. Valuation techniques that rely more
heavily on unobservable inputs and sophisticated models inherently
require a higher level of judgment and may require adjustment to reflect
factors that market participants would consider in estimating fair value,
such as close-out costs, which are presented in Note 21d.
is
UBS‘s governance framework over fair value measurement
described in Note 21b, and UBS provides a sensitivity analysis of the
estimated effects arising from changing significant unobservable inputs in
Level 3
reasonably possible alternative
to
financial
assumptions within Note 21g.
› Refer to Note 21 for more information
instruments
All or part of a financial asset is written off if it is deemed
uncollectible or forgiven. Write-offs reduce the principal amount
of a claim and are charged against related allowances for credit
losses. Recoveries, in part or in full, of amounts previously
written off are generally credited to Credit loss (expense) /
release.
ECL are recognized in the income statement in Credit loss
(expense) / release. A corresponding ECL allowance is reported
as a decrease in the carrying amount of financial assets
measured at amortized cost on the balance sheet. For financial
assets that are FVOCI, the carrying amount is not reduced, but
an accumulated amount is recognized in Other comprehensive
income. For off-balance sheet financial instruments and other
credit lines, provisions for ECL are presented in Provisions.
Default and credit impairment
UBS applies a single definition of default for credit risk
management purposes, regulatory reporting and ECL, with a
counterparty classified as defaulted based on quantitative and
qualitative criteria.
› Refer to ‘’Credit policies for distressed assets’’ in the ‘’Risk
management and control’’ section of this report for more
information
Measurement of expected credit losses
IFRS 9 ECL reflect an unbiased, probability-weighted estimate
based on loss expectations resulting from default events. The
method used to calculate ECL applies the following principal
factors: probability of default (PD), loss given default (LGD) and
exposure at default (EAD). Parameters are generally determined
on an individual financial asset level. Based on the materiality of
the portfolio, for credit card exposures and personal account
overdrafts in Switzerland, a portfolio approach is applied that
derives an average PD and LGD for the entire portfolio. PDs and
LGDs used in the ECL calculation are point-in-time (PIT)-based
for key portfolios and consider both current conditions and
expected cyclical changes. For material portfolios, PDs and LGDs
are determined for different scenarios, whereas EAD projections
are treated as scenario independent.
For the purpose of determining the ECL-relevant parameters,
UBS leverages its Pillar 1 internal ratings-based (IRB) models that
are also used in determining expected loss (EL) and risk-
weighted assets under the Basel III framework and Pillar 2 stress
loss models. Adjustments have been made to these models and
IFRS 9-related models have been developed that consider the
complexity, structure and risk profile of relevant portfolios and
take account of the fact that PDs and LGDs used in the ECL
calculation are PIT-based, as opposed to the corresponding
Basel III through-the-cycle (TTC) parameters. All models that are
relevant for measuring expected credit losses are subject to
UBS’s model validation and oversight processes.
lease receivables, financial guarantees and
g. Allowances and provisions for expected credit losses
Expected credit losses (ECL) are recognized for financial assets
measured at amortized cost, financial assets measured at FVOCI,
loan
fee and
commitments not measured at fair value. ECL are also
recognized on the undrawn portion of revolving revocable credit
lines, which include UBS’s credit card limits and master credit
facilities, and are referred to by UBS as “other credit lines.”
Though these other credit lines are revocable at any time, UBS is
exposed to credit risk because the borrower has the ability to
draw down funds before UBS can take credit risk mitigation
actions.
Recognition of expected credit losses
ECL are recognized on the following basis:
– Stage 1 instruments: Maximum 12-month ECL are recognized
from initial recognition, reflecting the portion of lifetime cash
shortfalls that would result if a default occurs in the 12
months after the reporting date, weighted by the risk of a
default occurring.
– Stage 2
instruments: Lifetime ECL are recognized
if a
significant increase in credit risk (SICR) is observed subsequent
to the instrument’s initial recognition, reflecting lifetime cash
shortfalls that would result from all possible default events
over the expected life of a financial instrument, weighted by
the risk of a default occurring. When an SICR is no longer
observed, the instrument will move back to stage 1.
– Stage 3 instruments: Lifetime ECL are always recognized for
credit-impaired financial instruments, as determined by the
occurrence of one or more loss events, by estimating
expected cash flows based on a chosen recovery strategy.
Credit-impaired exposures may include positions for which no
allowance has been recognized, for example because they are
expected to be fully recoverable through collateral held.
– Changes in lifetime ECL since initial recognition are also
recognized for assets that are purchased or originated credit-
impaired (POCI). POCI financial instruments include those that
are purchased at a deep discount or newly originated with a
defaulted counterparty; they remain a separate category until
derecognition.
294
294
Consolidated financial statements
Critical accounting estimates and judgments
The use of valuation techniques, modeling assumptions and estimates of
unobservable market inputs in the fair valuation of financial instruments
requires significant judgment and could affect the amount of gain or loss
recorded for a particular position. Valuation techniques that rely more
heavily on unobservable inputs and sophisticated models inherently
release.
All or part of a financial asset is written off if it is deemed
uncollectible or forgiven. Write-offs reduce the principal amount
of a claim and are charged against related allowances for credit
losses. Recoveries, in part or in full, of amounts previously
written off are generally credited to Credit loss (expense) /
require a higher level of judgment and may require adjustment to reflect
factors that market participants would consider in estimating fair value,
such as close-out costs, which are presented in Note 21d.
UBS‘s governance framework over fair value measurement
is
described in Note 21b, and UBS provides a sensitivity analysis of the
estimated effects arising from changing significant unobservable inputs in
Level 3
financial
instruments
to
reasonably possible alternative
assumptions within Note 21g.
› Refer to Note 21 for more information
ECL are recognized in the income statement in Credit loss
(expense) / release. A corresponding ECL allowance is reported
as a decrease in the carrying amount of financial assets
measured at amortized cost on the balance sheet. For financial
assets that are FVOCI, the carrying amount is not reduced, but
an accumulated amount is recognized in Other comprehensive
income. For off-balance sheet financial instruments and other
credit lines, provisions for ECL are presented in Provisions.
g. Allowances and provisions for expected credit losses
Expected credit losses (ECL) are recognized for financial assets
measured at amortized cost, financial assets measured at FVOCI,
fee and
lease receivables, financial guarantees and
loan
commitments not measured at fair value. ECL are also
recognized on the undrawn portion of revolving revocable credit
lines, which include UBS’s credit card limits and master credit
facilities, and are referred to by UBS as “other credit lines.”
Though these other credit lines are revocable at any time, UBS is
exposed to credit risk because the borrower has the ability to
draw down funds before UBS can take credit risk mitigation
actions.
Recognition of expected credit losses
ECL are recognized on the following basis:
– Stage 1 instruments: Maximum 12-month ECL are recognized
from initial recognition, reflecting the portion of lifetime cash
shortfalls that would result if a default occurs in the 12
months after the reporting date, weighted by the risk of a
default occurring.
– Stage 2
instruments: Lifetime ECL are recognized
if a
significant increase in credit risk (SICR) is observed subsequent
to the instrument’s initial recognition, reflecting lifetime cash
shortfalls that would result from all possible default events
over the expected life of a financial instrument, weighted by
the risk of a default occurring. When an SICR is no longer
observed, the instrument will move back to stage 1.
– Stage 3 instruments: Lifetime ECL are always recognized for
credit-impaired financial instruments, as determined by the
occurrence of one or more loss events, by estimating
expected cash flows based on a chosen recovery strategy.
Credit-impaired exposures may include positions for which no
allowance has been recognized, for example because they are
expected to be fully recoverable through collateral held.
recognized for assets that are purchased or originated credit-
impaired (POCI). POCI financial instruments include those that
are purchased at a deep discount or newly originated with a
defaulted counterparty; they remain a separate category until
derecognition.
Default and credit impairment
UBS applies a single definition of default for credit risk
management purposes, regulatory reporting and ECL, with a
counterparty classified as defaulted based on quantitative and
qualitative criteria.
› Refer to ‘’Credit policies for distressed assets’’ in the ‘’Risk
management and control’’ section of this report for more
information
Measurement of expected credit losses
IFRS 9 ECL reflect an unbiased, probability-weighted estimate
based on loss expectations resulting from default events. The
method used to calculate ECL applies the following principal
factors: probability of default (PD), loss given default (LGD) and
exposure at default (EAD). Parameters are generally determined
on an individual financial asset level. Based on the materiality of
the portfolio, for credit card exposures and personal account
overdrafts in Switzerland, a portfolio approach is applied that
derives an average PD and LGD for the entire portfolio. PDs and
LGDs used in the ECL calculation are point-in-time (PIT)-based
for key portfolios and consider both current conditions and
expected cyclical changes. For material portfolios, PDs and LGDs
are determined for different scenarios, whereas EAD projections
are treated as scenario independent.
For the purpose of determining the ECL-relevant parameters,
UBS leverages its Pillar 1 internal ratings-based (IRB) models that
are also used in determining expected loss (EL) and risk-
weighted assets under the Basel III framework and Pillar 2 stress
loss models. Adjustments have been made to these models and
IFRS 9-related models have been developed that consider the
complexity, structure and risk profile of relevant portfolios and
take account of the fact that PDs and LGDs used in the ECL
calculation are PIT-based, as opposed to the corresponding
Basel III through-the-cycle (TTC) parameters. All models that are
relevant for measuring expected credit losses are subject to
– Changes in lifetime ECL since initial recognition are also
UBS’s model validation and oversight processes.
Note 1 Summary of significant accounting policies (continued)
Note 1 Summary of significant accounting policies (continued)
Probability of default: PD represents the likelihood of a
default over a specified time period. A 12-month PD represents
the likelihood of default determined for the next 12 months and
a lifetime PD represents the probability of default over the
remaining lifetime of the instrument. PIT PDs are derived from
TTC PDs and scenario forecasts. The modeling is region-,
industry- and client segment-specific and considers both
macroeconomic scenario dependencies and client-idiosyncratic
information.
Exposure at default: EAD represents an estimate of the
exposure to credit risk at the time of a potential default
occurring, considering expected repayments, interest payments
and accruals, discounted at the EIR. Future drawdowns on
facilities are considered through a credit conversion factor (CCF)
that is reflective of historical drawdown and default patterns and
the characteristics of the respective portfolios.
Loss given default: LGD represents an estimate of the loss at
the time of a potential default occurring, taking into account
expected future cash flows from collateral and other credit
enhancements, or expected payouts from bankruptcy proceedings
for unsecured claims and, where applicable, time to realization of
collateral and the seniority of claims. The LGD is commonly
expressed as a percentage of the EAD.
Estimation of expected credit losses
Number of scenarios and estimation of scenario weights
The determination of the probability-weighted ECL requires
evaluating a range of diverse and relevant future economic
conditions, especially with a view to modeling the non-linear
effect of assumptions about macroeconomic factors on the
estimate.
To accommodate this requirement, UBS uses different
economic scenarios in the ECL calculation. Each scenario is
represented by a specific scenario narrative, which is relevant
considering the exposure of key portfolios to economic risks,
and for which a set of consistent macroeconomic variables is
determined. An econometric model is used to provide an input
into the scenario weight assessment process giving a first
indication of the probability that the GDP forecast used for each
scenario would materialize, if historically observed deviations of
GDP growth from trend growth were representative. As such
historical analyses of GDP development do not include an
assessment of the underlying economic or political causes,
management positions the model output into the context of
current conditions and future expectations and applies material
judgment in determining the final scenario weights.
The determined weights constitute the probabilities that the
respective set of macroeconomic conditions will occur and not
that
related
macroeconomic variables will materialize.
the chosen particular narratives with
the
Macroeconomic and other factors
The range of macroeconomic, market and other factors that is
modeled as part of the scenario determination is wide, and
historical information is used to support the identification of the
key factors. As the forecast horizon increases, the availability of
information decreases, requiring an increase in judgment. For
cycle-sensitive PD and LGD determination purposes, UBS projects
the relevant economic factors for a period of three years before
reverting, over a specified period, to a cycle-neutral PD and LGD
for longer-term projections.
Factors relevant for ECL calculation vary by type of exposure.
Regional and client-segment characteristics are generally taken
into account, with specific focus on Switzerland and the US,
considering UBS’s key ECL-relevant portfolios.
For UBS, the following forward-looking macroeconomic
variables represent the most relevant factors for ECL calculation:
– GDP growth rates, given their significant effect on borrowers’
performance;
– unemployment rates, given their significant effect on private
clients’ ability to meet contractual obligations;
– house price indices, given their significant effect on mortgage
collateral valuations;
– interest rates, given their significant effect on counterparties’
abilities to service debt;
– consumer price indices, given their overall relevance for
companies’ performance, private clients’ purchasing power
and economic stability; and
– equity indices, given that they are an important factor in our
corporate rating tools.
Scenario generation, review process and governance
A team of economists, who are part of Group Risk Control,
develop the forward-looking macroeconomic assumptions with
involvement from a broad range of experts.
The scenarios, their weight and the key macroeconomic and
other factors are subject to a critical assessment by the Scenario
and Operating Committees, which include senior management
from Group Risk and Group Finance. Important aspects for the
review include whether there may be particular credit risk
concerns that may not be capable of being addressed
systematically and require post-model adjustments for stage
allocation and ECL allowance.
The Group Model Governance Board, as the highest authority
under UBS’s model governance framework, ratifies the decisions
taken by the Operating Committee.
› Refer to Note 20 for more information
ECL measurement period
The period for which lifetime ECL are determined is based on
the maximum contractual period that UBS is exposed to credit
risk, taking into account contractual extension, termination and
prepayment options. For irrevocable loan commitments and
financial guarantee contracts,
the measurement period
represents the maximum contractual period for which UBS has
an obligation to extend credit.
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Financial statements Consolidated financial statements
Note 1 Summary of significant accounting policies (continued)
Additionally, some financial instruments include both an on-
demand loan and a revocable undrawn commitment, where the
contractual cancelation right does not limit UBS’s exposure to
credit risk to the contractual notice period, as the client has the
ability to draw down funds before UBS can take risk-mitigating
actions. In such cases, UBS is required to estimate the period
over which it is exposed to credit risk. This applies to UBS’s credit
card limits, which do not have a defined contractual maturity
date, are callable on demand and where the drawn and
undrawn components are managed as one exposure. The
exposure arising from UBS’s credit card limits is not significant
and is managed at a portfolio level, with credit actions triggered
when balances are past due. An ECL measurement period of
seven years is applied for credit card limits, capped at 12 months
for stage 1 balances, as a proxy for the period that UBS is
exposed to credit risk.
Customary master credit agreements in the Swiss corporate
market also include on-demand loans and revocable undrawn
commitments. For smaller commercial facilities, a risk-based
monitoring (RbM) approach is in place that highlights negative
trends as risk events, at an individual facility level, based on a
combination of continuously updated risk indicators. The risk
events trigger additional credit reviews by a risk officer, enabling
informed credit decisions to be taken. Larger corporate facilities
are not subject to RbM, but are reviewed at least annually
through a formal credit review. UBS has assessed these credit
risk management practices and considers both the RbM
approach and formal credit reviews as substantive credit reviews
resulting in a re-origination of the given facility. Following this, a
12-month measurement period from the reporting date is used
for both types of facilities as an appropriate proxy of the period
over which UBS is exposed to credit risk, with 12 months also
used as a look-back period for assessing SICR, always from the
respective reporting date.
Significant increase in credit risk
Financial instruments subject to ECL are monitored on an
ongoing basis. To determine whether the recognition of a
maximum 12-month ECL continues to be appropriate, an
assessment is made as to whether an SICR has occurred since
initial recognition of the financial instrument, applying both
quantitative and qualitative factors.
Primarily, UBS assesses changes in an instrument’s risk of
default on a quantitative basis by comparing the annualized
forward-looking and scenario-weighted
lifetime PD of an
instrument determined at two different dates:
– at the reporting date; and
– at inception of the instrument.
If, based on UBS’s quantitative modeling, an increase exceeds
a set threshold, an SICR is deemed to have occurred and the
lifetime ECL
instrument
recognized.
to stage 2 with
transferred
is
The threshold applied varies depending on the original credit
quality of the borrower, with a higher SICR threshold set for
those instruments with a low PD at inception. The SICR
assessment based on PD changes is made at an individual
financial asset level. A high-level overview of the SICR trigger,
which is a multiple of the annualized remaining lifetime PIT PD
expressed in rating downgrades, is provided in the “SICR
thresholds” table below. The actual SICR thresholds applied are
defined on a more granular level by interpolating between the
values shown in the table below.
SICR thresholds
Internal rating at origination
of the instrument
Rating downgrades /
SICR trigger
0–3
4–8
9–13
3
2
1
› Refer to the “Risk management and control” section of this
report for more details about UBS’s internal grading system
Irrespective of the SICR assessment based on default
probabilities, credit risk is generally deemed to have significantly
increased for an instrument if the contractual payments are
more than 30 days past due. For certain less material portfolios,
specifically the Swiss credit card portfolio, the 30-day past due
criterion is used as the primary indicator of an SICR. Where
instruments are transferred to stage 2 due to the 30-day past
due criterion, a minimum period of six months is applied before
a transfer back to stage 1 can be triggered. For instruments in
Personal & Corporate Banking and Global Wealth Management
Region Switzerland that are between 90 and 180 days past due
but have not been reclassified to stage 3, a one-year period is
applied before a transfer back to stage 1 can be triggered.
Additionally, based on
individual counterparty-specific
indicators, external market indicators of credit risk or general
economic conditions, counterparties may be moved to a watch
list, which is used as a secondary qualitative indicator for an
SICR. Exception management is further applied, allowing for
individual and collective adjustments on exposures sharing the
same credit risk characteristics to take account of specific
situations that are not otherwise fully reflected.
In general, the overall SICR determination process does not
apply to Lombard loans, securities financing transactions and
certain other asset-based lending transactions, because of the
risk management practices adopted, including daily monitoring
processes with strict margining. If margin calls are not satisfied,
a position is closed out and classified as a stage 3 position. In
exceptional cases, an individual adjustment and a transfer into
stage 2 may be made to take account of specific facts.
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Consolidated financial statements
Additionally, some financial instruments include both an on-
The threshold applied varies depending on the original credit
demand loan and a revocable undrawn commitment, where the
quality of the borrower, with a higher SICR threshold set for
contractual cancelation right does not limit UBS’s exposure to
those instruments with a low PD at inception. The SICR
credit risk to the contractual notice period, as the client has the
assessment based on PD changes is made at an individual
ability to draw down funds before UBS can take risk-mitigating
financial asset level. A high-level overview of the SICR trigger,
actions. In such cases, UBS is required to estimate the period
which is a multiple of the annualized remaining lifetime PIT PD
over which it is exposed to credit risk. This applies to UBS’s credit
expressed in rating downgrades, is provided in the “SICR
card limits, which do not have a defined contractual maturity
thresholds” table below. The actual SICR thresholds applied are
date, are callable on demand and where the drawn and
defined on a more granular level by interpolating between the
undrawn components are managed as one exposure. The
values shown in the table below.
exposure arising from UBS’s credit card limits is not significant
and is managed at a portfolio level, with credit actions triggered
SICR thresholds
when balances are past due. An ECL measurement period of
Internal rating at origination
Rating downgrades /
seven years is applied for credit card limits, capped at 12 months
of the instrument
SICR trigger
for stage 1 balances, as a proxy for the period that UBS is
exposed to credit risk.
Customary master credit agreements in the Swiss corporate
market also include on-demand loans and revocable undrawn
commitments. For smaller commercial facilities, a risk-based
monitoring (RbM) approach is in place that highlights negative
trends as risk events, at an individual facility level, based on a
0–3
4–8
9–13
3
2
1
› Refer to the “Risk management and control” section of this
report for more details about UBS’s internal grading system
combination of continuously updated risk indicators. The risk
Irrespective of the SICR assessment based on default
events trigger additional credit reviews by a risk officer, enabling
probabilities, credit risk is generally deemed to have significantly
informed credit decisions to be taken. Larger corporate facilities
increased for an instrument if the contractual payments are
are not subject to RbM, but are reviewed at least annually
more than 30 days past due. For certain less material portfolios,
through a formal credit review. UBS has assessed these credit
specifically the Swiss credit card portfolio, the 30-day past due
risk management practices and considers both the RbM
criterion is used as the primary indicator of an SICR. Where
approach and formal credit reviews as substantive credit reviews
instruments are transferred to stage 2 due to the 30-day past
resulting in a re-origination of the given facility. Following this, a
due criterion, a minimum period of six months is applied before
12-month measurement period from the reporting date is used
a transfer back to stage 1 can be triggered. For instruments in
for both types of facilities as an appropriate proxy of the period
Personal & Corporate Banking and Global Wealth Management
over which UBS is exposed to credit risk, with 12 months also
Region Switzerland that are between 90 and 180 days past due
used as a look-back period for assessing SICR, always from the
but have not been reclassified to stage 3, a one-year period is
respective reporting date.
Significant increase in credit risk
applied before a transfer back to stage 1 can be triggered.
Additionally, based on
individual counterparty-specific
indicators, external market indicators of credit risk or general
Financial instruments subject to ECL are monitored on an
economic conditions, counterparties may be moved to a watch
ongoing basis. To determine whether the recognition of a
list, which is used as a secondary qualitative indicator for an
maximum 12-month ECL continues to be appropriate, an
SICR. Exception management is further applied, allowing for
assessment is made as to whether an SICR has occurred since
individual and collective adjustments on exposures sharing the
initial recognition of the financial instrument, applying both
same credit risk characteristics to take account of specific
quantitative and qualitative factors.
situations that are not otherwise fully reflected.
Primarily, UBS assesses changes in an instrument’s risk of
In general, the overall SICR determination process does not
default on a quantitative basis by comparing the annualized
apply to Lombard loans, securities financing transactions and
forward-looking and scenario-weighted
lifetime PD of an
certain other asset-based lending transactions, because of the
instrument determined at two different dates:
– at the reporting date; and
– at inception of the instrument.
risk management practices adopted, including daily monitoring
processes with strict margining. If margin calls are not satisfied,
a position is closed out and classified as a stage 3 position. In
If, based on UBS’s quantitative modeling, an increase exceeds
exceptional cases, an individual adjustment and a transfer into
a set threshold, an SICR is deemed to have occurred and the
stage 2 may be made to take account of specific facts.
instrument
is
transferred
to stage 2 with
lifetime ECL
recognized.
Note 1 Summary of significant accounting policies (continued)
Note 1 Summary of significant accounting policies (continued)
Credit risk officers are responsible for the identification of an
SICR, which for accounting purposes is in some respects
different from internal credit risk management processes. This
difference mainly arises because ECL accounting requirements
are instrument-specific, such that a borrower can have multiple
exposures allocated to different stages, and maturing loans in
stage 2 will migrate to stage 1 upon renewal irrespective of the
actual credit risk at that time. Under a risk-based approach, a
holistic counterparty credit assessment and the absolute level of
risk at any given date will determine what risk-mitigating actions
may be warranted.
› Refer to the “Risk management and control” section of this
report for more information
Critical accounting estimates and judgments
The calculation of ECL requires management to apply significant
judgment and make estimates and assumptions that can result in
significant changes to the timing and amount of ECL recognized.
Determination of a significant increase in credit risk
IFRS 9 does not include a definition of what constitutes an SICR, with
UBS’s assessment considering qualitative and quantitative criteria. An
IFRS 9 Operating Committee has been established to review and
challenge the SICR results.
Scenarios, scenario weights and macroeconomic variables
ECL reflect an unbiased and probability-weighted amount, which UBS
determines by evaluating a range of possible outcomes. Management
selects forward-looking scenarios which include relevant macroeconomic
variables and management’s assumptions around future economic
conditions. An IFRS 9 Scenario Committee, in addition to the Operating
Committee, is in place to derive, review and challenge the scenario
selection and weights as well as to determine whether any additional
post-model adjustments are required that may significantly affect ECL.
ECL measurement period
Lifetime ECL are generally determined based upon the contractual
maturity of the transaction, which significantly affects ECL. For credit card
limits and Swiss callable master credit facilities, judgment is required, as
UBS must determine the period over which it is exposed to credit risk. A
seven-year period is applied for credit card limits, capped at 12 months
for stage 1 positions, and a 12-month period applied for master credit
facilities.
Modeling and post-model adjustments
A number of complex models have been developed or modified to
calculate ECL, with additional post-model adjustments required which
may significantly affect ECL. The models are governed by UBS’s model
validation controls and approved by the Group Model Governance Board
(the GMGB). The post-model adjustments are approved by the IFRS 9
Operating Committee and endorsed by the GMGB.
The Group provides a sensitivity analysis covering key macroeconomic
variables, scenario weights and SICR trigger points on ECL measurement
within Note 20f.
› Refer to Note 20 for more information
h. Restructured and modified financial assets
When payment default is expected or where default has already
occurred, UBS may grant concessions to borrowers in financial
difficulties that it would not consider in the normal course of its
business, such as preferential interest rates, extension of
maturity, modifying the schedule of repayments, debt / equity
swap, subordination, etc. When a concession or forbearance
measure is granted, each case is considered individually and the
exposure is generally classified as being in default. Forbearance
classification will remain until the loan is collected or written off,
non-preferential conditions superseding preferential conditions
are granted or until the counterparty has recovered and the
preferential conditions no longer exceed UBS’s risk tolerance.
Modifications result in an alteration of future contractual cash
flows and can occur within UBS’s normal risk tolerance or as
part of a credit restructuring where a counterparty is in financial
difficulties.
A restructuring or modification of a financial asset could lead
to a substantial change in the terms and conditions, resulting in
the original financial asset being derecognized and a new
financial asset being recognized. Where the modification does
not result in a derecognition, any difference between the
modified contractual cash flows discounted at the original EIR
and the existing gross carrying amount of the given financial
asset is recognized in the income statement as a modification
gain or loss.
i. Offsetting
UBS nets financial assets and liabilities on its balance sheet if (i) it
has the unconditional and legally enforceable right to set off the
recognized amounts, both in the normal course of business and
in the event of default, bankruptcy or insolvency of UBS and its
counterparties, and (ii) it intends either to settle on a net basis or
to realize the asset and settle the liability simultaneously. Netted
positions
for example, certain derivatives and
repurchase and reverse repurchase transactions with various
counterparties, exchanges and clearing houses.
include,
to
the
realize
they may be
the asset and settle
In assessing whether UBS intends to either settle on a net
basis, or
liability
simultaneously, emphasis is placed on the effectiveness of
operational settlement mechanics in eliminating substantially all
credit and liquidity exposure between the counterparties. This
condition precludes offsetting on the balance sheet for
substantial amounts of UBS’s financial assets and liabilities, even
though
to enforceable netting
subject
arrangements. For OTC derivative contracts, balance sheet
offsetting is generally only permitted in circumstances in which a
market settlement mechanism exists via an exchange or central
clearing
that effectively accomplishes net
settlement through a daily exchange of collateral via a cash
margining process. For repurchase arrangements and securities
financing
transactions, balance sheet offsetting may be
permitted only to the extent that the settlement mechanism
eliminates, or results in insignificant, credit and liquidity risk, and
processes the receivables and payables in a single settlement
process or cycle.
counterparty
296
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297
› Refer to Note 22 for more information
Financial statements Consolidated financial statements
Note 1 Summary of significant accounting policies (continued)
Hedges of net investments in foreign operations
Gains or losses on the hedging instrument relating to the effective
portion of a hedge are recognized directly in Other comprehensive
income within Equity, while any gains or losses relating to the
ineffective and / or undesignated portion (for example, the interest
element of a forward contract) are recognized in the income
statement. Upon disposal or partial disposal of the foreign
operation, the cumulative value of any such gains or losses
recognized in Equity associated with the entity is reclassified to
Other income.
Interest Rate Benchmark Reform
UBS can continue hedge accounting during the period of
uncertainty before existing interest rate benchmarks are replaced
with alternative risk-free interest rates. During this period, UBS
can assume that the current benchmark rates will continue to
exist, such that forecast transactions are considered highly
probable and hedge relationships remain, with little or no
consequential
impact on the financial statements. Upon
replacement of existing interest rate benchmarks by alternative
risk-free interest rates expected in 2021 and beyond, UBS will
apply the requirements of Amendments to IFRS 9, IAS 39, IFRS
7, IFRS 4 and IFRS 16 (Interest Rate Benchmark Reform – Phase
2).
› Refer to Note 1b and Note 1c for more information
3) Fee and commission income and expenses
UBS earns fee income from the diverse range of services it
provides to its clients. Fee income can be divided into two broad
categories: fees earned from services that are provided over a
certain period of time, such as management of clients’ assets,
custody services and certain advisory services; and fees earned
from point-in-time services, such as underwriting fees, deal-
contingent merger and acquisitions (M&A) fees and brokerage
fees (e.g., securities and derivatives execution and clearing). UBS
recognizes fees earned on transaction-based arrangements
when it has fully provided the service to the customer. Where
the contract requires services to be provided over time, income is
recognized on a systematic basis over the life of the agreement.
to
received
is allocated
Consideration
the separately
identifiable performance obligations in a contract. Owing to the
nature of UBS’s business, contracts that include multiple
performance obligations are typically those that are considered
to include a series of similar performance obligations fulfilled
over time with the same pattern of transfer to the client, e.g.,
management of client assets and custodial services. As a
consequence, UBS is not required to apply significant judgment
in allocating the consideration received across the various
performance obligations.
stated otherwise below, where
j. Hedge accounting
The Group applies hedge accounting requirements of IFRS 9,
for
unless
documentation and hedge effectiveness are met. If a hedge
relationship no longer meets the criteria for hedge accounting,
hedge accounting is discontinued. Voluntary discontinuation of
hedge accounting is permitted under IAS 39 but not under IFRS 9.
the criteria
Fair value hedges of interest rate risk related to debt instruments
The fair value change of the hedged item attributable to a hedged
risk is reflected as an adjustment to the carrying amount of the
hedged item, and recognized in the income statement along with
the change in the fair value of the hedging instrument.
Fair value hedges of portfolio interest rate risk related to loans
designated under IAS 39
The fair value change of the hedged item attributable to a
hedged risk is reflected within Other financial assets measured at
amortized cost or Other financial
liabilities measured at
amortized cost and recognized in the income statement along
with the change in the fair value of the hedging instrument.
Fair value hedges of foreign exchange risk related to debt
instruments
The fair value change of the hedged item attributable to a
hedged risk is reflected in the measurement of the hedged item
and recognized in the income statement along with the change
in the fair value of the hedging instrument. The foreign currency
basis spread of cross-currency swaps designated as hedging
derivatives is excluded from the designation and accounted for
as a cost of hedging with amounts deferred
in Other
income within Equity. These amounts are
comprehensive
released to the income statement over the term of the hedged
item.
Discontinuation of fair value hedges
Discontinuations for reasons other than derecognition of the
hedged item result in an adjustment to the carrying amount, which
is amortized to the income statement over the remaining life of the
hedged item using the effective interest method. If the hedged
item is derecognized, the unamortized fair value adjustment or
deferred cost of hedging amount is recognized immediately in the
income statement as part of any derecognition gain or loss.
Cash flow hedges of forecast transactions
Fair value gains or losses associated with the effective portion of
derivatives designated as cash flow hedges for cash flow
repricing risk are recognized initially in Other comprehensive
income within Equity and reclassified to the income statement in
the periods when the hedged forecast cash flows affect profit or
loss, including discontinued hedges for which forecast cash
flows are expected to occur. If the forecast transactions are no
longer expected to occur, the deferred gains or losses are
immediately reclassified to the income statement.
298
298
Consolidated financial statements
j. Hedge accounting
Hedges of net investments in foreign operations
The Group applies hedge accounting requirements of IFRS 9,
Gains or losses on the hedging instrument relating to the effective
unless
stated otherwise below, where
the criteria
for
portion of a hedge are recognized directly in Other comprehensive
documentation and hedge effectiveness are met. If a hedge
income within Equity, while any gains or losses relating to the
relationship no longer meets the criteria for hedge accounting,
ineffective and / or undesignated portion (for example, the interest
hedge accounting is discontinued. Voluntary discontinuation of
element of a forward contract) are recognized in the income
hedge accounting is permitted under IAS 39 but not under IFRS 9.
statement. Upon disposal or partial disposal of the foreign
Fair value hedges of interest rate risk related to debt instruments
recognized in Equity associated with the entity is reclassified to
operation, the cumulative value of any such gains or losses
The fair value change of the hedged item attributable to a hedged
Other income.
risk is reflected as an adjustment to the carrying amount of the
hedged item, and recognized in the income statement along with
Interest Rate Benchmark Reform
the change in the fair value of the hedging instrument.
UBS can continue hedge accounting during the period of
uncertainty before existing interest rate benchmarks are replaced
Fair value hedges of portfolio interest rate risk related to loans
with alternative risk-free interest rates. During this period, UBS
designated under IAS 39
can assume that the current benchmark rates will continue to
The fair value change of the hedged item attributable to a
exist, such that forecast transactions are considered highly
hedged risk is reflected within Other financial assets measured at
probable and hedge relationships remain, with little or no
amortized cost or Other financial
liabilities measured at
consequential
impact on the financial statements. Upon
amortized cost and recognized in the income statement along
replacement of existing interest rate benchmarks by alternative
with the change in the fair value of the hedging instrument.
risk-free interest rates expected in 2021 and beyond, UBS will
Fair value hedges of foreign exchange risk related to debt
7, IFRS 4 and IFRS 16 (Interest Rate Benchmark Reform – Phase
apply the requirements of Amendments to IFRS 9, IAS 39, IFRS
instruments
The fair value change of the hedged item attributable to a
hedged risk is reflected in the measurement of the hedged item
2).
› Refer to Note 1b and Note 1c for more information
and recognized in the income statement along with the change
3) Fee and commission income and expenses
in the fair value of the hedging instrument. The foreign currency
basis spread of cross-currency swaps designated as hedging
UBS earns fee income from the diverse range of services it
derivatives is excluded from the designation and accounted for
provides to its clients. Fee income can be divided into two broad
as a cost of hedging with amounts deferred
in Other
categories: fees earned from services that are provided over a
comprehensive
income within Equity. These amounts are
certain period of time, such as management of clients’ assets,
released to the income statement over the term of the hedged
custody services and certain advisory services; and fees earned
item.
Discontinuation of fair value hedges
from point-in-time services, such as underwriting fees, deal-
contingent merger and acquisitions (M&A) fees and brokerage
fees (e.g., securities and derivatives execution and clearing). UBS
Discontinuations for reasons other than derecognition of the
recognizes fees earned on transaction-based arrangements
hedged item result in an adjustment to the carrying amount, which
when it has fully provided the service to the customer. Where
is amortized to the income statement over the remaining life of the
the contract requires services to be provided over time, income is
hedged item using the effective interest method. If the hedged
recognized on a systematic basis over the life of the agreement.
item is derecognized, the unamortized fair value adjustment or
Consideration
received
is allocated
to
the separately
deferred cost of hedging amount is recognized immediately in the
identifiable performance obligations in a contract. Owing to the
income statement as part of any derecognition gain or loss.
nature of UBS’s business, contracts that include multiple
loss, including discontinued hedges for which forecast cash
flows are expected to occur. If the forecast transactions are no
longer expected to occur, the deferred gains or losses are
immediately reclassified to the income statement.
298
Note 1 Summary of significant accounting policies (continued)
Note 1 Summary of significant accounting policies (continued)
Point-in-time services are generally for a fixed price or
dependent on deal size, e.g., a fixed number of basis points of
trade size, where the amount of revenue is known when the
performance obligation is met.
Fixed period-in-time fees are recognized on a straight-line
basis over the performance period. Custodial and asset
management fees can be variable through reference to the size
of the customer portfolio and are generally billed on a monthly
or quarterly basis once the customer’s portfolio size is known or
known with near certainty. This is generally prior to UBS’s
reporting dates and such fees are also recognized ratably over
the performance period.
UBS does not recognize performance fees related to
management of clients’ assets or fees related to contingencies
beyond UBS’s control until such uncertainties are resolved.
UBS’s fees are generally earned from short-term contracts,
with the majority either collected immediately or via regular
monthly or quarterly amounts deducted directly from clients’
accounts. As a result, UBS’s contracts do not include a financing
component or result in the recognition of significant receivables
or prepayment assets. Furthermore, due to the short-term
nature of such contracts, UBS has not capitalized any material
costs to obtain or fulfill a contract or generated any significant
contract assets or liabilities.
UBS acts as principal in the majority of contracts with
customers, with the exception of derivatives execution and
clearing services, resulting in fee and commission income and
expense being presented gross on the face of the income
statement. For derivatives execution and clearing services, UBS
only records its specific fees in the income statement, with fees
payable to other parties not recognized as an expense but
instead directly offset against the associated income collected
from the given client.
UBS presents expenses primarily in line with their nature in
the income statement, differentiating between expenses that are
directly attributable to the satisfaction of specific performance
obligations associated with the generation of revenues, which
are presented within Total operating income as Fee and
commission expense, and those that are related to personnel,
general and administrative expenses, which are presented within
Total operating expenses.
› Refer to Note 4 for more information, including the
disaggregation of revenues
Cash flow hedges of forecast transactions
performance obligations are typically those that are considered
to include a series of similar performance obligations fulfilled
4) Cash and cash equivalents
Fair value gains or losses associated with the effective portion of
over time with the same pattern of transfer to the client, e.g.,
derivatives designated as cash flow hedges for cash flow
management of client assets and custodial services. As a
repricing risk are recognized initially in Other comprehensive
consequence, UBS is not required to apply significant judgment
income within Equity and reclassified to the income statement in
in allocating the consideration received across the various
the periods when the hedged forecast cash flows affect profit or
performance obligations.
For the purpose of the statement of cash flows, cash and cash
equivalents comprise balances with an original maturity of three
months or less, including cash, money market paper and
balances at central and other banks.
5) Share-based and other deferred compensation plans
UBS recognizes expenses for deferred compensation awards
over the period that the employee is required to provide service
to become entitled to the award. Where the service period is
shortened, for example in the case of employees affected by
termination
restructuring programs or mutually agreed
provisions, recognition of expense
is accelerated to the
termination date. Where no future service is required, such as
for employees who are eligible for retirement or who have met
certain age and length-of-service criteria, the services are
presumed to have been received and compensation expense is
recognized over the performance year or, in the case of off-cycle
awards, immediately on the grant date.
Share-based compensation plans
Share-based compensation expense is measured by reference to
the fair value of the equity instruments on the date of grant,
taking into account the terms and conditions inherent in the
award, including, where relevant, dividend rights, transfer
restrictions in effect beyond the vesting date, market conditions,
and non-vesting conditions.
For equity-settled awards, the fair value is not remeasured
unless the terms of the award are modified such that there is an
incremental increase in value. No adjustments are made for
modifications that result in a decrease in value. Any increase in
fair value resulting from a modification is recognized as
compensation expense, either over the remaining service period
or, for vested awards, immediately. Expenses are recognized, on
a per-tranche basis, over the service period based on an estimate
of the number of instruments expected to vest and are adjusted
to reflect the actual outcomes of service or performance
conditions.
For equity-settled awards, forfeiture events resulting from a
breach of a non-vesting condition (i.e., one that does not relate
to a service or performance condition) do not result in any
adjustment to the share-based compensation expense.
For cash-settled share-based awards, fair value is remeasured
at each reporting date, so that the cumulative expense
recognized equals the cash distributed.
Other deferred compensation plans
Compensation expense for other deferred compensation plans is
recognized on a per-tranche or straight-line basis, depending on
the nature of the plan. The amount recognized is measured
based on the present value of the amount expected to be paid
under the plan and is remeasured at each reporting date, so that
the cumulative expense recognized equals the cash or the fair
value of respective financial instruments distributed.
› Refer to Note 27 for more information
6) Post-employment benefit plans
UBS sponsors various post-employment benefit plans for its
employees worldwide, which include defined benefit and
defined contribution pension plans, and other post-employment
benefits, such as medical and life insurance benefits that are
payable after the completion of employment.
› Refer to Note 26 for more information
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Financial statements Consolidated financial statements
Note 1 Summary of significant accounting policies (continued)
The Group’s provision for income taxes is composed of
current and deferred taxes. Current income taxes represent taxes
to be paid or refunded for the current period or previous
periods.
Deferred taxes are recognized for temporary differences
between the carrying amounts and tax bases of assets and
liabilities that will result in taxable or deductible amounts in
future periods and are measured using the applicable tax rates
and laws that have been enacted or substantively enacted by the
end of the reporting period and that will be in effect when such
differences are expected to reverse.
in future years; and
Deferred tax assets arise from a variety of sources, the most
significant being: (i) tax losses that can be carried forward to be
used against profits
(ii) temporary
differences that will result in deductions against profits in future
years. Deferred tax assets are recognized only to the extent it is
probable that sufficient taxable profits will be available against
which these differences can be used. When an entity or tax
group has a history of recent losses, deferred tax assets are only
recognized to the extent there are sufficient taxable temporary
differences or there is convincing other evidence that sufficient
taxable profit will be available against which the unused tax
losses can be utilized.
tax
Deferred
liabilities are
temporary
differences between the carrying amounts of assets and
liabilities in the balance sheet that reflect the expectation that
certain items will give rise to taxable income in future periods.
recognized
for
Deferred and current tax assets and liabilities are offset when:
(i) they arise in the same tax reporting group; (ii) they relate to
the same tax authority; (iii) the legal right to offset exists; and (iv)
they are intended to be settled net or realized simultaneously.
Current and deferred taxes are recognized as income tax
benefit or expense in the income statement, except for current
and deferred taxes recognized in relation to: (i) the acquisition of
a subsidiary (for which such amounts would affect the amount
of goodwill arising from the acquisition); (ii) gains and losses on
the sale of treasury shares (for which the tax effects are
recognized directly in Equity); (iii) unrealized gains or losses on
financial instruments that are classified at FVOCI; (iv) changes in
fair value of derivative instruments designated as cash flow
hedges; (v) remeasurements of defined benefit plans; or (vi)
certain foreign currency translations of foreign operations.
Amounts relating to points (iii) through (vi) are recognized in
Other comprehensive income within Equity.
UBS reflects the potential effect of uncertain tax positions for
which acceptance by the relevant tax authority is not considered
probable by adjusting current or deferred taxes, as applicable,
using either the most likely amount or expected value methods,
depending on which method is deemed a better predictor of the
basis on which and extent to which the uncertainty will be
resolved.
Defined benefit plans
Defined benefit plans specify an amount of benefit that an
employee will receive, which usually depends on one or more
factors, such as age, years of service and compensation. The
defined benefit liability recognized in the balance sheet is the
present value of the defined benefit obligation less the fair value
of the plan’s assets at the balance sheet date, with changes
resulting from remeasurements recorded immediately in Other
comprehensive income. If the fair value of the plan’s assets is
higher than the present value of the defined benefit obligation,
the recognition of the resulting net asset is limited to the present
value of economic benefits available in the form of refunds from
the plan or reductions in future contributions to the plan. UBS
applies the projected unit credit method to determine the
present value of its defined benefit obligations, the related
current service cost and, where applicable, the past service cost.
These amounts, which take into account the specific features of
each plan, including risk sharing between employee and
employer, are calculated periodically by independent qualified
actuaries.
Critical accounting estimates and judgments
The net defined benefit liability or asset at the balance sheet date and the
related personnel expense depend on the expected future benefits to be
provided, determined using a number of economic and demographic
assumptions. A range of assumptions could be applied, and different
assumptions could significantly alter the defined benefit liability or asset
and pension expense recognized. The most significant assumptions
include life expectancy, the discount rate, expected salary increases,
pension increases, and interest credits on retirement savings account
balances. Sensitivity analysis for reasonable possible movements in each
significant assumption for UBS‘s post-employment obligations is provided
within Note 26.
› Refer to Note 26 for more information
Defined contribution plans
A defined contribution plan pays fixed contributions into a
separate entity from which post-employment and other benefits
are paid. UBS has no legal or constructive obligation to pay
further amounts if the plan does not hold sufficient assets to pay
employees the benefits relating to employee service in the
current and prior periods. Compensation expense is recognized
when the employees have rendered services in exchange for
contributions. This is generally in the year of contribution.
Prepaid contributions are recognized as an asset to the extent
that a cash refund or a reduction in future payments is available.
7) Income taxes
UBS is subject to the income tax laws of Switzerland and those
of the non-Swiss jurisdictions in which UBS has business
operations.
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Note 1 Summary of significant accounting policies (continued)
Note 1 Summary of significant accounting policies (continued)
Defined benefit plans
The Group’s provision for income taxes is composed of
Critical accounting estimates and judgments
Tax laws are complex, and judgment and interpretations about the
application of such laws are required when accounting for income taxes.
UBS considers the performance of its businesses and the accuracy of
historical forecasts and other factors in evaluating the recoverability of its
deferred tax assets, including the remaining tax loss carry-forward period,
and its assessment of expected future taxable profits in the forecast
period used for recognizing deferred tax assets. Estimating future
profitability and business plan forecasts is inherently subjective and is
particularly sensitive to future economic, market and other conditions.
Forecasts are reviewed annually, but adjustments may be made at
other times, if required. If recent losses have been incurred, convincing
evidence is required to prove there is sufficient future profitability given
the value of UBS’s deferred tax assets may be affected, with effects
primarily recognized through the income statement.
tax positions and
In addition, judgment is required to assess the expected value of
including
the
uncertain
interpretation of tax laws, the resolution of any income tax-related
appeals and litigation.
› Refer to Note 8 for more information
related probabilities,
8) Investments in associates
Interests in entities where UBS has significant influence over the
financial and operating policies of the entity but does not have
control are classified as investments in associates and accounted
for under the equity method of accounting. Typically, UBS has
significant influence when it holds or has the ability to hold
between 20% and 50% of a company’s voting rights.
Investments in associates are initially recognized at cost, and the
carrying amount is increased or decreased after the date of
acquisition to recognize the Group’s share of the investee’s
comprehensive income and any impairment losses.
The net investment in an associate is impaired if there is
objective evidence of a loss event and the carrying amount of
the investment in the associate exceeds its recoverable amount.
› Refer to Note 28 for more information
9) Property, equipment and software
Consolidated financial statements
Defined benefit plans specify an amount of benefit that an
current and deferred taxes. Current income taxes represent taxes
employee will receive, which usually depends on one or more
to be paid or refunded for the current period or previous
factors, such as age, years of service and compensation. The
periods.
defined benefit liability recognized in the balance sheet is the
Deferred taxes are recognized for temporary differences
present value of the defined benefit obligation less the fair value
between the carrying amounts and tax bases of assets and
of the plan’s assets at the balance sheet date, with changes
liabilities that will result in taxable or deductible amounts in
resulting from remeasurements recorded immediately in Other
future periods and are measured using the applicable tax rates
comprehensive income. If the fair value of the plan’s assets is
and laws that have been enacted or substantively enacted by the
higher than the present value of the defined benefit obligation,
end of the reporting period and that will be in effect when such
the recognition of the resulting net asset is limited to the present
differences are expected to reverse.
value of economic benefits available in the form of refunds from
Deferred tax assets arise from a variety of sources, the most
the plan or reductions in future contributions to the plan. UBS
significant being: (i) tax losses that can be carried forward to be
applies the projected unit credit method to determine the
used against profits
in future years; and
(ii) temporary
present value of its defined benefit obligations, the related
differences that will result in deductions against profits in future
current service cost and, where applicable, the past service cost.
years. Deferred tax assets are recognized only to the extent it is
These amounts, which take into account the specific features of
probable that sufficient taxable profits will be available against
each plan, including risk sharing between employee and
which these differences can be used. When an entity or tax
employer, are calculated periodically by independent qualified
group has a history of recent losses, deferred tax assets are only
actuaries.
Critical accounting estimates and judgments
recognized to the extent there are sufficient taxable temporary
differences or there is convincing other evidence that sufficient
taxable profit will be available against which the unused tax
losses can be utilized.
The net defined benefit liability or asset at the balance sheet date and the
Deferred
tax
liabilities are
recognized
for
temporary
related personnel expense depend on the expected future benefits to be
differences between the carrying amounts of assets and
provided, determined using a number of economic and demographic
assumptions. A range of assumptions could be applied, and different
assumptions could significantly alter the defined benefit liability or asset
and pension expense recognized. The most significant assumptions
include life expectancy, the discount rate, expected salary increases,
pension increases, and interest credits on retirement savings account
liabilities in the balance sheet that reflect the expectation that
certain items will give rise to taxable income in future periods.
Deferred and current tax assets and liabilities are offset when:
(i) they arise in the same tax reporting group; (ii) they relate to
the same tax authority; (iii) the legal right to offset exists; and (iv)
balances. Sensitivity analysis for reasonable possible movements in each
they are intended to be settled net or realized simultaneously.
significant assumption for UBS‘s post-employment obligations is provided
within Note 26.
› Refer to Note 26 for more information
Current and deferred taxes are recognized as income tax
benefit or expense in the income statement, except for current
and deferred taxes recognized in relation to: (i) the acquisition of
a subsidiary (for which such amounts would affect the amount
of goodwill arising from the acquisition); (ii) gains and losses on
Defined contribution plans
A defined contribution plan pays fixed contributions into a
the sale of treasury shares (for which the tax effects are
separate entity from which post-employment and other benefits
recognized directly in Equity); (iii) unrealized gains or losses on
are paid. UBS has no legal or constructive obligation to pay
financial instruments that are classified at FVOCI; (iv) changes in
further amounts if the plan does not hold sufficient assets to pay
fair value of derivative instruments designated as cash flow
employees the benefits relating to employee service in the
hedges; (v) remeasurements of defined benefit plans; or (vi)
current and prior periods. Compensation expense is recognized
certain foreign currency translations of foreign operations.
when the employees have rendered services in exchange for
Amounts relating to points (iii) through (vi) are recognized in
contributions. This is generally in the year of contribution.
Other comprehensive income within Equity.
Prepaid contributions are recognized as an asset to the extent
UBS reflects the potential effect of uncertain tax positions for
that a cash refund or a reduction in future payments is available.
which acceptance by the relevant tax authority is not considered
UBS is subject to the income tax laws of Switzerland and those
basis on which and extent to which the uncertainty will be
of the non-Swiss jurisdictions in which UBS has business
resolved.
probable by adjusting current or deferred taxes, as applicable,
using either the most likely amount or expected value methods,
depending on which method is deemed a better predictor of the
7) Income taxes
operations.
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Property, equipment and software includes own-used properties,
leasehold improvements, information technology hardware,
externally purchased and internally generated software, as well
as communications and other similar equipment. Property,
equipment and software is measured at cost less accumulated
depreciation and impairment losses and is reviewed at each
reporting date
impairment. Software
development costs are capitalized only when the costs can be
measured reliably and it is probable that future economic
benefits will arise. Depreciation of property, equipment and
software begins when they are available for use (i.e., when they
are in the location and condition necessary for them to be
capable of operating in the manner intended by management).
indication
for
for
Depreciation is calculated on a straight-line basis over an asset‘s
estimated useful life. The estimated useful economic lives of
UBS‘s property, equipment and software are:
– properties, excluding land: ≤ 67 years
– IT hardware and communications equipment: ≤ 7 years
– other machines and equipment: ≤ 10 years
– software: ≤ 10 years
– leased properties and leasehold improvements: the shorter of
the lease term or the economic life of asset (typically ≤ 20
years).
Property, equipment and software are generally tested for
impairment at the appropriate cash-generating unit (CGU) level,
alongside goodwill and intangible assets as described in item 10
in this Note. An impairment charge is, however, only recognized
for such assets if both the asset’s fair value less costs of disposal
and value in use (if determinable) are below its carrying amount.
The fair values of such assets, other than property that has a
market price, are generally determined using a replacement cost
approach that reflects the amount that would be currently
required by a market participant to replace the service capacity
of the asset. If such assets are no longer used, they are tested
individually for impairment.
› Refer to Note 12 for more information
10) Goodwill and intangible assets
Goodwill represents the future economic benefits arising from
other assets acquired in a business combination that are not
individually identified and recognized. Goodwill is not amortized,
but is assessed for impairment at the end of each reporting
period, or when indicators of impairment exist. UBS tests goodwill
for impairment annually, irrespective of whether there is any
indication of impairment.
The impairment test is performed for each CGU to which
goodwill is allocated by comparing the recoverable amount, based
on its value in use, to the carrying amount of the respective CGU.
An impairment charge is recognized in the income statement if
the carrying amount exceeds the recoverable amount.
Intangible assets include separately identifiable intangible
items arising from business combinations and certain purchased
trademarks and similar items. Intangible assets are recognized at
cost. The cost of an intangible asset acquired in a business
combination is its fair value at the date of acquisition. Intangible
assets with a finite useful life are amortized using the straight-
line method over their estimated useful life, generally not
exceeding 20 years. In rare cases, intangible assets can have an
indefinite useful life, in which case they are not amortized. At
each reporting date,
intangible assets are reviewed for
indications of impairment. If such indications exist, the intangible
assets are analyzed to assess whether their carrying amount is
fully recoverable. An impairment loss is recognized if the
carrying amount exceeds the recoverable amount.
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301
Financial statements Consolidated financial statements
Note 1 Summary of significant accounting policies (continued)
Critical accounting estimates and judgments
Critical accounting estimates and judgments
UBS‘s methodology for goodwill impairment testing is based on a model
that is most sensitive to the following key assumptions: (i) forecasts of
earnings available to shareholders in years one to three; (ii) changes in the
discount rates; and (iii) changes in the long-term growth rate.
Earnings available to shareholders are estimated on the basis of
forecast results, which are part of the business plan approved by the BoD.
The discount rates and growth rates are determined using external
information, as well as considering inputs from both internal and external
analysts and the view of management.
The key assumptions used to determine the recoverable amounts of
each cash-generating unit are tested for sensitivity by applying reasonably
possible changes to those assumptions.
› Refer to Notes 2 and 13 for more information
Recognition of provisions often involves significant judgment in assessing
the existence of an obligation that results from past events and in
estimating the probability, timing and amount of any outflows of
resources. This is particularly the case for litigation, regulatory and similar
matters, which, due to their nature, are subject to many uncertainties,
making their outcome difficult to predict.
The amount of any provision recognized
is sensitive to the
assumptions used and there could be a wide range of possible outcomes
for any particular matter.
Management regularly reviews all the available information regarding
such matters, including legal advice, to assess whether the recognition
criteria for provisions have been satisfied and to determine the timing and
amount of any potential outflows.
› Refer to Note 18 for more information
11) Provisions and contingent liabilities
12) Foreign currency translation
Provisions are liabilities of uncertain timing or amount, and are
generally recognized in accordance with IAS 37, Provisions,
Contingent Liabilities and Contingent Assets, when: (i) UBS has a
present obligation as a result of a past event; (ii) it is probable
that an outflow of resources will be required to settle the
obligation; and (iii) a reliable estimate of the amount of the
obligation can be made.
The majority of UBS’s provisions relate to litigation, regulatory
and similar matters, restructuring, and employee benefits.
Restructuring provisions are generally
recognized as a
consequence of management agreeing to materially change the
scope of the business or the manner in which it is conducted,
including changes in management structure. Provisions for
employee benefits relate mainly to service anniversaries and
sabbatical
in accordance with
measurement principles set out in item 6 in this Note. In
addition, UBS presents expected credit loss allowances within
Provisions if they relate to a loan commitment, financial
guarantee contract or a revolving revocable credit line.
leave, and are recognized
IAS 37 provisions are measured considering the best estimate
of the consideration required to settle the present obligation at
the balance sheet date.
When conditions required to recognize a provision are not
met, a contingent liability is disclosed, unless the likelihood of an
outflow of resources is remote. Contingent liabilities are also
disclosed for possible obligations that arise from past events the
existence of which will be confirmed only by uncertain future
events not wholly within the control of UBS.
Transactions denominated in a foreign currency are translated
into the functional currency of the reporting entity at the spot
exchange rate on the date of the transaction. At the balance
sheet date, all monetary assets, including those at FVOCI, and
liabilities denominated
monetary
in foreign currency are
translated
into the functional currency using the closing
exchange rate. Translation differences are reported in Other net
income from financial instruments measured at fair value
through profit or loss.
Non-monetary items measured at historical cost are translated
at the exchange rate on the date of the transaction.
Upon consolidation, assets and liabilities of foreign operations
are translated into US dollars, UBS’s presentation currency, at the
closing exchange rate on the balance sheet date, and income and
expense items and other comprehensive income are translated at
the average rate for the period. The resulting foreign currency
translation differences are recognized in Equity and reclassified to
the income statement when UBS disposes of, partially or in its
entirety, the foreign operation and UBS no longer controls the
foreign operation.
Share capital issued, share premium and treasury shares held
are translated at the historic average rate, with the difference
between the historic average rate and the spot rate realized upon
repayment of share capital or disposal of treasury shares reported
as Share premium. Cumulative amounts recognized in OCI in
respect of cash flow hedges and financial assets measured at
FVOCI are translated at the closing exchange rate as of the
balance sheet dates, with any translation effects adjusted through
Retained earnings.
› Refer to Note 33 for more information
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302
Consolidated financial statements
Critical accounting estimates and judgments
Critical accounting estimates and judgments
UBS‘s methodology for goodwill impairment testing is based on a model
that is most sensitive to the following key assumptions: (i) forecasts of
earnings available to shareholders in years one to three; (ii) changes in the
discount rates; and (iii) changes in the long-term growth rate.
Earnings available to shareholders are estimated on the basis of
Recognition of provisions often involves significant judgment in assessing
the existence of an obligation that results from past events and in
estimating the probability, timing and amount of any outflows of
resources. This is particularly the case for litigation, regulatory and similar
matters, which, due to their nature, are subject to many uncertainties,
forecast results, which are part of the business plan approved by the BoD.
making their outcome difficult to predict.
The discount rates and growth rates are determined using external
information, as well as considering inputs from both internal and external
The amount of any provision recognized
is sensitive to the
assumptions used and there could be a wide range of possible outcomes
analysts and the view of management.
for any particular matter.
The key assumptions used to determine the recoverable amounts of
each cash-generating unit are tested for sensitivity by applying reasonably
possible changes to those assumptions.
› Refer to Notes 2 and 13 for more information
Management regularly reviews all the available information regarding
such matters, including legal advice, to assess whether the recognition
criteria for provisions have been satisfied and to determine the timing and
amount of any potential outflows.
› Refer to Note 18 for more information
11) Provisions and contingent liabilities
12) Foreign currency translation
Provisions are liabilities of uncertain timing or amount, and are
generally recognized in accordance with IAS 37, Provisions,
Contingent Liabilities and Contingent Assets, when: (i) UBS has a
present obligation as a result of a past event; (ii) it is probable
that an outflow of resources will be required to settle the
obligation; and (iii) a reliable estimate of the amount of the
obligation can be made.
The majority of UBS’s provisions relate to litigation, regulatory
and similar matters, restructuring, and employee benefits.
Restructuring provisions are generally
recognized as a
consequence of management agreeing to materially change the
scope of the business or the manner in which it is conducted,
including changes in management structure. Provisions for
employee benefits relate mainly to service anniversaries and
sabbatical
leave, and are recognized
in accordance with
measurement principles set out in item 6 in this Note. In
addition, UBS presents expected credit loss allowances within
Provisions if they relate to a loan commitment, financial
guarantee contract or a revolving revocable credit line.
IAS 37 provisions are measured considering the best estimate
of the consideration required to settle the present obligation at
the balance sheet date.
When conditions required to recognize a provision are not
met, a contingent liability is disclosed, unless the likelihood of an
outflow of resources is remote. Contingent liabilities are also
disclosed for possible obligations that arise from past events the
existence of which will be confirmed only by uncertain future
events not wholly within the control of UBS.
Transactions denominated in a foreign currency are translated
into the functional currency of the reporting entity at the spot
exchange rate on the date of the transaction. At the balance
sheet date, all monetary assets, including those at FVOCI, and
monetary
liabilities denominated
in foreign currency are
translated
into the functional currency using the closing
exchange rate. Translation differences are reported in Other net
income from financial instruments measured at fair value
through profit or loss.
Non-monetary items measured at historical cost are translated
at the exchange rate on the date of the transaction.
Upon consolidation, assets and liabilities of foreign operations
are translated into US dollars, UBS’s presentation currency, at the
closing exchange rate on the balance sheet date, and income and
expense items and other comprehensive income are translated at
the average rate for the period. The resulting foreign currency
translation differences are recognized in Equity and reclassified to
the income statement when UBS disposes of, partially or in its
entirety, the foreign operation and UBS no longer controls the
foreign operation.
Share capital issued, share premium and treasury shares held
are translated at the historic average rate, with the difference
between the historic average rate and the spot rate realized upon
repayment of share capital or disposal of treasury shares reported
as Share premium. Cumulative amounts recognized in OCI in
respect of cash flow hedges and financial assets measured at
FVOCI are translated at the closing exchange rate as of the
balance sheet dates, with any translation effects adjusted through
Retained earnings.
› Refer to Note 33 for more information
Note 1 Summary of significant accounting policies (continued)
Note 1 Summary of significant accounting policies (continued)
13) Equity, treasury shares and contracts on UBS Group AG
shares
UBS Group AG shares held (treasury shares)
UBS Group AG shares held by the Group, including those
purchased as part of market-making activities, are presented in
Equity as Treasury shares at their acquisition cost and are
deducted from Equity until they are canceled or reissued. The
difference between the proceeds from sales of treasury shares
and their weighted average cost (net of tax, if any) is reported as
Share premium.
Non-controlling interests
If UBS has an obligation to purchase a non-controlling interest
subject to option or forward arrangements, the amounts
allocated to non-controlling interests are reduced and a liability
equivalent to the exercise price of the option or forward is
recognized, with any difference between these two amounts
recorded in Share premium.
Net cash settlement contracts
Contracts involving UBS Group AG shares that require net cash
settlement, or provide the counterparty or UBS with a settlement
option that includes a choice of settling net in cash, are classified
as derivatives held for trading.
14) Leasing
UBS predominantly enters into lease contracts, or contracts that
include lease components, as a lessee of real estate, including
offices, retail branches and sales offices, with a small number of IT
hardware leases. UBS identifies non-lease components of a
lease
contract and accounts
components.
separately
them
from
for
When UBS is a lessee in a lease arrangement, UBS recognizes a
lease liability and corresponding right-of-use (RoU) asset at the
commencement of the lease term when UBS acquires control of
the physical use of the asset. Lease liabilities are presented within
Other financial liabilities measured at amortized cost and RoU
assets within Property, equipment and software. The lease liability
is measured based on the present value of the lease payments
over the lease term, discounted using UBS’s unsecured borrowing
rate, given that the rate implicit in a lease is generally not
observable. Interest expense on the lease liability is presented
within Interest expense from financial instruments measured at
amortized cost. The RoU asset is recorded at an amount equal to
the lease liability but is adjusted for rent prepayments, initial
direct costs, any costs to refurbish the leased asset and / or lease
incentives received. The RoU asset is depreciated over the shorter
of the lease term or the useful life of the underlying asset, with
the depreciation presented within Depreciation and impairment
of property, equipment and software.
Lease payments generally include fixed and variable payments
that depend on an index (such as an inflation index). When a
lease contains an extension or termination option that the
Group considers reasonably certain to be exercised, the expected
rental payments or costs of termination are included within the
lease payments used to generate the lease liability. UBS does not
typically enter into leases with purchase options or residual value
guarantees.
Where UBS acts as a lessor or sub-lessor under a finance lease,
a receivable is recognized in Other financial assets measured at
amortized cost at an amount equal to the present value of the
aggregate of the lease payments plus any unguaranteed residual
value that UBS expects to recover at the end of the lease term.
Initial direct costs are also included in the initial measurement of
the lease receivable. Lease payments received during the lease
term are allocated as repayments of the outstanding receivable.
Interest income reflects a constant periodic rate of return on UBS’s
net investment using the interest rate implicit in the lease (or, for
sub-leases, the rate for the head lease). UBS reviews the estimated
unguaranteed residual value annually, and if the estimated
residual value to be realized is less than the amount assumed at
lease inception, a loss is recognized for the expected shortfall.
Where UBS acts as a lessor or sub-lessor in an operating lease,
UBS recognizes the operating lease income on a straight-line basis
over the lease term.
Lease receivables are subject to impairment requirements as
set out in item 2g in this Note. ECL on lease receivables are
determined following the general impairment model within
IFRS 9, Financial Instruments, without utilizing the simplified
approach of always measuring impairment at the amount of
lifetime ECL.
Comparative policy | Policy applicable prior to 1 January 2019
Operating lease rentals payable were recognized as an expense on a
straight-line basis over the lease term, which commenced with
control of the physical use of the property. Lease incentives were
treated as a reduction of rental expense and were recognized on a
consistent basis over the lease term. Operating lease expenses of
USD 533 million were presented within General and
administrative expenses in 2018. As at the date of adoption of
IFRS 16, UBS had USD 24 million of finance leases and
accounted for them consistently with the policy applied from
1 January 2019 above. The adoption of IFRS 16 had no impact
on retained earnings.
› Refer to Note 12 and 30 for more information
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303
303
Financial statements
Consolidated financial statements
Note 1 Summary of significant accounting policies (continued)
b) Changes in accounting policies, comparability and other adjustments
New or amended accounting standards
Adoption of hedge accounting requirements of IFRS 9, Financial
Instruments
Effective from 1 January 2020, UBS has prospectively adopted
the hedge accounting requirements of
IFRS 9, Financial
Instruments, for all of its existing hedge accounting programs,
except for fair value hedges of portfolio interest rate risk, which,
as permitted under IFRS 9, continue to be accounted for under
IAS 39, Financial Instruments: Recognition and Measurement.
The adoption of these requirements has not changed any of
the hedge designations disclosed in the Annual Report 2019
with only minor amendments to hedge documentation and
hedge effectiveness testing methodologies required to make
them compliant with IFRS 9. The adoption had no financial
effect on UBS’s financial statements. However, starting on
1 January 2020, UBS began to designate cross-currency swaps
as Fair value hedges of foreign exchange risk related to debt
instruments and utilized the cost of hedging approach
introduced by IFRS 9.
› Refer to Note 1a item 2j for more information about the Group’s
hedge accounting policies under IFRS 9 and Note 25 for more
information about Fair value hedges of foreign exchange risk
related to debt instruments
Other changes to financial reporting
Modification of deferred compensation awards
During 2020, UBS modified the terms of certain outstanding
deferred compensation awards granted for performance years
2015 through 2019 by removing the requirement to provide
future service for qualifying employees. These awards remain
subject to forfeiture if certain non-vesting conditions are not
satisfied. As a result, UBS recognized an expense of USD 359
million in the third quarter of 2020, of which USD 314 million
in compensation-related
was recorded within Variable compensation – performance
awards, USD 24 million within Social security and USD 21 million
within Other personnel expenses, with a USD 212 million
increase
liabilities for cash-settled
awards and social security-related accruals, and a USD 147
million increase in share premium for equity-settled awards. The
full year effect was an expense of approximately USD 280
million, of which USD 240 million is disclosed within Variable
compensation – performance awards, USD 20 million within
Social security and USD 20 million within Other personnel
expenses, with increases of approximately USD 170 million in
compensation-related liabilities for cash-settled awards and
social security-related accruals and approximately USD 110
million in share premium for equity-settled awards.
Outstanding deferred compensation awards granted to
Group Executive Board members, those granted under the Long-
Term Incentive Plan, as well as those granted to financial
advisors in the US, were not affected by these changes.
Restatement of compensation-related liabilities
During 2020, UBS restated its balance sheet and statement of
changes in equity as of 1 January 2018 to correct a USD 43
million liability understatement in connection with a legacy
Global Wealth Management deferred compensation plan, with
the effects presented in the table below. The restatement
resulted from a correction of an actuarial calculation associated
the
with compensation-related
understatement were not material to prior-year financial
statements; however, such effects would have been material to
the quarterly reporting period in which the understatement was
identified and therefore prior years were restated. The
restatement had no effect on Net profit / (loss) or basic and
diluted earnings per share for the current period or for any
comparative periods.
liabilities. The effects of
USD million
Balance sheet assets
Deferred tax assets
TToottaall aasssseettss
Balance sheet liabilities
Other non-financial liabilities
of which: Compensation-related liabilities
of which: financial advisor compensation plans
TToottaall lliiaabbiilliittiieess
Equity
Retained earnings
EEqquuiittyy aattttrriibbuuttaabbllee ttoo sshhaarreehhoollddeerrss
TToottaall eeqquuiittyy
TToottaall lliiaabbiilliittiieess aanndd eeqquuiittyy
As reported
31.12.19
Effect
Restated
As reported
31.12.18
Effect
Restated
As reported
Effect
Restated
1.1.18
9,537
997722,,118833
11
1111
9,548
997722,,119944
10,105
995588,,448899
11
1111
10,116
995588,,550000
10,184
993388,,778888
11
1111
10,195
993388,,779999
8,794
6,812
1,463
991177,,447766
34,154
5544,,553333
5544,,770077
997722,,118833
43
43
43
4433
(32)
((3322))
((3322))
1111
8,837
6,855
1,506
991177,,551199
34,122
5544,,550011
5544,,667755
997722,,119944
9,022
7,278
1,458
990055,,338866
30,448
5522,,992288
5533,,110033
995588,,448899
43
43
43
4433
(32)
((3322))
((3322))
1111
9,065
7,321
1,501
990055,,442299
30,416
5522,,889966
5533,,007711
995588,,550000
9,443
7,873
43
43
9,486
7,916
Not disclosed
888866,,885511
4433
888866,,889944
25,389
5511,,887799
5511,,993388
993388,,778888
(32)
((3322))
((3322))
1111
25,357
5511,,884477
5511,,990066
993388,,779999
304
304
Consolidated financial statements
b) Changes in accounting policies, comparability and other adjustments
New or amended accounting standards
was recorded within Variable compensation – performance
awards, USD 24 million within Social security and USD 21 million
Adoption of hedge accounting requirements of IFRS 9, Financial
within Other personnel expenses, with a USD 212 million
Instruments
increase
in compensation-related
liabilities for cash-settled
Effective from 1 January 2020, UBS has prospectively adopted
awards and social security-related accruals, and a USD 147
the hedge accounting requirements of
IFRS 9, Financial
million increase in share premium for equity-settled awards. The
Instruments, for all of its existing hedge accounting programs,
full year effect was an expense of approximately USD 280
except for fair value hedges of portfolio interest rate risk, which,
million, of which USD 240 million is disclosed within Variable
as permitted under IFRS 9, continue to be accounted for under
compensation – performance awards, USD 20 million within
IAS 39, Financial Instruments: Recognition and Measurement.
Social security and USD 20 million within Other personnel
The adoption of these requirements has not changed any of
expenses, with increases of approximately USD 170 million in
the hedge designations disclosed in the Annual Report 2019
compensation-related liabilities for cash-settled awards and
with only minor amendments to hedge documentation and
social security-related accruals and approximately USD 110
hedge effectiveness testing methodologies required to make
million in share premium for equity-settled awards.
them compliant with IFRS 9. The adoption had no financial
Outstanding deferred compensation awards granted to
effect on UBS’s financial statements. However, starting on
Group Executive Board members, those granted under the Long-
1 January 2020, UBS began to designate cross-currency swaps
Term Incentive Plan, as well as those granted to financial
as Fair value hedges of foreign exchange risk related to debt
advisors in the US, were not affected by these changes.
instruments and utilized the cost of hedging approach
introduced by IFRS 9.
› Refer to Note 1a item 2j for more information about the Group’s
hedge accounting policies under IFRS 9 and Note 25 for more
information about Fair value hedges of foreign exchange risk
related to debt instruments
Other changes to financial reporting
Modification of deferred compensation awards
Restatement of compensation-related liabilities
During 2020, UBS restated its balance sheet and statement of
changes in equity as of 1 January 2018 to correct a USD 43
million liability understatement in connection with a legacy
Global Wealth Management deferred compensation plan, with
the effects presented in the table below. The restatement
resulted from a correction of an actuarial calculation associated
with compensation-related
liabilities. The effects of
the
understatement were not material to prior-year financial
During 2020, UBS modified the terms of certain outstanding
statements; however, such effects would have been material to
deferred compensation awards granted for performance years
the quarterly reporting period in which the understatement was
2015 through 2019 by removing the requirement to provide
identified and therefore prior years were restated. The
future service for qualifying employees. These awards remain
restatement had no effect on Net profit / (loss) or basic and
subject to forfeiture if certain non-vesting conditions are not
diluted earnings per share for the current period or for any
satisfied. As a result, UBS recognized an expense of USD 359
comparative periods.
million in the third quarter of 2020, of which USD 314 million
USD million
Balance sheet assets
Deferred tax assets
TToottaall aasssseettss
Balance sheet liabilities
Other non-financial liabilities
TToottaall lliiaabbiilliittiieess
Equity
Retained earnings
EEqquuiittyy aattttrriibbuuttaabbllee ttoo sshhaarreehhoollddeerrss
TToottaall eeqquuiittyy
TToottaall lliiaabbiilliittiieess aanndd eeqquuiittyy
of which: Compensation-related liabilities
of which: financial advisor compensation plans
31.12.19
31.12.18
1.1.18
As reported
Effect
Restated
As reported
Effect
Restated
As reported
Effect
Restated
9,537
997722,,118833
11
1111
9,548
997722,,119944
10,105
995588,,448899
11
1111
10,116
995588,,550000
10,184
993388,,778888
11
1111
10,195
993388,,779999
8,794
6,812
1,463
991177,,447766
34,154
5544,,553333
5544,,770077
997722,,118833
43
43
43
4433
(32)
((3322))
((3322))
1111
8,837
6,855
1,506
9,022
7,278
1,458
9,065
7,321
1,501
9,443
7,873
43
43
9,486
7,916
Not disclosed
991177,,551199
990055,,338866
990055,,442299
888866,,885511
4433
888866,,889944
34,122
5544,,550011
5544,,667755
30,448
5522,,992288
5533,,110033
30,416
5522,,889966
5533,,007711
25,389
5511,,887799
5511,,993388
997722,,119944
995588,,448899
995588,,550000
993388,,778888
(32)
((3322))
((3322))
1111
25,357
5511,,884477
5511,,990066
993388,,779999
43
43
43
4433
(32)
((3322))
((3322))
1111
Note 1 Summary of significant accounting policies (continued)
Note 1 Summary of significant accounting policies (continued)
Segment reporting
Effective from 1 January 2020, UBS no longer discloses a
detailed cost breakdown by financial statement line item within
its segment reporting disclosures provided in Note 2. The
modified approach of presenting operating expenses for each
division aligns the reporting with the way that UBS manages its
cost base. This change has no effect on the income statement,
or on the net profit of any business division.
Presentation of interest income and expense from financial
instruments measured at fair value through profit or loss
Effective from 1 January 2020, UBS presents interest income and
interest expense from financial instruments measured at fair
value through profit or loss on a net basis, in line with how UBS
assesses and reports interest and in accordance with IFRS. This
presentation change has no effect on Net interest income or on
Net profit / (loss) attributable to shareholders. Prior periods have
in presentation. Further
been aligned with this change
information about net
financial
from
income
interest
instruments measured at fair value through profit or loss is
provided in Note 3.
c) International Financial Reporting Standards and Interpretations to be adopted in 2021 and later and other changes
Amendments to IAS 39, IFRS 9 and IFRS 7 (Interest Rate
Benchmark Reform – Phase 2)
In August 2020, the IASB issued Interest Rate Benchmark
Reform – Phase 2, Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4
and IFRS 16 addressing a number of issues in financial reporting
areas that arise when IBOR rates are reformed or replaced.
The amendments provide a practical expedient which permits
certain changes
in the contractual cash flows of debt
instruments attributable to the replacement of IBOR rates with
alternative risk-free interest rates (RFRs) to be accounted for
prospectively by updating the instrument’s EIR.
In terms of hedge accounting, the amendments provide relief
from discontinuing hedge relationships because of changes
resulting from the replacement of IBOR rates and temporary
relief from having to ensure that the designated RFR risk
component
the
amendments do not require remeasurement or immediate
release to the income statement of the accumulated amounts
resulting from IBOR hedges upon the change to RFRs.
identifiable. Additionally,
separately
is
Furthermore, the amendments introduce additional disclosure
requirements covering any new risks arising from the reforms
and how the transition to alternative benchmark rates is
managed.
UBS will adopt these amendments on 1 January 2021 and
does not expect a material effect on the Group’s financial
statements.
› Refer to Note 25 for more information
IFRS 17, Insurance Contracts
In May 2017, the IASB issued IFRS 17, Insurance Contracts,
which sets out the accounting requirements for contractual
rights and obligations that arise from insurance contracts issued
and reinsurance contracts held. IFRS 17 is effective from
1 January 2023. UBS is assessing the standard, but does not
expect it to have a material effect on the Group’s financial
statements.
Amendments to IAS 1, Presentation of Financial Statements, IFRS
Practice Statement 2, Making Materiality Judgements and IAS 8,
Accounting Policies, Changes in Accounting Estimates and Errors
In February 2021, the IASB issued amendments to IAS 1,
Presentation of Financial Statements, IFRS Practice Statement 2,
Making Materiality Judgements and amendments to IAS 8,
Accounting Policies, Changes in Accounting Estimates and
Errors, to help improve accounting policy disclosures and
distinguish changes in accounting estimates from changes in
accounting policies. These amendments are effective from
1 January 2023, with early application permitted. UBS is
currently assessing
financial
statements.
the effect on
the Group’s
Annual Improvements to IFRS Standards 2018–2020 Cycle and
narrow-scope amendments to IFRS 3, Business Combinations,
and IAS 37, Provisions, Contingent Liabilities and Contingent
Assets
In May 2020, the IASB issued several narrow-scope amendments
to a number of standards as well as Annual Improvements to
IFRS Standards 2018–2020 Cycle. These minor amendments are
effective from 1 January 2022. UBS is currently assessing the
effect on the Group’s financial statements.
304
305
305
Financial statements
UBS’s
internal
accounting
policies, which
include
management accounting policies and service level agreements,
determine the revenues and expenses directly attributable to
each reportable segment. Transactions between the reportable
segments are carried out at internally agreed rates and are
reflected in the operating results of the reportable segments.
Revenue-sharing agreements are used to allocate external client
revenues to reportable segments where several reportable
segments are involved in the value creation chain. Total
intersegment revenues for the Group are immaterial, as the
majority of the revenues are allocated across the segments by
means of revenue-sharing agreements. Interest income earned
from managing UBS’s consolidated equity is allocated to the
reportable segments based on average attributed equity and
currency composition. Assets and liabilities of the reportable
invested with Group
segments are funded through and
Functions, and the net interest margin is reflected in the results
of each reportable segment.
Segment assets are based on a third-party view and do not
include intercompany balances. This view is in line with internal
reporting to the GEB. If one operating segment is involved in an
external transaction together with another operating segment or
Group Functions, additional criteria are considered to determine
the segment that will report the associated assets. This will
include a consideration of which segment’s business needs are
being addressed by the transaction and which segment is
providing the funding and / or resources. Allocation of liabilities
follows the same principles.
Non-current assets disclosed for segment reporting purposes
represent assets that are expected to be recovered more than 12
months after the reporting date, excluding financial instruments,
deferred tax assets and post-employment benefits.
Effective from 1 January 2020, UBS only reports total
operating expenses for each business division and no longer
discloses a detailed cost breakdown by financial statement line
item. This change streamlines reporting, ensures alignment with
how UBS manages its cost base and has no effect on the income
statement, or on the net profit of any business division.
Consolidated financial statements
Note 2a Segment reporting
UBS’s businesses are organized globally into four business
divisions: Global Wealth Management, Personal & Corporate
Banking, Asset Management and the Investment Bank. All four
business divisions are supported by Group Functions and qualify
as reportable segments for the purpose of segment reporting.
Together with Group Functions, the four business divisions
reflect the management structure of the Group:
– Global Wealth Management provides investment advice
and solutions, as well as lending solutions, to private clients,
in particular in the ultra high net worth and high net worth
segments. The business is managed globally across the
regions.
– Personal & Corporate Banking provides comprehensive
financial products and services to private, corporate and
institutional clients, operating across all banking markets in
Switzerland.
– Asset Management is a large-scale and diversified global
asset manager. It offers investment capabilities and styles
across all major traditional and alternative asset classes, as
well as advisory
institutions, wholesale
intermediaries and wealth management clients globally.
support
to
– The Investment Bank provides a range of services to
institutional, corporate and wealth management clients
globally, to help them raise capital, grow their businesses,
invest and manage risks. Offerings include advisory services,
capital markets, cash and derivatives trading across equities
and fixed income and financing.
– Group Functions – formerly named Corporate Center, is
made up of the following major areas: Group Services (which
consists of Technology, Corporate Services, Human
Resources, Operations, Finance, Legal, Risk Control, Research
and Analytics, Compliance, Regulatory & Governance,
Communications & Branding and UBS in Society), Group
Treasury and Non-core and Legacy Portfolio.
Financial information about the four business divisions and
Group Functions is presented separately in internal management
reports to the Group Executive Board (the GEB), which is
considered the “chief operating decision maker” pursuant to
IFRS 8, Operating Segments.
306
306
Note 2a Segment reporting
Note 2a Segment reporting (continued)
USD million
For the year ended 31 December 2020
Net interest income
Non-interest income1
Income
Credit loss (expense) / release
Total operating income
Total operating expenses
OOppeerraattiinngg pprrooffiitt // ((lloossss)) bbeeffoorree ttaaxx
Tax expense / (benefit)
NNeett pprrooffiitt // ((lloossss))
AAddddiittiioonnaall iinnffoorrmmaattiioonn
Total assets
Additions to non-current assets
Functions, and the net interest margin is reflected in the results
USD million
For the year ended 31 December 2019
Net interest income
Non-interest income
Income
Credit loss (expense) / release
Total operating income
Total operating expenses
OOppeerraattiinngg pprrooffiitt // ((lloossss)) bbeeffoorree ttaaxx
Tax expense / (benefit)
NNeett pprrooffiitt // ((lloossss))
AAddddiittiioonnaall iinnffoorrmmaattiioonn
Total assets2
Additions to non-current assets
USD million
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group
Functions
UBS
4,027
13,107
17,134
(88)
17,045
13,026
44,,001199
2,049
1,858
3,908
(257)
3,651
2,392
11,,225599
(17)
2,993
2,975
(2)
2,974
1,519
11,,445555
284
9,235
9,519
(305)
9,214
6,732
22,,448822
(481)
30
(452)
(42)
(494)
567
((11,,006600))
5,862
27,222
33,084
(694)
32,390
24,235
88,,115555
1,583
66,,557722
367,714
5
Global Wealth
Management
231,657
12
Personal &
Corporate
Banking
28,589
385
369,683
150
128,122
2,294
1,125,765
2,847
Asset
Management
Investment
Bank
Group
Functions
UBS
3,947
12,426
16,373
(20)
16,353
12,955
33,,339977
1,992
1,744
3,736
(21)
3,715
2,274
11,,444411
(25)
1,962
1,938
0
1,938
1,406
553322
(669)
7,968
7,299
(30)
7,269
6,485
778844
(744)
367
(378)
(7)
(385)
192
((557777))
4,501
24,467
28,967
(78)
28,889
23,312
55,,557777
1,267
44,,331100
309,766
68
209,405
10
34,565
0
315,855
1
102,603
5,217
972,194
5,297
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group
Functions
UBS
Consolidated financial statements
UBS’s businesses are organized globally into four business
UBS’s
internal
accounting
policies, which
include
divisions: Global Wealth Management, Personal & Corporate
management accounting policies and service level agreements,
Banking, Asset Management and the Investment Bank. All four
determine the revenues and expenses directly attributable to
business divisions are supported by Group Functions and qualify
each reportable segment. Transactions between the reportable
as reportable segments for the purpose of segment reporting.
segments are carried out at internally agreed rates and are
Together with Group Functions, the four business divisions
reflected in the operating results of the reportable segments.
reflect the management structure of the Group:
Revenue-sharing agreements are used to allocate external client
revenues to reportable segments where several reportable
– Global Wealth Management provides investment advice
segments are involved in the value creation chain. Total
and solutions, as well as lending solutions, to private clients,
intersegment revenues for the Group are immaterial, as the
in particular in the ultra high net worth and high net worth
majority of the revenues are allocated across the segments by
segments. The business is managed globally across the
means of revenue-sharing agreements. Interest income earned
from managing UBS’s consolidated equity is allocated to the
– Personal & Corporate Banking provides comprehensive
reportable segments based on average attributed equity and
financial products and services to private, corporate and
currency composition. Assets and liabilities of the reportable
institutional clients, operating across all banking markets in
segments are funded through and
invested with Group
regions.
Switzerland.
– Asset Management is a large-scale and diversified global
of each reportable segment.
asset manager. It offers investment capabilities and styles
Segment assets are based on a third-party view and do not
across all major traditional and alternative asset classes, as
include intercompany balances. This view is in line with internal
well as advisory
support
to
institutions, wholesale
reporting to the GEB. If one operating segment is involved in an
intermediaries and wealth management clients globally.
external transaction together with another operating segment or
– The Investment Bank provides a range of services to
Group Functions, additional criteria are considered to determine
institutional, corporate and wealth management clients
the segment that will report the associated assets. This will
globally, to help them raise capital, grow their businesses,
include a consideration of which segment’s business needs are
invest and manage risks. Offerings include advisory services,
being addressed by the transaction and which segment is
capital markets, cash and derivatives trading across equities
providing the funding and / or resources. Allocation of liabilities
and fixed income and financing.
follows the same principles.
– Group Functions – formerly named Corporate Center, is
Non-current assets disclosed for segment reporting purposes
made up of the following major areas: Group Services (which
represent assets that are expected to be recovered more than 12
consists of Technology, Corporate Services, Human
months after the reporting date, excluding financial instruments,
Resources, Operations, Finance, Legal, Risk Control, Research
deferred tax assets and post-employment benefits.
and Analytics, Compliance, Regulatory & Governance,
Effective from 1 January 2020, UBS only reports total
Communications & Branding and UBS in Society), Group
operating expenses for each business division and no longer
Treasury and Non-core and Legacy Portfolio.
discloses a detailed cost breakdown by financial statement line
item. This change streamlines reporting, ensures alignment with
Financial information about the four business divisions and
how UBS manages its cost base and has no effect on the income
Group Functions is presented separately in internal management
statement, or on the net profit of any business division.
reports to the Group Executive Board (the GEB), which is
considered the “chief operating decision maker” pursuant to
IFRS 8, Operating Segments.
For the year ended 31 December 2018
Net interest income
Non-interest income
Income
Credit loss (expense) / release
Total operating income
Total operating expenses
OOppeerraattiinngg pprrooffiitt // ((lloossss)) bbeeffoorree ttaaxx
Tax expense / (benefit)
NNeett pprrooffiitt // ((lloossss))
AAddddiittiioonnaall iinnffoorrmmaattiioonn
Total assets2
Additions to non-current assets
11 Includes a USD 631 million net gain on the sale of a majority stake in Fondcenter AG, of which USD 571 million was recognized in Asset Management and USD 60 million was recognized in Global Wealth
Management. Refer to Note 29 for more information. 22 Information has been restated where applicable. Refer to Note 1b for more information.
5,048
25,283
30,330
(118)
30,213
24,222
55,,999911
1,468
44,,552222
4,101
12,700
16,800
(15)
16,785
13,531
33,,225544
(29)
1,881
1,852
0
1,852
1,426
442266
(459)
8,538
8,079
(38)
8,041
6,554
11,,448866
2,049
2,168
4,217
(56)
4,161
2,365
11,,779966
(613)
(4)
(617)
(8)
(626)
346
((997711))
113,667
1,666
313,737
196
958,500
1,975
200,703
23
302,253
89
28,140
1
306
307
307
Financial statements Consolidated financial statements
Note 2b Segment reporting by geographic location
The operating regions shown in the table below correspond to
the regional management structure of the Group. The allocation
of operating income to these regions reflects, and is consistent
with, the basis on which the business is managed and its
performance is evaluated. These allocations involve assumptions
and judgments that management considers to be reasonable,
in estimates or
and may be refined to reflect changes
management structure. The main principles of the allocation
methodology are that client revenues are attributed to the
domicile of the given client and trading and portfolio
management revenues are attributed to the country where the
risk is managed. This revenue attribution is consistent with the
mandate of the regional Presidents. Certain revenues, such as
those related to Non-core and Legacy Portfolio in Group
Functions, are managed at a Group level. These revenues are
included in the Global line.
The geographic analysis of non-current assets is based on the
location of the entity in which the given assets are recorded.
For the year ended 31 December 2020
Americas
of which: USA
Asia Pacific
Europe, Middle East and Africa (excluding Switzerland)
Switzerland
Global
TToottaall
For the year ended 31 December 2019
Americas
of which: USA
Asia Pacific
Europe, Middle East and Africa (excluding Switzerland)
Switzerland
Global
TToottaall
For the year ended 31 December 2018
Americas
of which: USA
Asia Pacific
Europe, Middle East and Africa (excluding Switzerland)
Switzerland
Global
TToottaall
TToottaall ooppeerraattiinngg iinnccoommee
TToottaall nnoonn--ccuurrrreenntt aasssseettss
UUSSDD bbiilllliioonn
SShhaarree %%
UUSSDD bbiilllliioonn
SShhaarree %%
1133..00
1111..77
66..00
66..55
66..99
00..11
3322..44
4400
3366
1188
2200
2211
00
110000
99..00
88..44
11..55
33..00
77..66
00..00
2211..11
4422
4400
77
1144
3366
00
110000
Total operating income1
Total non-current assets
USD billion
Share %
USD billion
Share %
12.0
10.9
4.7
5.8
6.7
(0.3)
2288..99
42
38
16
20
23
(1)
110000
8.9
8.5
1.4
3.0
7.1
0.0
2200..33
44
42
7
15
35
0
110000
Total operating income1
Total non-current assets
USD billion
Share %
USD billion
Share %
12.6
11.5
4.9
6.2
7.1
(0.6)
3300..22
42
38
16
21
24
(2)
110000
7.4
7.0
0.9
2.0
6.8
0.0
1177..11
43
41
5
12
40
0
110000
11 Effective as of 1 January 2020, the Investment Bank was realigned into two new business lines, Global Banking and Global Markets, which affects how the business is managed and therefore the allocation of
operating income to the regions. The presentation of prior-year information reflects the new regional management structure of the Investment Bank.
308
308
Note 2b Segment reporting by geographic location
Income statement notes
The operating regions shown in the table below correspond to
domicile of the given client and trading and portfolio
the regional management structure of the Group. The allocation
management revenues are attributed to the country where the
of operating income to these regions reflects, and is consistent
risk is managed. This revenue attribution is consistent with the
with, the basis on which the business is managed and its
mandate of the regional Presidents. Certain revenues, such as
performance is evaluated. These allocations involve assumptions
those related to Non-core and Legacy Portfolio in Group
and judgments that management considers to be reasonable,
Functions, are managed at a Group level. These revenues are
and may be refined to reflect changes
in estimates or
included in the Global line.
management structure. The main principles of the allocation
The geographic analysis of non-current assets is based on the
methodology are that client revenues are attributed to the
location of the entity in which the given assets are recorded.
Note 3 Net interest income and other net income from financial instruments measured at fair value through profit or loss
USD million
Net interest income from financial instruments measured at fair value through profit or loss
Other net income from financial instruments measured at fair value through profit or loss
of which: net gains / (losses) from financial liabilities designated at fair value 1
TToottaall nneett iinnccoommee ffrroomm ffiinnaanncciiaall iinnssttrruummeennttss mmeeaassuurreedd aatt ffaaiirr vvaalluuee tthhrroouugghh pprrooffiitt oorr lloossss
For the year ended
3311..1122..2200
11,,229999
66,,996600
11,,550099
88,,225599
31.12.19
1,011
6,842
(8,748)
7,853
31.12.18
1,338
6,960
9,382
8,298
Net interest income
NNeett iinntteerreesstt iinnccoommee ffrroomm ffiinnaanncciiaall iinnssttrruummeennttss mmeeaassuurreedd aatt aammoorrttiizzeedd ccoosstt aanndd ffaaiirr vvaalluuee tthhrroouugghh ootthheerr ccoommpprreehheennssiivvee iinnccoommee
Interest income from loans and deposits2
Interest income from securities financing transactions3
Interest income from other financial instruments measured at amortized cost
Interest income from debt instruments measured at fair value through other comprehensive income
Interest income from derivative instruments designated as cash flow hedges
TToottaall iinntteerreesstt iinnccoommee ffrroomm ffiinnaanncciiaall iinnssttrruummeennttss mmeeaassuurreedd aatt aammoorrttiizzeedd ccoosstt aanndd ffaaiirr vvaalluuee tthhrroouugghh ootthheerr ccoommpprreehheennssiivvee iinnccoommee
Interest expense on loans and deposits4
Interest expense on securities financing transactions5
Interest expense on debt issued
Interest expense on lease liabilities
TToottaall iinntteerreesstt eexxppeennssee ffrroomm ffiinnaanncciiaall iinnssttrruummeennttss mmeeaassuurreedd aatt aammoorrttiizzeedd ccoosstt
TToottaall nneett iinntteerreesstt iinnccoommee ffrroomm ffiinnaanncciiaall iinnssttrruummeennttss mmeeaassuurreedd aatt aammoorrttiizzeedd ccoosstt aanndd ffaaiirr vvaalluuee tthhrroouugghh ootthheerr ccoommpprreehheennssiivvee iinnccoommee
NNeett iinntteerreesstt iinnccoommee ffrroomm ffiinnaanncciiaall iinnssttrruummeennttss mmeeaassuurreedd aatt ffaaiirr vvaalluuee tthhrroouugghh pprrooffiitt oorr lloossss
Net interest income from financial instruments at fair value held for trading
Net interest income from brokerage balances
Net interest income from securities financing transactions at fair value not held for trading6
Interest income from other financial instruments at fair value not held for trading
Interest expense on other financial instruments designated at fair value
TToottaall nneett iinntteerreesstt iinnccoommee ffrroomm ffiinnaanncciiaall iinnssttrruummeennttss mmeeaassuurreedd aatt ffaaiirr vvaalluuee tthhrroouugghh pprrooffiitt oorr lloossss
TToottaall nneett iinntteerreesstt iinnccoommee
11 Excludes fair value changes of hedges related to financial liabilities designated at fair value and foreign currency translation effects arising from translating foreign currency transactions into the respective
functional currency, both of which are reported within Other net income from financial instruments measured at fair value through profit or loss. 2019 and 2018 included a net loss of USD 1,830 million and a net
gain of USD 2,152 million, respectively, driven by financial liabilities related to unit-linked investment contracts, which are designated at fair value through profit or loss. This was offset by a net gain of USD 1,830
million and a net loss of USD 2,134 million in 2019 and 2018, respectively, related to financial assets for unit-linked investment contracts that are mandatorily measured at fair value through profit or loss not held
for trading. 22 Consists of interest income from cash and balances at central banks, loans and advances to banks and customers, and cash collateral receivables on derivative instruments, as well as negative
interest on amounts due to banks, customer deposits, and cash collateral payables on derivative instruments. 33 Includes interest income on receivables from securities financing transactions and negative interest,
including fees, on payables from securities financing transactions. 44 Consists of interest expense on amounts due to banks, cash collateral payables on derivative instruments, and customer deposits, as well as
negative interest on cash and balances at central banks, loans and advances to banks, and cash collateral receivables on derivative instruments. 55 Includes interest expense on payables from securities financing
transactions and negative interest, including fees, on receivables from securities financing transactions. 66 Includes interest expense on securities financing transactions designated at fair value.
8,008
2,005
364
120
188
10,684
2,634
1,152
3,285
122
7,194
3,490
66,,669900
886622
333355
110011
882222
88,,881100
11,,003311
887700
22,,223377
111100
44,,224477
44,,556633
7,801
1,567
266
142
324
10,100
1,980
1,130
3,281
1,214
339
116
914
(1,571)
1,011
4,501
1,105
575
115
901
(1,357)
1,338
5,048
884411
668822
7777
558855
((888866))
11,,229999
55,,886622
6,391
3,710
Consolidated financial statements
For the year ended 31 December 2020
Europe, Middle East and Africa (excluding Switzerland)
For the year ended 31 December 2019
Europe, Middle East and Africa (excluding Switzerland)
For the year ended 31 December 2018
Americas
of which: USA
Asia Pacific
Switzerland
Global
TToottaall
Americas
of which: USA
Asia Pacific
Switzerland
Global
TToottaall
Americas
of which: USA
Asia Pacific
Switzerland
Global
TToottaall
Europe, Middle East and Africa (excluding Switzerland)
TToottaall ooppeerraattiinngg iinnccoommee
TToottaall nnoonn--ccuurrrreenntt aasssseettss
UUSSDD bbiilllliioonn
SShhaarree %%
UUSSDD bbiilllliioonn
SShhaarree %%
Total operating income1
Total non-current assets
USD billion
Share %
USD billion
Share %
1133..00
1111..77
66..00
66..55
66..99
00..11
3322..44
12.0
10.9
4.7
5.8
6.7
(0.3)
2288..99
12.6
11.5
4.9
6.2
7.1
(0.6)
3300..22
4400
3366
1188
2200
2211
00
110000
42
38
16
20
23
(1)
110000
42
38
16
21
24
(2)
110000
99..00
88..44
11..55
33..00
77..66
00..00
2211..11
8.9
8.5
1.4
3.0
7.1
0.0
2200..33
7.4
7.0
0.9
2.0
6.8
0.0
1177..11
4422
4400
77
1144
3366
00
110000
44
42
7
15
35
0
110000
43
41
5
12
40
0
110000
Total operating income1
Total non-current assets
USD billion
Share %
USD billion
Share %
11 Effective as of 1 January 2020, the Investment Bank was realigned into two new business lines, Global Banking and Global Markets, which affects how the business is managed and therefore the allocation of
operating income to the regions. The presentation of prior-year information reflects the new regional management structure of the Investment Bank.
308
309
309
Financial statements Consolidated financial statements
Note 4 Net fee and commission income
USD million
FFeeee aanndd ccoommmmiissssiioonn iinnccoommee
Underwriting fees
of which: equity underwriting fees
of which: debt underwriting fees
M&A and corporate finance fees
Brokerage fees
Investment fund fees
Portfolio management and related services
Other
TToottaall ffeeee aanndd ccoommmmiissssiioonn iinnccoommee11
of which: recurring
of which: transaction-based
of which: performance-based
FFeeee aanndd ccoommmmiissssiioonn eexxppeennssee
Brokerage fees paid
Distribution fees paid
Other
TToottaall ffeeee aanndd ccoommmmiissssiioonn eexxppeennssee
NNeett ffeeee aanndd ccoommmmiissssiioonn iinnccoommee
of which: net brokerage fees
For the year ended
3311..1122..2200
31.12.19
31.12.18
11,,008855
665577
442288
773366
44,,113322
55,,228899
88,,000099
11,,771100
2200,,996611
1133,,000099
77,,449911
446611
227744
558899
991122
11,,777755
1199,,118866
33,,885588
741
360
382
774
3,248
4,858
7,656
1,832
19,110
12,544
6,402
163
310
590
797
1,696
17,413
2,938
811
431
380
768
3,521
4,954
7,756
1,786
19,598
12,911
6,594
93
316
580
807
1,703
17,895
3,205
11 For the year ended 31 December 2020, reflects third-party fee and commission income of USD 12,475 million for Global Wealth Management, USD 1,426 million for Personal & Corporate Banking, USD 3,129
million for Asset Management, USD 3,882 million for the Investment Bank and USD 49 million for Group Functions (for the year ended 31 December 2019: USD 11,694 million for Global Wealth Management,
USD 1,307 million for Personal & Corporate Banking, USD 2,659 million for Asset Management, USD 3,355 million for the Investment Bank and USD 94 million for Group Functions; for the year ended 31 December
2018: USD 12,059 million for Global Wealth Management, USD 1,338 million for Personal & Corporate Banking, USD 2,579 million for Asset Management, USD 3,525 million for the Investment Bank and USD 97
million for Group Functions).
Note 5 Other income
USD million
AAssssoocciiaatteess,, jjooiinntt vveennttuurreess aanndd ssuubbssiiddiiaarriieess
Net gains / (losses) from acquisitions and disposals of subsidiaries1
Net gains / (losses) from disposals of investments in associates
Share of net profits of associates and joint ventures
Impairments related to associates
TToottaall
Net gains / (losses) from disposals of financial assets measured at fair value through other comprehensive income
Income from properties5
Net gains / (losses) from properties held for sale
Other
TToottaall ootthheerr iinnccoommee
For the year ended
3311..1122..2200
31.12.19
31.12.18
66335522
00
884433
00
771199
4400
2266
776666
22116677
11,,007766
(36)
4
46
(1)
13
31
27
(19)
160
212
(290)
46
5294
0
284
0
24
40
80
428
11 Includes foreign exchange gains / (losses) reclassified from other comprehensive income related to the disposal or closure of foreign operations. 22 Includes a USD 631 million net gain on the sale of a majority
stake in Fondcenter AG. Refer to Note 29 for more information. 33 Includes a valuation gain of USD 26 million on UBS’s equity ownership of SIX Group. 44 Includes a valuation gain of USD 460 million on UBS’s
equity ownership of SIX Group related to the sale of SIX Payment Services to Worldline. 55 Includes rent received from third parties. 66 Includes net gains of USD 140 million arising from sale-and-leaseback
transactions, primarily related to a property in Geneva, partly offset by remeasurement losses relating to properties that were reclassified as held for sale. 77 Includes a USD 215 million gain on the sale of
intellectual property rights associated with the Bloomberg Commodity Index family.
310
310
Consolidated financial statements
Note 4 Net fee and commission income
USD million
FFeeee aanndd ccoommmmiissssiioonn iinnccoommee
Underwriting fees
of which: equity underwriting fees
of which: debt underwriting fees
M&A and corporate finance fees
Brokerage fees
Investment fund fees
Portfolio management and related services
Other
TToottaall ffeeee aanndd ccoommmmiissssiioonn iinnccoommee11
of which: recurring
of which: transaction-based
of which: performance-based
FFeeee aanndd ccoommmmiissssiioonn eexxppeennssee
Brokerage fees paid
Distribution fees paid
Other
TToottaall ffeeee aanndd ccoommmmiissssiioonn eexxppeennssee
NNeett ffeeee aanndd ccoommmmiissssiioonn iinnccoommee
of which: net brokerage fees
million for Group Functions).
Note 5 Other income
For the year ended
3311..1122..2200
31.12.19
31.12.18
741
360
382
774
3,248
4,858
7,656
1,832
19,110
12,544
6,402
163
310
590
797
1,696
17,413
2,938
811
431
380
768
3,521
4,954
7,756
1,786
19,598
12,911
6,594
93
316
580
807
1,703
17,895
3,205
For the year ended
3311..1122..2200
31.12.19
31.12.18
(36)
4
46
(1)
13
31
27
(19)
160
212
(290)
46
5294
0
284
0
24
40
80
428
11,,008855
665577
442288
773366
44,,113322
55,,228899
88,,000099
11,,771100
2200,,996611
1133,,000099
77,,449911
446611
227744
558899
991122
11,,777755
1199,,118866
33,,885588
66335522
884433
00
00
771199
4400
2266
776666
22116677
11,,007766
11 For the year ended 31 December 2020, reflects third-party fee and commission income of USD 12,475 million for Global Wealth Management, USD 1,426 million for Personal & Corporate Banking, USD 3,129
million for Asset Management, USD 3,882 million for the Investment Bank and USD 49 million for Group Functions (for the year ended 31 December 2019: USD 11,694 million for Global Wealth Management,
USD 1,307 million for Personal & Corporate Banking, USD 2,659 million for Asset Management, USD 3,355 million for the Investment Bank and USD 94 million for Group Functions; for the year ended 31 December
2018: USD 12,059 million for Global Wealth Management, USD 1,338 million for Personal & Corporate Banking, USD 2,579 million for Asset Management, USD 3,525 million for the Investment Bank and USD 97
USD million
AAssssoocciiaatteess,, jjooiinntt vveennttuurreess aanndd ssuubbssiiddiiaarriieess
Net gains / (losses) from acquisitions and disposals of subsidiaries1
Net gains / (losses) from disposals of investments in associates
Share of net profits of associates and joint ventures
Impairments related to associates
TToottaall
Income from properties5
Net gains / (losses) from properties held for sale
Other
TToottaall ootthheerr iinnccoommee
Net gains / (losses) from disposals of financial assets measured at fair value through other comprehensive income
11 Includes foreign exchange gains / (losses) reclassified from other comprehensive income related to the disposal or closure of foreign operations. 22 Includes a USD 631 million net gain on the sale of a majority
stake in Fondcenter AG. Refer to Note 29 for more information. 33 Includes a valuation gain of USD 26 million on UBS’s equity ownership of SIX Group. 44 Includes a valuation gain of USD 460 million on UBS’s
equity ownership of SIX Group related to the sale of SIX Payment Services to Worldline. 55 Includes rent received from third parties. 66 Includes net gains of USD 140 million arising from sale-and-leaseback
transactions, primarily related to a property in Geneva, partly offset by remeasurement losses relating to properties that were reclassified as held for sale. 77 Includes a USD 215 million gain on the sale of
intellectual property rights associated with the Bloomberg Commodity Index family.
Note 6 Personnel expenses
USD million
Salaries1
Variable compensation – performance awards2
of which: guarantees for new hires
Variable compensation – other2
Financial advisor compensation2,4
Contractors
Social security
Post-employment benefit plans5
Other personnel expenses
TToottaall ppeerrssoonnnneell eexxppeennsseess
For the year ended
3311..1122..2200
31.12.19
31.12.18
77,,002233
33,,22009933
2255
222200
44,,009911
337755
88999933
884455
55661133
6,518
2,755
29
246
4,043
381
799
787
555
6,448
2,995
43
243
4,054
489
791
4576
654
1177,,222244
16,084
16,132
11 Includes role-based allowances. 22 Refer to Note 27 for more information. 33 During 2020, UBS modified the conditions for continued vesting of certain outstanding deferred compensation awards for qualifying
employees, resulting in an expense of approximately USD 280 million, of which USD 240 million is disclosed within Variable compensation – performance awards, USD 20 million within Social security and USD 20
million within Other personnel expenses. Refer to Note 1b for more information. 44 Financial advisor compensation consists of grid-based compensation based directly on compensable revenues generated by
financial advisors and supplemental compensation calculated on the basis of financial advisor productivity, firm tenure, assets and other variables. It also includes expenses related to compensation commitments
with financial advisors entered into at the time of recruitment that are subject to vesting requirements. 55 Refer to Note 26 for more information. 66 Changes to the pension fund of UBS in Switzerland announced
in 2018 resulted in a reduction in the pension obligation recognized by UBS. As a consequence, a pre-tax gain of USD 241 million was recognized in the income statement in 2018, with no overall effect on total
equity. Refer to Note 26 for more information.
Note 7 General and administrative expenses
USD million
Occupancy
Rent and maintenance of IT and other equipment
Communication and market data services
Administration
of which: UK and German bank levies1
Marketing and public relations2
Travel and entertainment
Professional fees
Outsourcing of IT and other services
Litigation, regulatory and similar matters3
Other
TToottaall ggeenneerraall aanndd aaddmmiinniissttrraattiivvee eexxppeennsseess
For the year ended
3311..1122..2200
31.12.19
31.12.18
441122
881133
661155
556655
5555
229933
116699
667755
11,,002288
119977
111177
44,,888855
381
718
627
551
41
317
378
882
1,158
165
111
5,288
914
654
638
590
58
366
425
1,015
1,427
657
110
6,797
11 The UK bank levy expenses of USD 38 million (USD 30 million for 2019 and USD 40 million for 2018) included a credit of USD 27 million (USD 31 million for 2019 and USD 45 million for 2018) related to prior
years. 22 Includes charitable donations. 33 Reflects the net increase in provisions for litigation, regulatory and similar matters recognized in the income statement. Refer to Note 18 for more information. Also
includes recoveries from third parties of USD 3 million in 2020 (USD 11 million in 2019 and USD 29 million in 2018).
310
311
311
Financial statements Consolidated financial statements
Note 8 Income taxes
USD million
Tax expense / (benefit)
SSwwiissss
Current
Deferred
TToottaall SSwwiissss
NNoonn--SSwwiissss
Current
Deferred
TToottaall nnoonn--SSwwiissss
TToottaall iinnccoommee ttaaxx eexxppeennssee // ((bbeenneeffiitt)) rreeccooggnniizzeedd iinn tthhee iinnccoommee ssttaatteemmeenntt
For the year ended
31.12.19
3311..1122..2200
31.12.18
448822
111166
559988
774499
223366
998855
11,,558833
365
265
663300
426
211
663377
11,,226677
469
2,377
22,,884466
575
(1,953)
((11,,337788))
11,,446688
Income tax recognized in the income statement
Income tax expenses of USD 1,583 million were recognized for
the Group in 2020, representing an effective tax rate of 19.4%.
This included Swiss tax expenses of USD 598 million and non-
Swiss tax expenses of USD 985 million.
The Swiss tax expenses included current tax expenses of
USD 482 million related to taxable profits of UBS Switzerland AG
and other Swiss entities. They also included deferred tax
expenses of USD 116 million, which primarily reflect the
amortization of deferred tax assets (DTAs) previously recognized
in relation to deductible temporary differences.
The non-Swiss tax expenses included current tax expenses of
USD 749 million related to taxable profits earned by non-Swiss
subsidiaries and branches, and net deferred tax expenses of
USD 236 million. Expenses of USD 444 million, primarily relating
to the amortization of DTAs previously recognized in relation to
tax losses carried forward and deductible temporary differences
of UBS Americas Inc., were partly offset by a net benefit of
USD 208 million in respect of the remeasurement of DTAs. This
net benefit included net upward remeasurements of DTAs of
USD 146 million for certain entities, primarily in connection with
our business planning process, and USD 62 million in respect of
additional DTA recognition that resulted from the contribution
of real estate assets by UBS AG to UBS Americas Inc. and UBS
Financial Services Inc. in 2020. This allowed the full recognition
of DTAs in respect of the associated historic real estate costs that
were previously capitalized for US tax purposes under the
elections that were made in the fourth quarter of 2018.
The effective tax rate for 2020 of 19.4% is lower than the
Group’s normal tax rate of around 25%, mainly as a result of
the aforementioned deferred tax benefit of USD 208 million in
respect of the remeasurement of DTAs and also because no net
tax expense was recognized in respect of the pre-tax gain of
USD 631 million in relation to the sale of a majority stake in
Fondcenter AG.
USD million
Operating profit / (loss) before tax
of which: Swiss
of which: non-Swiss
Income taxes at Swiss tax rate of 19.5% for 2020, 20.5% for 2019 and 21% for 2018
Increase / (decrease) resulting from:
Non-Swiss tax rates differing from Swiss tax rate
Tax effects of losses not recognized
Previously unrecognized tax losses now utilized
Non-taxable and lower-taxed income
Non-deductible expenses and additional taxable income
Adjustments related to prior years – current tax
Adjustments related to prior years – deferred tax
Change in deferred tax recognition
Adjustments to deferred tax balances arising from changes in tax rates
Other items
IInnccoommee ttaaxx eexxppeennssee // ((bbeenneeffiitt))
For the year ended
31.12.19
5,577
2,571
3,006
1,143
3311..1122..2200
88,,115555
33,,440033
44,,775522
11,,559900
111100
114444
((221122))
((339944))
338855
((6677))
1122
((338811))
223344
116611
11,,558833
82
131
(265)
(351)
732
(5)
(6)
(294)
(9)
107
1,267
31.12.18
5,991
1,843
4,148
1,258
55
223
(25)
(430)
905
114
26
(795)
0
137
1,468
312
312
Consolidated financial statements
Note 8 Income taxes
Tax expense / (benefit)
USD million
SSwwiissss
Current
Deferred
TToottaall SSwwiissss
NNoonn--SSwwiissss
Current
Deferred
TToottaall nnoonn--SSwwiissss
448822
111166
559988
774499
223366
998855
365
265
663300
426
211
663377
469
2,377
22,,884466
575
(1,953)
((11,,337788))
11,,446688
TToottaall iinnccoommee ttaaxx eexxppeennssee // ((bbeenneeffiitt)) rreeccooggnniizzeedd iinn tthhee iinnccoommee ssttaatteemmeenntt
11,,558833
11,,226677
Income tax recognized in the income statement
of UBS Americas Inc., were partly offset by a net benefit of
USD 208 million in respect of the remeasurement of DTAs. This
Income tax expenses of USD 1,583 million were recognized for
net benefit included net upward remeasurements of DTAs of
the Group in 2020, representing an effective tax rate of 19.4%.
USD 146 million for certain entities, primarily in connection with
This included Swiss tax expenses of USD 598 million and non-
our business planning process, and USD 62 million in respect of
Swiss tax expenses of USD 985 million.
additional DTA recognition that resulted from the contribution
The Swiss tax expenses included current tax expenses of
of real estate assets by UBS AG to UBS Americas Inc. and UBS
USD 482 million related to taxable profits of UBS Switzerland AG
Financial Services Inc. in 2020. This allowed the full recognition
and other Swiss entities. They also included deferred tax
of DTAs in respect of the associated historic real estate costs that
expenses of USD 116 million, which primarily reflect the
were previously capitalized for US tax purposes under the
amortization of deferred tax assets (DTAs) previously recognized
elections that were made in the fourth quarter of 2018.
in relation to deductible temporary differences.
The effective tax rate for 2020 of 19.4% is lower than the
The non-Swiss tax expenses included current tax expenses of
Group’s normal tax rate of around 25%, mainly as a result of
USD 749 million related to taxable profits earned by non-Swiss
the aforementioned deferred tax benefit of USD 208 million in
subsidiaries and branches, and net deferred tax expenses of
respect of the remeasurement of DTAs and also because no net
USD 236 million. Expenses of USD 444 million, primarily relating
tax expense was recognized in respect of the pre-tax gain of
to the amortization of DTAs previously recognized in relation to
USD 631 million in relation to the sale of a majority stake in
tax losses carried forward and deductible temporary differences
Fondcenter AG.
USD million
Operating profit / (loss) before tax
of which: Swiss
of which: non-Swiss
Income taxes at Swiss tax rate of 19.5% for 2020, 20.5% for 2019 and 21% for 2018
Increase / (decrease) resulting from:
Non-Swiss tax rates differing from Swiss tax rate
Tax effects of losses not recognized
Previously unrecognized tax losses now utilized
Non-taxable and lower-taxed income
Non-deductible expenses and additional taxable income
Adjustments related to prior years – current tax
Adjustments related to prior years – deferred tax
Change in deferred tax recognition
Adjustments to deferred tax balances arising from changes in tax rates
Other items
IInnccoommee ttaaxx eexxppeennssee // ((bbeenneeffiitt))
88,,115555
33,,440033
44,,775522
11,,559900
111100
114444
((221122))
((339944))
338855
((6677))
1122
((338811))
223344
116611
11,,558833
5,577
2,571
3,006
1,143
82
131
(265)
(351)
732
(5)
(6)
(294)
(9)
107
1,267
5,991
1,843
4,148
1,258
55
223
(25)
(430)
905
114
26
(795)
0
137
1,468
For the year ended
3311..1122..2200
31.12.19
31.12.18
The components of operating profit before tax, and the differences between income tax expense reflected in the financial
statements and the amounts calculated at the Swiss tax rate, are provided in the table on the previous page and explained below.
Note 8 Income taxes (continued)
Component
Description
Non-Swiss tax rates
differing from Swiss tax
rate
To the extent that Group profits or losses arise outside Switzerland, the applicable local tax rate may differ from the Swiss tax
rate. This item reflects, for such profits, an adjustment from the tax expense that would arise at the Swiss tax rate to the tax
expense that would arise at the applicable local tax rate. Similarly, it reflects, for such losses, an adjustment from the tax
benefit that would arise at the Swiss tax rate to the tax benefit that would arise at the applicable local tax rate.
Tax effects of losses not
recognized
This item relates to tax losses of entities arising in the year that are not recognized as DTAs and where no tax benefit arises in
relation to those losses. Therefore, the tax benefit calculated by applying the local tax rate to those losses as described above
is reversed.
Previously unrecognized
tax losses now utilized
This item relates to taxable profits of the year that are offset by tax losses of previous years for which no DTAs were previously
recorded. Consequently, no current tax or deferred tax expense arises in relation to those taxable profits and the tax expense
calculated by applying the local tax rate on those profits is reversed.
Non-taxable and lower-
taxed income
This item relates to tax deductions for the year in respect of permanent differences. These include deductions in respect of
profits that are either not taxable or are taxable at a lower rate of tax than the local tax rate. They also include deductions
made for tax purposes, which are not reflected in the accounts.
Non-deductible expenses
and additional taxable
income
This item relates to additional taxable income for the year in respect of permanent differences. These include income that is
recognized for tax purposes by an entity but is not included in its profit that is reported in the financial statements, as well as
expenses for the year that are non-deductible (e.g., client entertainment costs are not deductible in certain locations).
Adjustments related to
prior years – current tax
This item relates to adjustments to current tax expense for prior years (e.g., if the tax payable for a year is agreed with the tax
authorities in an amount that differs from the amount previously reflected in the financial statements).
Adjustments related to
prior years – deferred tax
This item relates to adjustments to deferred tax positions recognized in prior years (e.g., if a tax loss for a year is fully
recognized and the amount of the tax loss agreed with the tax authorities is expected to differ from the amount previously
recognized as DTAs in the accounts).
Change in deferred tax
recognition
This item relates to changes in DTAs, including changes in DTAs previously recognized resulting from reassessments of
expected future taxable profits. It also includes changes in temporary differences in the year, for which deferred tax is not
recognized.
Adjustments to deferred
tax balances arising from
changes in tax rates
This item relates to remeasurements of DTAs and liabilities recognized due to changes in tax rates. These have the effect of
changing the future tax saving that is expected from tax losses or deductible tax differences and therefore the amount of
DTAs recognized or, alternatively, changing the tax cost of additional taxable income from taxable temporary differences and
therefore the deferred tax liability.
For the year ended
3311..1122..2200
31.12.19
31.12.18
Other items
Other items include other differences between profits or losses at the local tax rate and the actual local tax expense or
benefit, including movements in provisions for uncertain positions in relation to the current year and other items.
Income tax recognized directly in equity
A net tax expense of USD 237 million was recognized in Other
comprehensive income (2019: net expense of USD 326 million)
and a net tax benefit of USD 18 million recognized in Share
premium (2019: benefit of USD 11 million).
312
313
313
Financial statements Consolidated financial statements
Note 8 Income taxes (continued)
Deferred tax assets and liabilities
The Group has gross DTAs, valuation allowances and recognized
DTAs related to tax
loss carry-forwards and deductible
temporary differences, and also deferred tax liabilities in respect
of taxable temporary differences, as shown in the table below.
The valuation allowances reflect DTAs that were not recognized
because, as of the last remeasurement period, management did
not consider it probable that there would be sufficient future
taxable profits available to utilize the related tax loss carry-
forwards and deductible temporary differences.
Of the recognized DTAs as of 31 December 2020, USD 8.8
billion related to the US and USD 0.4 billion related to other
locations (as of 31 December 2019, USD 9.3 billion related to
the US and USD 0.2 billion related to other locations).
The recognition of DTAs is supported by forecasts of taxable
profits for the entities concerned. In addition, tax planning
opportunities are available that would result in additional future
taxable income and these would be utilized, if necessary.
As of 31 December 2020, the Group has recognized DTAs of
USD 138 million (31 December 2019: USD 75 million) in respect
of entities that incurred losses in either the current or preceding
year.
in
recognized
liabilities are
tax
respect of
Deferred
investments
in subsidiaries, branches and associates, and
interests in joint arrangements, except to the extent that the
Group can control the timing of the reversal of the associated
taxable temporary difference and it is probable that such will not
reverse in the foreseeable future. However, as of 31 December
2020, this exception was not considered to apply to any taxable
temporary differences.
USD million
Deferred tax assets2
Tax loss carry-forwards
Temporary differences
of which: related to real estate costs capitalized for US tax
purposes
of which: related to compensation and benefits
of which: related to trading assets
of which: other
TToottaall ddeeffeerrrreedd ttaaxx aasssseettss
3311..1122..2200
31.12.191
VVaalluuaattiioonn
aalllloowwaannccee
((88,,771155))
((556655))
00
((117733))
((66))
((338866))
((99,,228800))
RReeccooggnniizzeedd
55,,339933
33,,881199
22,,226688
995555
1166
558800
99,,221122
Gross
14,826
4,197
2,219
1,091
99
788
19,022
Valuation
allowance
(8,861)
(613)
0
(179)
(5)
(429)
(9,474)
GGrroossss
1144,,110088
44,,338844
22,,226688
11,,112288
2233
996666
1188,,449922
Deferred tax liabilities
Goodwill and intangible assets
Cash flow hedges
Other
TToottaall ddeeffeerrrreedd ttaaxx lliiaabbiilliittiieess
11 Comparative-period information has been restated. Refer to Note 1b for more information. 22 Less deferred tax liabilities as applicable.
3311
442255
110088
556644
Recognized
5,965
3,583
2,219
912
93
359
9,548
29
156
126
311
losses
federal
incurred prior
In general, US
to
tax
31 December 2017 can be carried forward for 20 years.
However, US federal tax losses incurred after 31 December 2017
and UK tax losses can be carried forward indefinitely, although
the utilization of such losses is limited to 80% of the entity’s
future year taxable profits for the US and generally to 25%
thereof for the UK. The amounts of US tax loss carry-forwards
that are included in the table below are based on their amount
for federal tax purposes rather than for state and local tax
purposes.
3311..1122..2200
114466
663388
1133,,225577
33,,885588
1177,,222277
3355,,112277
31.12.19
13
609
14,712
4,030
18,364
37,728
As of 31 December 2020, USD 16.3 billion of the unrecognized
tax losses carried forward related to the US (these primarily
related to UBS AG’s US branch), USD 13.8 billion related to the
UK and USD 5.0 billion related to other locations (as of
31 December 2019, USD 17.8 billion related to the US,
USD 14.9 billion related to the UK and USD 5.0 billion related to
other locations).
Unrecognized tax loss carry-forwards
USD million
Within 1 year
From 2 to 5 years
From 6 to 10 years
From 11 to 20 years
No expiry
TToottaall
314
314
Consolidated financial statements
Note 8 Income taxes (continued)
Deferred tax assets and liabilities
profits for the entities concerned. In addition, tax planning
opportunities are available that would result in additional future
The Group has gross DTAs, valuation allowances and recognized
taxable income and these would be utilized, if necessary.
DTAs related to tax
loss carry-forwards and deductible
As of 31 December 2020, the Group has recognized DTAs of
temporary differences, and also deferred tax liabilities in respect
USD 138 million (31 December 2019: USD 75 million) in respect
of taxable temporary differences, as shown in the table below.
of entities that incurred losses in either the current or preceding
The valuation allowances reflect DTAs that were not recognized
year.
because, as of the last remeasurement period, management did
Deferred
tax
liabilities are
recognized
in
respect of
not consider it probable that there would be sufficient future
investments
in subsidiaries, branches and associates, and
taxable profits available to utilize the related tax loss carry-
interests in joint arrangements, except to the extent that the
forwards and deductible temporary differences.
Group can control the timing of the reversal of the associated
Of the recognized DTAs as of 31 December 2020, USD 8.8
taxable temporary difference and it is probable that such will not
billion related to the US and USD 0.4 billion related to other
reverse in the foreseeable future. However, as of 31 December
locations (as of 31 December 2019, USD 9.3 billion related to
2020, this exception was not considered to apply to any taxable
the US and USD 0.2 billion related to other locations).
temporary differences.
The recognition of DTAs is supported by forecasts of taxable
of which: related to real estate costs capitalized for US tax
purposes
of which: related to compensation and benefits
of which: related to trading assets
USD million
Deferred tax assets2
Tax loss carry-forwards
Temporary differences
of which: other
TToottaall ddeeffeerrrreedd ttaaxx aasssseettss
Deferred tax liabilities
Goodwill and intangible assets
Cash flow hedges
Other
TToottaall ddeeffeerrrreedd ttaaxx lliiaabbiilliittiieess
3311..1122..2200
31.12.191
RReeccooggnniizzeedd
Recognized
GGrroossss
1144,,110088
44,,338844
22,,226688
11,,112288
2233
996666
1188,,449922
VVaalluuaattiioonn
aalllloowwaannccee
((88,,771155))
((556655))
00
((117733))
((66))
((338866))
((99,,228800))
Gross
14,826
4,197
2,219
1,091
99
788
19,022
Valuation
allowance
(8,861)
(613)
0
(179)
(5)
(429)
(9,474)
55,,339933
33,,881199
22,,226688
995555
1166
558800
99,,221122
3311
442255
110088
556644
5,965
3,583
2,219
912
93
359
9,548
29
156
126
311
11 Comparative-period information has been restated. Refer to Note 1b for more information. 22 Less deferred tax liabilities as applicable.
As of 31 December 2020, USD 16.3 billion of the unrecognized
In general, US
federal
tax
losses
incurred prior
to
tax losses carried forward related to the US (these primarily
31 December 2017 can be carried forward for 20 years.
related to UBS AG’s US branch), USD 13.8 billion related to the
However, US federal tax losses incurred after 31 December 2017
UK and USD 5.0 billion related to other locations (as of
and UK tax losses can be carried forward indefinitely, although
31 December 2019, USD 17.8 billion related to the US,
the utilization of such losses is limited to 80% of the entity’s
USD 14.9 billion related to the UK and USD 5.0 billion related to
future year taxable profits for the US and generally to 25%
3311..1122..2200
31.12.19
114466
663388
1133,,225577
33,,885588
1177,,222277
3355,,112277
13
609
14,712
4,030
18,364
37,728
Unrecognized tax loss carry-forwards
other locations).
USD million
Within 1 year
From 2 to 5 years
From 6 to 10 years
From 11 to 20 years
No expiry
TToottaall
314
Balance sheet notes
Note 9 Financial assets at amortized cost and other positions in scope of expected credit loss measurement
The tables on the following pages provide information about
financial instruments and certain other credit lines that are
subject to expected credit loss (ECL) requirements. UBS’s ECL
disclosure segments or “ECL segments” are aggregated
portfolios based on shared risk characteristics and on the same
or similar rating methods applied. The key segments are
presented in the table below.
› Refer to Note 20 for more information about expected credit
loss measurement
Segment
Segment description
Description of credit risk sensitivity
Business division / Group Functions
Private clients with
mortgages
Lending to private clients secured by
owner-occupied real estate and
personal account overdrafts of those
clients
Sensitive to the interest rate environment,
unemployment levels, real estate collateral
values and other regional aspects
– Personal & Corporate Banking
– Global Wealth Management
Real estate financing
Rental or income-producing real estate
financing to private and corporate
clients secured by real estate
Sensitive to GDP developments, the
interest rate environment, real estate
collateral values and other regional
aspects
– Personal & Corporate Banking
– Global Wealth Management
– Investment Bank
Large corporate clients
Lending to large corporate and multi-
national clients
SME clients
Lending to small and medium-sized
corporate clients
Lombard
Loans secured by pledges of marketable
securities, guarantees and other forms
of collateral
Credit cards
Credit card solutions in Switzerland and
the US
Commodity trade
finance
Working capital financing of commodity
traders, generally extended on a self-
liquidating transactional basis
Sensitive to GDP developments,
unemployment levels, seasonality,
business cycles and collateral values
(diverse collateral, including real estate
and other collateral types)
Sensitive to GDP developments,
unemployment levels, the interest rate
environment and, to some extent,
seasonality, business cycles and collateral
values (diverse collateral, including real
estate and other collateral types)
– Personal & Corporate Banking
– Investment Bank
– Personal & Corporate Banking
Sensitive to the market (e.g., changes in
collateral values)
– Global Wealth Management
Sensitive to unemployment levels
– Personal & Corporate Banking
– Global Wealth Management
– Personal & Corporate Banking
Sensitive primarily to the strength of
individual transaction structures and
collateral values (price volatility of
commodities), as the primary source for
debt service is directly linked to the
shipments financed
thereof for the UK. The amounts of US tax loss carry-forwards
that are included in the table below are based on their amount
for federal tax purposes rather than for state and local tax
purposes.
Financial intermediaries
and hedge funds
Lending to financial institutions and
pension funds, including exposures to
broker-dealers and clearing houses
Sensitive to unemployment levels, the
quality and volatility index changes, equity
market and GDP developments,
regulatory changes and political risk
– Personal & Corporate Banking
– Investment Bank
› Refer to Note 20f for more details regarding sensitivity
315
315
Financial statements Consolidated financial statements
Note 9 Financial assets at amortized cost and other positions in scope of expected credit loss measurement (continued)
The tables below and on the following pages provide ECL exposure and ECL allowance and provision information about financial
instruments and certain non-financial instruments that are subject to ECL.
USD million
3311..1122..2200
FFiinnaanncciiaall iinnssttrruummeennttss mmeeaassuurreedd aatt aammoorrttiizzeedd ccoosstt
Cash and balances at central banks
Loans and advances to banks
Receivables from securities financing transactions
Cash collateral receivables on derivative instruments
Loans and advances to customers
of which: Private clients with mortgages
of which: Real estate financing
of which: Large corporate clients
of which: SME clients
of which: Lombard
of which: Credit cards
of which: Commodity trade finance
Other financial assets measured at amortized cost
of which: Loans to financial advisors
TToottaall ffiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt aammoorrttiizzeedd ccoosstt
FFiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt ffaaiirr vvaalluuee tthhrroouugghh ootthheerr ccoommpprreehheennssiivvee iinnccoommee
TToottaall oonn--bbaallaannccee sshheeeett ffiinnaanncciiaall aasssseettss iinn ssccooppee ooff EECCLL rreeqquuiirreemmeennttss
OOffff--bbaallaannccee sshheeeett ((iinn ssccooppee ooff EECCLL))
Guarantees
of which: Large corporate clients
of which: SME clients
of which: Financial intermediaries and hedge funds
of which: Lombard
of which: Commodity trade finance
Irrevocable loan commitments
of which: Large corporate clients
Forward starting reverse repurchase and securities borrowing agreements
Committed unconditionally revocable credit lines
of which: Real estate financing
of which: Large corporate clients
of which: SME clients
of which: Lombard
of which: Credit cards
of which: Commodity trade finance
CCaarrrryyiinngg aammoouunntt11
SSttaaggee 11
TToottaall
158,231
158,231
15,260
15,444
74,210
74,210
32,737
32,737
379,528
356,948
148,175 138,769
43,429 37,568
15,161 12,658
14,872 11,990
133,850 133,795
1,198
3,214
26,377
1,982
666633,,776633
88,,225588
667722,,002211
SSttaaggee 22
0
184
0
0
20,341
8,448
5,838
2,029
2,254
0
330
43
348
137
2200,,887733
00
2200,,887733
1,558
3,269
27,194
2,569
668877,,334455
88,,225588
669955,,660033
TToottaall eexxppoossuurree
SSttaaggee 11
TToottaall
14,687
17,081
2,048
3,710
936
1,310
7,413
7,637
633
641
1,416
1,441
41,372
36,894
24,209 20,195
3,247
35,233
5,811
2,783
4,596
9,671
8,220
242
3,277
9933,,333377
SSttaaggee 22
2,225
1,549
326
224
0
25
4,374
3,950
0
4,792
517
2,099
1,169
0
430
0
5
1111,,339966
3,247
40,134
6,328
4,909
5,827
9,671
8,661
242
3,282
110055,,111166
SSttaaggee 33
0
0
0
0
2,240
959
23
474
628
55
30
12
469
450
22,,770099
00
22,,770099
SSttaaggee 33
170
113
48
0
8
0
104
64
0
108
0
27
63
0
11
0
0
338822
TToottaall
0
(16)
(2)
0
(1,060)
(166)
(63)
(279)
(310)
(36)
(38)
(106)
(133)
(108)
((11,,221111))
00
((11,,221111))
TToottaall
(63)
(20)
(13)
(17)
(2)
(2)
(142)
(121)
0
(50)
(12)
(9)
(16)
0
(8)
0
(2)
((225577))
((11,,446688))
EECCLL aalllloowwaanncceess
SSttaaggee 11
0
(9)
(2)
0
(142)
(35)
(15)
(27)
(19)
(5)
(11)
(5)
(34)
(27)
((118877))
00
((118877))
SSttaaggee 22
0
(5)
0
0
(215)
(93)
(44)
(40)
(23)
0
(11)
0
(9)
(5)
((222299))
00
((222299))
EECCLL pprroovviissiioonnss
SSttaaggee 11
(14)
(4)
(1)
(7)
0
(1)
(74)
(63)
0
(29)
(5)
(2)
(12)
(1)
(6)
0
(2)
((111199))
((330066))
SSttaaggee 22
(15)
(5)
(1)
(9)
0
0
(68)
(58)
0
(21)
(7)
(7)
(4)
0
(2)
0
0
((110044))
((333333))
SSttaaggee 33
0
(1)
0
0
(703)
(39)
(4)
(212)
(268)
(31)
(16)
(101)
(90)
(76)
((779955))
00
((779955))
SSttaaggee 33
(34)
(12)
(11)
0
(2)
0
0
0
0
0
0
0
0
0
0
0
0
((3344))
((882299))
Irrevocable committed prolongation of existing loans
TToottaall ooffff--bbaallaannccee sshheeeett ffiinnaanncciiaall iinnssttrruummeennttss aanndd ootthheerr ccrreeddiitt lliinneess
TToottaall aalllloowwaanncceess aanndd pprroovviissiioonnss
11 The carrying amount of financial assets measured at amortized cost represents the total gross exposure net of the respective ECL allowances.
316
316
The tables below and on the following pages provide ECL exposure and ECL allowance and provision information about financial
instruments and certain non-financial instruments that are subject to ECL.
FFiinnaanncciiaall iinnssttrruummeennttss mmeeaassuurreedd aatt aammoorrttiizzeedd ccoosstt
TToottaall
SSttaaggee 11
SSttaaggee 22
SSttaaggee 33
SSttaaggee 11
SSttaaggee 22
SSttaaggee 33
CCaarrrryyiinngg aammoouunntt11
EECCLL aalllloowwaanncceess
3311..1122..2200
Consolidated financial statements
USD million
Cash and balances at central banks
Loans and advances to banks
Receivables from securities financing transactions
Cash collateral receivables on derivative instruments
Loans and advances to customers
of which: Private clients with mortgages
of which: Real estate financing
of which: Large corporate clients
of which: SME clients
of which: Lombard
of which: Credit cards
of which: Commodity trade finance
Other financial assets measured at amortized cost
of which: Loans to financial advisors
TToottaall ffiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt aammoorrttiizzeedd ccoosstt
OOffff--bbaallaannccee sshheeeett ((iinn ssccooppee ooff EECCLL))
Guarantees
of which: Large corporate clients
of which: SME clients
of which: Lombard
of which: Commodity trade finance
Irrevocable loan commitments
of which: Large corporate clients
of which: Financial intermediaries and hedge funds
of which: Real estate financing
of which: Large corporate clients
of which: SME clients
of which: Lombard
of which: Credit cards
of which: Commodity trade finance
Irrevocable committed prolongation of existing loans
TToottaall aalllloowwaanncceess aanndd pprroovviissiioonnss
Forward starting reverse repurchase and securities borrowing agreements
Committed unconditionally revocable credit lines
379,528
356,948
20,341
2,240
(1,060)
(142)
(215)
158,231
158,231
15,444
74,210
32,737
15,260
74,210
32,737
148,175 138,769
43,429 37,568
15,161 12,658
14,872 11,990
133,850 133,795
1,558
3,269
1,198
3,214
27,194
26,377
2,569
1,982
17,081
14,687
3,710
1,310
7,637
641
2,048
936
7,413
633
1,441
1,416
41,372
36,894
24,209 20,195
3,247
3,247
40,134
35,233
6,328
4,909
5,827
9,671
8,661
242
3,282
5,811
2,783
4,596
9,671
8,220
242
3,277
9933,,333377
184
0
0
0
8,448
5,838
2,029
2,254
0
330
43
348
137
2,225
1,549
326
224
0
25
4,374
3,950
0
4,792
517
2,099
1,169
0
430
0
5
0
0
0
0
959
23
474
628
55
30
12
469
450
170
113
48
0
8
0
104
64
0
108
0
27
63
0
11
0
0
TToottaall
0
(16)
(2)
0
(166)
(63)
(279)
(310)
(36)
(38)
(106)
(133)
(108)
TToottaall
(63)
(20)
(13)
(17)
(2)
(2)
(142)
(121)
0
(50)
(12)
(9)
(16)
0
(8)
0
(2)
0
(9)
(2)
0
(35)
(15)
(27)
(19)
(5)
(11)
(5)
(34)
(27)
((118877))
00
((118877))
(4)
(1)
(7)
0
(1)
(74)
(63)
0
(29)
(5)
(2)
(12)
(1)
(6)
0
(2)
0
(5)
0
0
(93)
(44)
(40)
(23)
0
(11)
0
(9)
(5)
((222299))
00
((222299))
(5)
(1)
(9)
0
0
(68)
(58)
0
(21)
(7)
(7)
(4)
0
(2)
0
0
0
(1)
0
0
(703)
(39)
(4)
(212)
(268)
(31)
(16)
(101)
(90)
(76)
((779955))
00
((779955))
(34)
(12)
(11)
0
(2)
0
0
0
0
0
0
0
0
0
0
0
0
TToottaall eexxppoossuurree
EECCLL pprroovviissiioonnss
TToottaall
SSttaaggee 11
SSttaaggee 22
SSttaaggee 33
SSttaaggee 11
SSttaaggee 22
SSttaaggee 33
(14)
(15)
FFiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt ffaaiirr vvaalluuee tthhrroouugghh ootthheerr ccoommpprreehheennssiivvee iinnccoommee
88,,225588
88,,225588
00
00
00
TToottaall oonn--bbaallaannccee sshheeeett ffiinnaanncciiaall aasssseettss iinn ssccooppee ooff EECCLL rreeqquuiirreemmeennttss
669955,,660033
667722,,002211
2200,,887733
22,,770099
((11,,221111))
668877,,334455
666633,,776633
2200,,887733
22,,770099
((11,,221111))
TToottaall ooffff--bbaallaannccee sshheeeett ffiinnaanncciiaall iinnssttrruummeennttss aanndd ootthheerr ccrreeddiitt lliinneess
110055,,111166
1111,,339966
338822
((225577))
((11,,446688))
((111199))
((330066))
((110044))
((333333))
((3344))
((882299))
11 The carrying amount of financial assets measured at amortized cost represents the total gross exposure net of the respective ECL allowances.
Note 9 Financial assets at amortized cost and other positions in scope of expected credit loss measurement (continued)
Note 9 Financial assets at amortized cost and other positions in scope of expected credit loss measurement (continued)
USD million
31.12.19
FFiinnaanncciiaall iinnssttrruummeennttss mmeeaassuurreedd aatt aammoorrttiizzeedd ccoosstt
Cash and balances at central banks
Loans and advances to banks
Receivables from securities financing transactions
Cash collateral receivables on derivative instruments
Loans and advances to customers
of which: Private clients with mortgages
of which: Real estate financing
of which: Large corporate clients
of which: SME clients
of which: Lombard
of which: Credit cards
of which: Commodity trade finance
Other financial assets measured at amortized cost
of which: Loans to financial advisors
TToottaall ffiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt aammoorrttiizzeedd ccoosstt
FFiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt ffaaiirr vvaalluuee tthhrroouugghh ootthheerr ccoommpprreehheennssiivvee iinnccoommee
TToottaall oonn--bbaallaannccee sshheeeett ffiinnaanncciiaall aasssseettss iinn ssccooppee ooff EECCLL rreeqquuiirreemmeennttss
OOffff--bbaallaannccee sshheeeett ((iinn ssccooppee ooff EECCLL))
Guarantees
of which: Large corporate clients
of which: SME clients
of which: Financial intermediaries and hedge funds
of which: Lombard
of which: Commodity trade finance
Irrevocable loan commitments
of which: Large corporate clients
Forward starting reverse repurchase and securities borrowing agreements
Committed unconditionally revocable credit lines
of which: Real estate financing
of which: Large corporate clients
of which: SME clients
of which: Lombard
of which: Credit cards
of which: Commodity trade finance
Carrying amount1
Stage 1
Total
107,068
107,068
12,367
12,447
84,245
84,245
23,289
23,289
326,786
309,499
132,646 124,063
38,481 32,932
9,184
9,703
11,786
9,817
112,893 112,796
1,314
2,826
21,953
2,341
555588,,442200
66,,334455
556644,,776655
Stage 2
0
80
0
0
15,538
7,624
5,532
424
1,449
0
325
8
451
334
1166,,006699
00
1166,,006699
1,661
2,844
22,980
2,877
557766,,881155
66,,334455
558833,,115599
Total exposure
Stage 1
Total
17,757
18,142
3,461
3,687
1,055
1,180
7,950
7,966
622
622
2,320
2,334
27,547
27,078
18,735 18,349
1,657
33,848
4,934
4,188
4,589
7,975
7,535
344
3,285
8833,,662266
1,657
35,092
5,242
4,274
4,787
7,976
7,890
344
3,289
8855,,772288
Stage 2
304
203
67
16
0
13
419
359
0
1,197
307
69
171
0
355
0
0
11,,992200
Stage 3
0
0
0
0
1,749
959
17
94
521
98
22
10
576
202
22,,332266
00
22,,332266
Stage 3
82
24
58
0
0
0
50
27
0
46
0
17
27
1
0
0
4
118822
Total
0
(6)
(2)
0
(764)
(110)
(43)
(117)
(303)
(22)
(35)
(81)
(143)
(109)
((991155))
00
((991155))
Total
(42)
(10)
(24)
(5)
(1)
(1)
(35)
(27)
0
(34)
(16)
(1)
(9)
0
(6)
0
(3)
((111144))
((11,,002299))
ECL allowances
Stage 1
0
(4)
(2)
0
(82)
(15)
(5)
(15)
(17)
(4)
(8)
(5)
(35)
(29)
((112244))
00
((112244))
Stage 2
0
(1)
0
0
(123)
(55)
(34)
(4)
(15)
0
(14)
0
(13)
(11)
((113377))
00
((113377))
ECL provisions
Stage 1
(8)
(1)
0
(4)
0
(1)
(30)
(24)
0
(17)
(3)
(1)
(8)
0
(4)
0
(3)
((5588))
((118811))
Stage 2
(1)
0
0
0
0
0
(5)
(3)
0
(17)
(13)
0
(1)
0
(2)
0
0
((2233))
((116600))
Stage 3
0
(1)
0
0
(559)
(41)
(4)
(98)
(271)
(18)
(13)
(77)
(95)
(70)
((665555))
00
((665555))
Stage 3
(33)
(9)
(23)
0
(1)
0
0
0
0
0
0
0
0
0
0
0
0
((3333))
((668888))
Irrevocable committed prolongation of existing loans
TToottaall ooffff--bbaallaannccee sshheeeett ffiinnaanncciiaall iinnssttrruummeennttss aanndd ootthheerr ccrreeddiitt lliinneess
TToottaall aalllloowwaanncceess aanndd pprroovviissiioonnss
11 The carrying amount of financial assets measured at amortized cost represents the total gross exposure net of the respective ECL allowances.
316
317
317
Financial statements Consolidated financial statements
Note 9 Financial assets at amortized cost and other positions in scope of expected credit loss measurement (continued)
Coverage ratios are calculated for the core loan portfolio by
taking ECL allowances and provisions divided by the gross
carrying amount of the exposures. Core loan exposure is defined
as the sum of Loans and advances to customers and Loans to
financial advisors.
residential mortgage loans would continue to be fully covered
by real estate collateral even if the value of that collateral
decreased by 20%, for a 30% reduction, more than 98%
would be covered;
– the amount of unsecured retail lending (including credit
These ratios are influenced by the following key factors:
cards) is insignificant;
– lending in Switzerland includes government backed COVID-
19 loans;
– Lombard
loans are generally secured with marketable
securities in portfolios that are, as a rule, highly diversified,
with strict lending policies that are intended to ensure that
credit risk is minimal under most circumstances;
– mortgage loans to private clients and real estate financing are
controlled by conservative eligibility criteria, including low
loan-to-value ratios and strong debt service capabilities; for
example, more than 99% of the aggregated amount of Swiss
– contractual maturities in the loan portfolio, which are a factor
in the calculation of ECLs, are generally short, with a large
part of the loan portfolio having contractual maturities of 12
months or less; and
– write-offs of ECL allowances against the gross loan balances
when all or part of a financial asset is deemed uncollectible or
forgiven, reduces the coverage ratios.
Coverage ratios for core loan portfolio
3311..1122..2200
GGrroossss ccaarrrryyiinngg aammoouunntt ((UUSSDD mmiilllliioonn))
TToottaall
148,341
43,492
15,440
15,183
133,886
1,596
3,375
19,274
2,677
338833,,226666
SSttaaggee 11
138,803
37,583
12,684
12,010
133,800
1,209
3,219
17,781
2,009
335599,,009999
SSttaaggee 22
8,540
5,883
2,069
2,277
0
342
43
1,402
142
2200,,669977
SSttaaggee 33
998
27
686
896
86
46
113
91
526
33,,447700
GGrroossss eexxppoossuurree ((UUSSDD mmiilllliioonn))
TToottaall
6,285
7,056
32,828
9,121
14,178
8,661
1,683
7,690
14,366
SSttaaggee 11
6,083
6,576
25,026
7,239
14,170
8,220
1,658
7,242
13,876
9900,,009900
SSttaaggee 22
198
481
7,598
1,734
0
430
25
448
482
1111,,339966
SSttaaggee 33
3
0
205
148
8
11
0
0
8
EECCLL ccoovveerraaggee ((bbppss))
SSttaaggee 11
2
4
21
16
0
91
16
14
135
55
SSttaaggee 22
108
75
192
101
0
333
2
25
351
110066
EECCLL ccoovveerraaggee ((bbppss))
SSttaaggee 11
6
9
27
19
1
8
8
13
7
SSttaaggee 22
16
185
92
63
0
44
15
248
11
TToottaall
11
15
181
204
3
240
315
31
404
3300
TToottaall
7
21
46
40
2
9
10
26
13
SSttaaggee 33
390
1,414
3,089
2,991
3,592
3,488
8,939
3,563
1,446
22,,224477
SSttaaggee 33
197
0
565
779
1,941
0
8,279
166
12,414
TToottaall22
110011,,886699
11 Includes Loans and advances to customers of USD 380,589 million and Loans to financial advisors of USD 2,677 million which are presented on the balance sheet line Other assets measured at amortized cost.
22 Excludes Forward starting reverse repurchase and securities borrowing agreements.
889944
338822
1133
9911
2255
OOnn--bbaallaannccee sshheeeett
Private clients with mortgages
Real estate financing
Large corporate clients
SME clients
Lombard
Credit cards
Commodity trade finance
Other loans and advances to customers
Loans to financial advisors
TToottaall11
OOffff--bbaallaannccee sshheeeett
Private clients with mortgages
Real estate financing
Large corporate clients
SME clients
Lombard
Credit cards
Commodity trade finance
Financial intermediaries and hedge funds
Other off-balance sheet commitments
318
318
Consolidated financial statements
Note 9 Financial assets at amortized cost and other positions in scope of expected credit loss measurement (continued)
Note 9 Financial assets at amortized cost and other positions in scope of expected credit loss measurement (continued)
Coverage ratios are calculated for the core loan portfolio by
residential mortgage loans would continue to be fully covered
Coverage ratios for core loan portfolio
31.12.19
Gross carrying amount (USD million)
Total
132,756
38,524
9,819
12,089
112,915
1,696
2,925
16,824
2,987
333300,,553366
Stage 1
124,077
32,937
9,199
9,834
112,799
1,322
2,831
16,582
2,370
331111,,995511
Stage 2
7,679
5,567
429
1,464
0
339
8
176
344
1166,,000055
Stage 3
1,000
21
192
791
116
35
87
67
272
22,,558800
Gross exposure (USD million)
Total
5,520
6,046
26,706
6,782
9,902
7,890
2,678
9,676
8,872
Stage 1
5,466
5,715
26,009
6,407
9,895
7,535
2,664
9,651
8,626
Stage 2
51
326
630
273
0
355
13
25
246
Stage 3
2
4
67
101
7
0
0
0
0
ECL coverage (bps)
Stage 1
1
2
16
18
0
60
17
9
122
44
Stage 2
72
62
100
104
0
404
3
15
305
8833
Total
8
11
119
251
2
205
278
31
366
2266
Stage 3
406
1,765
5,088
3,420
1,566
3,718
8,844
5,750
2,570
22,,443366
ECL coverage (bps)
Stage 1
6
9
10
15
0
5
5
5
4
Stage 2
100
390
59
115
0
52
9
71
34
Total
7
29
14
53
1
8
5
5
5
Stage 3
245
0
1,319
2,265
1,403
0
2,713
83
22,592
Other off-balance sheet commitments
TToottaall22
8844,,007700
11 Includes Loans and advances to customers of USD 327,550 million and Loans to financial advisors of USD 2,987 million which are presented on the balance sheet line Other assets measured at amortized cost.
22 Excludes Forward starting reverse repurchase and securities borrowing agreements.
8811,,996699
11,,992200
11,,882222
112200
118822
1144
77
taking ECL allowances and provisions divided by the gross
by real estate collateral even if the value of that collateral
carrying amount of the exposures. Core loan exposure is defined
decreased by 20%, for a 30% reduction, more than 98%
as the sum of Loans and advances to customers and Loans to
would be covered;
financial advisors.
– the amount of unsecured retail lending (including credit
These ratios are influenced by the following key factors:
cards) is insignificant;
– lending in Switzerland includes government backed COVID-
– contractual maturities in the loan portfolio, which are a factor
19 loans;
in the calculation of ECLs, are generally short, with a large
– Lombard
loans are generally secured with marketable
part of the loan portfolio having contractual maturities of 12
securities in portfolios that are, as a rule, highly diversified,
months or less; and
with strict lending policies that are intended to ensure that
– write-offs of ECL allowances against the gross loan balances
OOnn--bbaallaannccee sshheeeett
Private clients with mortgages
Real estate financing
Large corporate clients
SME clients
Lombard
Credit cards
Commodity trade finance
Other loans and advances to customers
Loans to financial advisors
credit risk is minimal under most circumstances;
when all or part of a financial asset is deemed uncollectible or
TToottaall11
– mortgage loans to private clients and real estate financing are
forgiven, reduces the coverage ratios.
OOffff--bbaallaannccee sshheeeett
Private clients with mortgages
Real estate financing
Large corporate clients
SME clients
Lombard
Credit cards
Commodity trade finance
Financial intermediaries and hedge funds
controlled by conservative eligibility criteria, including low
loan-to-value ratios and strong debt service capabilities; for
example, more than 99% of the aggregated amount of Swiss
Coverage ratios for core loan portfolio
3311..1122..2200
OOnn--bbaallaannccee sshheeeett
Private clients with mortgages
Real estate financing
Large corporate clients
SME clients
Lombard
Credit cards
Commodity trade finance
Other loans and advances to customers
Loans to financial advisors
TToottaall11
OOffff--bbaallaannccee sshheeeett
Private clients with mortgages
Real estate financing
Large corporate clients
SME clients
Lombard
Credit cards
Commodity trade finance
Financial intermediaries and hedge funds
Other off-balance sheet commitments
TToottaall22
GGrroossss ccaarrrryyiinngg aammoouunntt ((UUSSDD mmiilllliioonn))
EECCLL ccoovveerraaggee ((bbppss))
TToottaall
SSttaaggee 11
SSttaaggee 22
SSttaaggee 33
TToottaall
SSttaaggee 11
SSttaaggee 22
SSttaaggee 33
338833,,226666
335599,,009999
2200,,669977
33,,447700
148,341
138,803
43,492
15,440
15,183
37,583
12,684
12,010
133,886
133,800
1,596
3,375
1,209
3,219
19,274
17,781
2,677
2,009
TToottaall
6,285
7,056
6,083
6,576
32,828
25,026
9,121
7,239
14,178
14,170
8,661
1,683
7,690
8,220
1,658
7,242
14,366
13,876
8,540
5,883
2,069
2,277
0
342
43
1,402
142
198
481
7,598
1,734
0
430
25
448
482
998
27
686
896
86
46
113
91
526
3
0
205
148
8
11
0
0
8
11
15
181
204
3
240
315
31
404
3300
7
21
46
40
2
9
10
26
13
2255
2
4
21
16
0
91
16
14
135
55
6
9
27
19
1
8
8
13
7
1133
108
75
192
101
0
333
2
25
351
110066
16
185
92
63
0
44
15
248
11
9911
390
1,414
3,089
2,991
3,592
3,488
8,939
3,563
1,446
22,,224477
197
0
565
779
1,941
0
8,279
166
12,414
889944
GGrroossss eexxppoossuurree ((UUSSDD mmiilllliioonn))
EECCLL ccoovveerraaggee ((bbppss))
SSttaaggee 11
SSttaaggee 22
SSttaaggee 33
TToottaall
SSttaaggee 11
SSttaaggee 22
SSttaaggee 33
11 Includes Loans and advances to customers of USD 380,589 million and Loans to financial advisors of USD 2,677 million which are presented on the balance sheet line Other assets measured at amortized cost.
22 Excludes Forward starting reverse repurchase and securities borrowing agreements.
110011,,886699
9900,,009900
1111,,339966
338822
318
319
319
Financial statements
Consolidated financial statements
Note 10 Derivative instruments
Overview
Risks of derivative instruments
The derivative financial assets shown on the balance sheet can
be an important component of the Group’s credit exposure,
however, the positive replacement values related to a respective
counterparty are rarely an adequate reflection of the Group’s
credit exposure in its derivatives business with that counterparty.
This is generally the case because, on the one hand, replacement
values can increase over time (potential future exposure), while,
on the other hand, exposure may be mitigated by entering into
master netting agreements and bilateral collateral arrangements.
Both the exposure measures used internally by the Group to
control credit risk and the capital requirements imposed by
regulators reflect these additional factors.
› Refer to Note 22 for more information about derivative financial
assets and liabilities after consideration of netting potential
allowed under enforceable netting arrangements
› Refer to the “Risk management and control” section of this
report for more information about the risks arising from
derivative instruments
Contingent collateral features of derivative liabilities
Certain derivative instruments contain contingent collateral or
termination features triggered upon a downgrade of the
published credit ratings of the Group in the normal course of
business. Based on UBS’s credit ratings as of 31 December 2020,
USD 0.0 billion, USD 0.5 billion and USD 1.1 billion would have
been required for contractual obligations related to OTC
derivatives in the event of a one-notch, two-notch and three-
notch reduction in long-term credit ratings, respectively. In
evaluating UBS’s liquidity requirements, UBS considers additional
collateral or termination payments that would be required in the
event of a reduction in UBS’s long-term credit ratings, and a
corresponding reduction in UBS’s short-term ratings.
the
industry-standard
ISDA. Regulators
Over-the-counter (OTC) derivative contracts are usually traded
under a standardized International Swaps and Derivatives
Association (ISDA) master agreement between UBS and its
counterparties. Terms are negotiated directly with counterparties
settlement
contracts have
and
mechanisms prescribed by
in various
jurisdictions have begun a phased introduction of rules requiring
the payment and collection of initial and variation margin on
certain OTC derivative contracts, which may have a bearing on
their price and other relevant terms. Due to challenges brought
on by COVID-19, the International Organization of Securities
Commissions (IOSCO) has extended the deadline for the
completion of the final phase-in of margin requirements for
non-centrally cleared derivatives, to 1 September 2022.
Other derivative contracts are standardized in terms of their
amounts and settlement dates, and are bought and sold on
regulated exchanges. These are commonly referred to as
exchange-traded derivatives (ETD) contracts. Exchanges offer the
benefits of pricing transparency, standardized daily settlement of
changes in value and, consequently, reduced credit risk.
Most of the Group’s derivative transactions relate to sales and
market-making activity. Sales activities include the structuring
and marketing of derivative products to customers to enable
them to take, transfer, modify or reduce current or expected
risks. Market-making aims to directly support the facilitation and
execution of client activity, and involves quoting bid and offer
prices to other market participants with the intention of
generating revenues based on spread and volume. The Group
also uses various derivative instruments for hedging purposes.
› Refer to Notes 16 and 21 for more information about derivative
instruments
› Refer to Note 25 for more information about derivatives
designated in hedge accounting relationships
320
320
Consolidated financial statements
Note 10 Derivative instruments
Note 10 Derivative instruments (continued)
Overview
Risks of derivative instruments
Derivative instruments
3311..1122..2200
DDeerriivvaattiivvee
ffiinnaanncciiaall
lliiaabbiilliittiieess
4433..99
00..44
3300..99
1122..55
00..00
22..99
22..66
00..33
7700..55
2299..00
3344..44
77..11
4411..22
99..88
1100..99
1111..33
99..11
22..00
00..88
00..77
NNoottiioonnaall
aammoouunnttss
rreellaatteedd ttoo
ddeerriivvaattiivvee
ffiinnaanncciiaall
aasssseettss22
992288..00
1199..88
440077..00
444477..55
5533..66
5577..66
5533..66
11..99
22,,995511..11
777799..11
11,,772277..33
444400..99
444499..66
8899..44
8877..11
227733..11
5577..88
1177..77
2233..55
88..00
NNoottiioonnaall
aammoouunnttss
rreellaatteedd ttoo
ddeerriivvaattiivvee
ffiinnaanncciiaall
lliiaabbiilliittiieess22
888800..44
2211..99
336644..88
446600..55
3333..11
6644..88
6622..33
22..55
22,,882200..44
885533..33
11,,556677..33
339944..77
558811..33
110088..44
114466..22
332266..88
4499..77
1188..00
1177..88
66..33
DDeerriivvaattiivvee
ffiinnaanncciiaall
aasssseettss
5500..99
00..00
4400..88
1100..11
00..00
22..44
22..22
00..11
6688..77
2277..33
3344..33
77..11
3344..88
66..44
77..00
1100..77
1100..77
22..22
00..55
11..00
OOtthheerr
nnoottiioonnaall
aammoouunnttss22,,33
1111,,229911..55
22,,660022..55
88,,110055..22
448800..66
110033..33
11..44
9911..33
6677..99
2233..55
1100..11
99..33
Derivative
financial
assets
42.6
0.0
34.3
8.1
0.0
2.0
1.7
0.3
52.5
22.4
22.8
7.3
22.8
4.0
5.0
7.2
6.6
1.8
0.4
1.0
31.12.19
Derivative
financial
liabilities
36.6
0.3
26.2
10.0
0.0
3.0
2.2
0.8
54.0
23.4
23.8
6.8
25.5
5.5
6.8
7.8
5.4
1.7
0.6
0.4
Notional
amounts
related to
derivative
financial
assets2
1,020.2
16.3
454.7
464.8
84.4
70.2
65.0
2.0
3,173.4
935.3
1,573.2
660.9
420.3
81.3
88.6
250.4
56.1
13.8
27.4
5.9
Notional
amounts
related to
derivative
financial
liabilities2
975.2
19.6
402.9
486.1
66.6
69.9
66.0
3.3
2,993.8
966.6
1,418.5
604.9
534.5
96.3
144.1
294.1
60.0
15.1
23.6
4.9
Other
notional
amounts2,3
11,999.2
3,136.8
8,086.0
546.9
229.5
1.2
122.1
84.9
37.2
12.6
12.0
USD billion
IInntteerreesstt rraattee ccoonnttrraaccttss
of which: forward contracts (OTC)1
of which: swaps (OTC)
of which: options (OTC)
of which: futures (ETD)
of which: options (ETD)
CCrreeddiitt ddeerriivvaattiivvee ccoonnttrraaccttss
of which: credit default swaps (OTC)
of which: total return swaps (OTC)
FFoorreeiiggnn eexxcchhaannggee ccoonnttrraaccttss
of which: forward contracts (OTC)
of which: swaps (OTC)
of which: options (OTC)
EEqquuiittyy ccoonnttrraaccttss
of which: swaps (OTC)
of which: options (OTC)
of which: futures (ETD)
of which: options (ETD)
of which: agency transactions (ETD)4
CCoommmmooddiittyy ccoonnttrraaccttss
of which: swaps (OTC)
of which: options (OTC)
of which: futures (ETD)
of which: forward contracts (ETD)
Over-the-counter (OTC) derivative contracts are usually traded
The derivative financial assets shown on the balance sheet can
under a standardized International Swaps and Derivatives
be an important component of the Group’s credit exposure,
Association (ISDA) master agreement between UBS and its
however, the positive replacement values related to a respective
counterparties. Terms are negotiated directly with counterparties
counterparty are rarely an adequate reflection of the Group’s
and
the
contracts have
industry-standard
settlement
credit exposure in its derivatives business with that counterparty.
mechanisms prescribed by
ISDA. Regulators
in various
This is generally the case because, on the one hand, replacement
jurisdictions have begun a phased introduction of rules requiring
values can increase over time (potential future exposure), while,
the payment and collection of initial and variation margin on
on the other hand, exposure may be mitigated by entering into
certain OTC derivative contracts, which may have a bearing on
master netting agreements and bilateral collateral arrangements.
their price and other relevant terms. Due to challenges brought
Both the exposure measures used internally by the Group to
on by COVID-19, the International Organization of Securities
control credit risk and the capital requirements imposed by
Commissions (IOSCO) has extended the deadline for the
regulators reflect these additional factors.
completion of the final phase-in of margin requirements for
non-centrally cleared derivatives, to 1 September 2022.
Other derivative contracts are standardized in terms of their
amounts and settlement dates, and are bought and sold on
regulated exchanges. These are commonly referred to as
› Refer to Note 22 for more information about derivative financial
assets and liabilities after consideration of netting potential
allowed under enforceable netting arrangements
› Refer to the “Risk management and control” section of this
report for more information about the risks arising from
exchange-traded derivatives (ETD) contracts. Exchanges offer the
derivative instruments
benefits of pricing transparency, standardized daily settlement of
changes in value and, consequently, reduced credit risk.
Contingent collateral features of derivative liabilities
Most of the Group’s derivative transactions relate to sales and
market-making activity. Sales activities include the structuring
Certain derivative instruments contain contingent collateral or
and marketing of derivative products to customers to enable
termination features triggered upon a downgrade of the
them to take, transfer, modify or reduce current or expected
published credit ratings of the Group in the normal course of
risks. Market-making aims to directly support the facilitation and
business. Based on UBS’s credit ratings as of 31 December 2020,
execution of client activity, and involves quoting bid and offer
USD 0.0 billion, USD 0.5 billion and USD 1.1 billion would have
prices to other market participants with the intention of
been required for contractual obligations related to OTC
generating revenues based on spread and volume. The Group
derivatives in the event of a one-notch, two-notch and three-
also uses various derivative instruments for hedging purposes.
notch reduction in long-term credit ratings, respectively. In
› Refer to Notes 16 and 21 for more information about derivative
instruments
› Refer to Note 25 for more information about derivatives
designated in hedge accounting relationships
evaluating UBS’s liquidity requirements, UBS considers additional
collateral or termination payments that would be required in the
event of a reduction in UBS’s long-term credit ratings, and a
corresponding reduction in UBS’s short-term ratings.
00..22
0.0
0.1
6.9
0.1
00..22
00..33
00..00
1177..22
1188..33
1100..00
1100..22
LLooaann ccoommmmiittmmeennttss
mmeeaassuurreedd aatt FFVVTTPPLL ((OOTTCC))55
UUnnsseettttlleedd ppuurrcchhaasseess ooff nnoonn--ddeerriivvaattiivvee
ffiinnaanncciiaall iinnssttrruummeennttss66
UUnnsseettttlleedd ssaalleess ooff nnoonn--ddeerriivvaattiivvee
ffiinnaanncciiaall iinnssttrruummeennttss66
TToottaall ddeerriivvaattiivvee iinnssttrruummeennttss,,
bbaasseedd oonn IIFFRRSS nneettttiinngg77
12,135.1
11 Includes certain forward starting repurchase and reverse repurchase agreements that are classified as measured at fair value through profit or loss and are recognized within derivative instruments. The notional
amounts related to these instruments were previously presented in the former Note 34 under Forward starting transactions (refer to the “Consolidated financial statements” section of the Annual Report 2019 for
more information). Starting with this report, the presentation of these notionals has been aligned with the fair values presented in this table and prior periods have been amended to ensure comparability. 22 In
cases where derivative financial instruments are presented on a net basis on the balance sheet, the respective notional amounts of the netted derivative financial instruments are still presented on a gross basis.
33 Other notional amounts relate to derivatives that are cleared through either a central counterparty or an exchange. The fair value of these derivatives is presented on the balance sheet net of the corresponding
cash margin under Cash collateral receivables on derivative instruments and Cash collateral payables on derivative instruments and was not material for all periods presented. 44 Notional amounts of exchange-
traded agency transactions and OTC-cleared transactions entered into on behalf of clients are not disclosed as they have a significantly different risk profile. 55 These notional amounts relate to derivative loan
commitments that were previously presented in the former Note 34 under loan commitments measured at fair value (refer to the “Consolidated financial statements” section of the Annual Report 2019 for more
information). Starting with this report, the presentation of these notionals has been aligned with the fair values of the derivative loan commitments presented in this table and prior periods have been amended to
ensure comparability. 66 Changes in the fair value of purchased and sold non-derivative financial instruments between trade date and settlement date are recognized as derivative financial instruments.
77 Derivative financial assets and liabilities are presented net on the balance sheet if UBS has the unconditional and legally enforceable right to offset the recognized amounts, both in the normal course of business
and in the event of default, bankruptcy or insolvency of the entity and all of the counterparties, and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. Refer to
Note 22 for more information on netting arrangements.
1111,,339944..44
44,,442299..77
4,772.2
4,657.0
44,,447799..55
115599..66
116611..11
121.8
120.9
16.6
1122..99
15.4
00..33
7.1
0.1
0.1
9.7
On a notional amount basis, approximately 50% of OTC interest
rate contracts held as of 31 December 2020 (31 December
2019: 54%) mature within one year, 30% (31 December 2019:
28%) within one to five years and 20% (31 December 2019:
18%) after five years. Notional amounts of interest rate
contracts cleared through either a central counterparty or an
exchange that are legally settled on a daily basis are presented
under Other notional amounts in the table above and are
categorized into maturity buckets on the basis of contractual
maturities of the cleared underlying derivative contracts.
320
321
321
Financial statements
Consolidated financial statements
Note 11 Financial assets measured at fair value through other comprehensive income
USD million
FFiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt ffaaiirr vvaalluuee tthhrroouugghh ootthheerr ccoommpprreehheennssiivvee iinnccoommee11
DDeebbtt iinnssttrruummeennttss
Government and government agencies
of which: USA
Banks
Corporates and other
TToottaall ffiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt ffaaiirr vvaalluuee tthhrroouugghh ootthheerr ccoommpprreehheennssiivvee iinnccoommee
Unrealized gains, before tax
Unrealized (losses), before tax
NNeett uunnrreeaalliizzeedd ggaaiinnss // ((lloosssseess)),, bbeeffoorree ttaaxx
3311..1122..2200
31.12.19
88,,115555
77,,772277
110033
00
88,,225588
220044
((44))
220000
6,162
5,814
178
4
6,345
41
(25)
16
15
NNeett uunnrreeaalliizzeedd ggaaiinnss // ((lloosssseess)),, aafftteerr ttaaxx
11 Refer to Note 21c for more information about product type and fair value hierarchy categorization. Refer also to Note 9 and Note 20 for more information about expected credit loss measurement.
115511
Note 12 Property, equipment and software
At historical cost less accumulated depreciation
USD million
HHiissttoorriiccaall ccoosstt
Balance at the beginning of the year
Additions
Disposals / write-offs3
Reclassifications4
Foreign currency translation
Balance at the end of the year
AAccccuummuullaatteedd ddeepprreecciiaattiioonn
Balance at the beginning of the year
Depreciation
Impairment5
Disposals / write-offs3
Reclassifications4
Foreign currency translation
Balance at the end of the year
Owned
properties
Leased
properties1
Leasehold
improve-
ments
IT hardware and
communication
equipment
Internally
generated
software
Purchased
software
Other
machines
and
equipment
Projects in
progress
22002200
2019
7,650
26
(315)
(461)
686
7,586
4,466
173
0
(200)
(332)
406
4,513
3,745
4432
(8)
0
70
4,249
519
535
4
(3)
0
28
1,082
3,004
37
(169)
217
85
3,174
1,768
236
1
(164)
5
70
1,917
1,559
192
(245)
11
65
1,581
1,053
170
0
(243)
0
41
1,021
6,176
131
(135)
1,015
75
7,262
2,906
753
67
(129)
0
35
3,631
2244,,443311
485
22,,331122
75
((999900))
(76)
((559900))
3
11,,007744
19
506
2266,,223388
23,321
1,931
(636)
(398)
213
24,431
1,014
1,389
0
(1,410)
43
1,036
799
20
(42)
34
31
843
358
61
0
(76)
0
13
356
559
69
0
(42)
0
23
608
0
0
0
0
0
0
0
1111,,662288
11,,999977
7722
((885555))
((332288))
661166
1133,,112299
10,619
1,728
37
(614)
(254)
112
11,628
NNeett bbooookk vvaalluuee
Net book value at the beginning of the
year
NNeett bbooookk vvaalluuee aatt tthhee eenndd ooff tthhee yyeeaarr
11 Represents right-of-use assets recognized by UBS as lessee. Includes immaterial leased IT equipment. The total cash outflow for leases during 2020 was USD 679 million (2019: USD 641 million). Interest expense
on lease liabilities is included within Interest expense from financial instruments measured at amortized cost and Lease liabilities are included within Other financial liabilities measured at amortized cost. Refer to
Notes 3 and 19a, respectively. Also refer to Note 1 for more information about the nature of UBS’s leasing activities. 22 In 2020, right-of-use assets included the Additions from sale-and-leaseback transactions,
from which UBS recognized net gains of USD 140 million, included within Other income. Refer to Note 5. 33 Includes write-offs of fully depreciated assets. 44 The total net reclassification amount for the respective
periods represents reclassifications to Properties and other non-current assets held for sale. 55 Impairment charges recorded in 2020 generally relate to assets that are no longer used for which the recoverable
amount based on a value in use approach was determined to be zero. Includes the impairment of internally generated software resulting from a decision in the fourth quarter of 2020 to not proceed with an internal
business transfer from UBS Switzerland AG to UBS AG. 66 Consists of USD 855 million related to internally generated software, USD 92 million related to Owned properties and USD 89 million related to Leasehold
improvements.
1,014
11,,00336666
12,702
12,804
1122,,880044
1133,,110099
1,236
11,,225588
3,184
33,,007733
3,270
33,,663300
3,226
33,,116677
126
115500
241
223355
506
556600
322
322
TToottaall ffiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt ffaaiirr vvaalluuee tthhrroouugghh ootthheerr ccoommpprreehheennssiivvee iinnccoommee
Note 12 Property, equipment and software
At historical cost less accumulated depreciation
Consolidated financial statements
Government and government agencies
USD million
DDeebbtt iinnssttrruummeennttss
of which: USA
Banks
Corporates and other
Unrealized gains, before tax
Unrealized (losses), before tax
NNeett uunnrreeaalliizzeedd ggaaiinnss // ((lloosssseess)),, bbeeffoorree ttaaxx
NNeett uunnrreeaalliizzeedd ggaaiinnss // ((lloosssseess)),, aafftteerr ttaaxx
Balance at the beginning of the year
USD million
HHiissttoorriiccaall ccoosstt
Additions
Disposals / write-offs3
Reclassifications4
Foreign currency translation
Balance at the end of the year
AAccccuummuullaatteedd ddeepprreecciiaattiioonn
Balance at the beginning of the year
Depreciation
Impairment5
Disposals / write-offs3
Reclassifications4
Foreign currency translation
Balance at the end of the year
NNeett bbooookk vvaalluuee
year
Net book value at the beginning of the
NNeett bbooookk vvaalluuee aatt tthhee eenndd ooff tthhee yyeeaarr
Note 11 Financial assets measured at fair value through other comprehensive income
Note 13 Goodwill and intangible assets
FFiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt ffaaiirr vvaalluuee tthhrroouugghh ootthheerr ccoommpprreehheennssiivvee iinnccoommee11
3311..1122..2200
31.12.19
Introduction
11 Refer to Note 21c for more information about product type and fair value hierarchy categorization. Refer also to Note 9 and Note 20 for more information about expected credit loss measurement.
88,,115555
77,,772277
110033
00
88,,225588
220044
((44))
220000
115511
6,162
5,814
178
4
6,345
41
(25)
16
15
Leasehold
IT hardware and
Internally
Other
machines
Owned
properties
Leased
improve-
communication
generated
Purchased
and
Projects in
properties1
ments
equipment
software
software
equipment
progress
22002200
2019
7,650
26
(315)
(461)
686
4,466
173
0
(200)
(332)
406
3,745
4432
(8)
0
70
519
535
4
(3)
0
28
3,004
37
(169)
217
85
1,768
236
1
(164)
5
70
1,559
192
(245)
11
65
1,581
1,053
170
0
(243)
0
41
6,176
131
(135)
1,015
75
7,262
2,906
753
67
(129)
0
35
485
75
(76)
3
19
358
61
0
(76)
0
13
356
799
20
(42)
34
31
559
69
0
(42)
0
23
608
1,014
1,389
0
(1,410)
2244,,443311
22,,331122
23,321
1,931
((999900))
((559900))
(636)
(398)
213
43
11,,007744
0
0
0
0
0
0
0
1111,,662288
11,,999977
10,619
1,728
7722
((885555))
((332288))
661166
37
(614)
(254)
112
1133,,112299
11,628
4,513
1,082
1,917
1,021
3,631
7,586
4,249
3,174
506
24,431
2266,,223388
1,036
843
3,184
33,,007733
3,226
33,,116677
1,236
11,,225588
506
556600
3,270
33,,663300
126
115500
241
223355
1,014
11,,00336666
1122,,880044
1133,,110099
12,702
12,804
11 Represents right-of-use assets recognized by UBS as lessee. Includes immaterial leased IT equipment. The total cash outflow for leases during 2020 was USD 679 million (2019: USD 641 million). Interest expense
on lease liabilities is included within Interest expense from financial instruments measured at amortized cost and Lease liabilities are included within Other financial liabilities measured at amortized cost. Refer to
Notes 3 and 19a, respectively. Also refer to Note 1 for more information about the nature of UBS’s leasing activities. 22 In 2020, right-of-use assets included the Additions from sale-and-leaseback transactions,
from which UBS recognized net gains of USD 140 million, included within Other income. Refer to Note 5. 33 Includes write-offs of fully depreciated assets. 44 The total net reclassification amount for the respective
periods represents reclassifications to Properties and other non-current assets held for sale. 55 Impairment charges recorded in 2020 generally relate to assets that are no longer used for which the recoverable
amount based on a value in use approach was determined to be zero. Includes the impairment of internally generated software resulting from a decision in the fourth quarter of 2020 to not proceed with an internal
business transfer from UBS Switzerland AG to UBS AG. 66 Consists of USD 855 million related to internally generated software, USD 92 million related to Owned properties and USD 89 million related to Leasehold
improvements.
UBS performs an impairment test on its goodwill assets on an
annual basis or when indicators of impairment exist.
UBS considers Asset Management and the Investment Bank,
as they are reported in Note 2a, as separate cash-generating
units (CGUs), as that is the level at which the performance of
investments (and the related goodwill) is reviewed and assessed
by management. Given that a significant amount of goodwill in
Global Wealth Management relates to the PaineWebber
acquisition in 2000, which mainly affected the Americas portion
of the business, this goodwill remains separately monitored by
the Americas, despite
formation of Global Wealth
Management in 2018. Accordingly, goodwill for Global Wealth
Management is separately considered for impairment at the level
of two CGUs: Americas; and Switzerland and International
(consisting of EMEA, Asia Pacific and Global).
the
The impairment test is performed for each CGU to which
goodwill is allocated by comparing the recoverable amount,
based on its value in use, with the carrying amount of the
respective CGU. An impairment charge is recognized if the
carrying amount exceeds the recoverable amount.
As of 31 December 2020, total goodwill recognized on the
balance sheet was USD 6.2 billion, of which USD 3.7 billion was
carried by the Global Wealth Management Americas CGU,
USD 1.2 billion was carried by the Global Wealth Management
Switzerland and International CGU, and USD 1.2 billion was
carried by Asset Management. The Investment Bank CGU had
no goodwill. Based on the impairment testing methodology
described below, UBS concluded that the goodwill balances as
of 31 December 2020 allocated to these CGUs are not impaired.
Methodology for goodwill impairment testing
The recoverable amounts are determined using a discounted
cash flow model, which has been adapted to use inputs that
consider features of the banking business and its regulatory
environment. The recoverable amount of a CGU is the sum of
the discounted earnings attributable to shareholders from the
first three forecast years and the terminal value, adjusted for the
effect of the capital assumed to be needed over the next three
years and to support growth beyond that period. The terminal
value, which covers all periods beyond the third year, is
calculated on the basis of the forecast of third-year profit, the
discount rate and the long-term growth rate, as well as the
implied perpetual capital growth.
The carrying amount for each CGU is determined by
reference to the Group’s equity attribution framework. Within
that framework, which is described in the “Capital, liquidity and
funding, and balance sheet” section of this report, UBS
attributes equity to the businesses on the basis of their risk-
weighted assets and leverage ratio denominator (both metrics
include resource allocations from Group Functions to the
business divisions), their goodwill and their intangible assets, as
well as attributed equity related to certain CET1 deduction
items. The framework is primarily used for the purpose of
measuring the performance of the businesses and includes
certain management assumptions. Attributed equity equals the
capital that a CGU requires to conduct its business and is
currently considered a reasonable approximation of the carrying
amount of the CGUs. The attributed equity methodology is
aligned with the business planning process, the inputs from
which are used in calculating the recoverable amounts of the
respective CGU.
› Refer to the “Capital, liquidity and funding, and balance sheet”
section of this report for more information about the equity
attribution framework
Assumptions
linked to external market
Valuation parameters used within the Group’s impairment test
model are
information, where
applicable. The model used to determine the recoverable
amount is most sensitive to changes in the forecast earnings
available to shareholders in years one to three, to changes in the
discount rates and to changes in the long-term growth rate. The
applied long-term growth rate is based on long-term economic
growth rates for different regions worldwide. Earnings available
to shareholders are estimated on the basis of forecast results,
which are part of the business plan approved by the Board of
Directors.
The discount rates are determined by applying a capital asset
pricing model-based approach, as well as considering
quantitative and qualitative inputs from both internal and
external analysts and the view of management. In addition, they
take into account regional differences in risk-free rates at the
level of individual CGUs. Consistently, long-term growth rates
are determined based on nominal or real GDP growth rate
forecasts, depending on the region.
322
323
323
Financial statements
Consolidated financial statements
Note 13 Goodwill and intangible assets (continued)
Key assumptions used to determine the recoverable amounts
of each CGU are tested for sensitivity by applying a reasonably
possible change to those assumptions. Forecast earnings
available to shareholders were changed by 20%, the discount
rates were changed by 1.5 percentage points and the long-term
growth rates were changed by 0.75 percentage points. Under
all scenarios, reasonably possible changes in key assumptions
did not result in an impairment of goodwill or intangible assets
reported by Global Wealth Management Americas, Global
Wealth Management Switzerland and International, and Asset
Management.
If the estimated earnings and other assumptions in future
periods deviate from the current outlook, the value of goodwill
attributable to Global Wealth Management Americas, Global
Wealth Management Switzerland and International, and Asset
Management may become impaired in the future, giving rise to
losses in the income statement. Recognition of any impairment
of goodwill would reduce IFRS equity and net profit. It would
not affect cash flows and, as goodwill is required to be deducted
from capital under the Basel III capital framework, no effect
would be expected on the Group’s capital ratios.
Discount and growth rates
In %
Global Wealth Management Americas
Global Wealth Management Switzerland and International
Asset Management
Investment Bank
Discount rates
Growth rates
3311..1122..2200
99..55
88..55
88..55
1111..00
31.12.19
9.5
8.5
9.0
11.0
3311..1122..2200
55..11
33..77
33..55
44..88
31.12.19
4.2
3.4
3.0
4.0
Goodwill
Intangible assets
Customer
relationships,
contractual
rights and other
760
Total
Total
Infrastructure1
2019
22002200
6,272
(158)3
788
1472
1,548
147
USD million
HHiissttoorriiccaall ccoosstt
Balance at the beginning of the year
Additions
Disposals
Write-offs
Foreign currency translation
Balance at the end of the year
AAccccuummuullaatteedd aammoorrttiizzaattiioonn aanndd iimmppaaiirrmmeenntt
Balance at the beginning of the year
Amortization
Impairment4
Disposals
Write-offs
Foreign currency translation
Balance at the end of the year
NNeett bbooookk vvaalluuee aatt tthhee eenndd ooff tthhee yyeeaarr
11 Consists of the branch network intangible asset recognized in connection with the acquisition of PaineWebber Group, Inc. 22 Relates to the establishment of a banking partnership with Banco do Brasil. Refer to
Note 29 for more information. 33 Relates to the sale of a majority stake in Fondcenter AG. Refer to Note 29 for more information. 44 Impairment charges recorded in 2020 relate to assets for which the recoverable
amount was determined considering their value in use (recoverable amount of the impaired intangible assets in 2020 was USD 5 million).
11,,335511
5555
22
00
((3355))
1111
11,,338855
66,,448800
1,371
65
0
(8)
(75)
(2)
1,351
6,469
77,,882200
114477
((115588))
((3355))
9911
77,,886655
8,018
11
(11)
(185)
(12)
7,820
(35)
11
1,385
298
(35)
11
624
298
(35)
22
1,683
1,351
55
2
(35)
22
922
621
25
2
69
6,182
760
0
730
30
6,182
760
324
324
Note 13 Goodwill and intangible assets (continued)
Note 13 Goodwill and intangible assets (continued)
Key assumptions used to determine the recoverable amounts
If the estimated earnings and other assumptions in future
The table below presents goodwill and intangible assets by CGU for the year ended 31 December 2020.
USD million
GGooooddwwiillll
Balance at the beginning of the year
Additions
Disposals
Foreign currency translation
BBaallaannccee aatt tthhee eenndd ooff tthhee yyeeaarr
IInnttaannggiibbllee aasssseettss
Balance at the beginning of the year
Additions
Disposals
Amortization
Impairment
Foreign currency translation
BBaallaannccee aatt tthhee eenndd ooff tthhee yyeeaarr
Global Wealth
Management
Americas
Global Wealth
Management
Switzerland and
International
Asset
Management
Investment
Bank
Group Functions
Total
3,719
1,198
1,354
5
33,,772244
92
(36)
(2)
(9)
4466
34
11,,223333
92
(12)
7
8888
(158)
30
11,,222266
0
00
0
00
5
147
(4)
12
116611
0
00
7
(4)
44
6,272
0
(158)
69
66,,118822
197
147
0
(55)
(2)
11
229988
The table below presents estimated aggregated amortization expenses for intangible assets.
Balance at the beginning of the year
6,272
760
77,,882200
8,018
Total
Infrastructure1
rights and other
Total
22002200
2019
USD million
EEssttiimmaatteedd,, aaggggrreeggaatteedd aammoorrttiizzaattiioonn eexxppeennsseess ffoorr::
2021
2022
2023
2024
2025
Thereafter
Not amortized due to indefinite useful life
TToottaall
Intangible assets
33
28
27
24
23
160
2
298
Consolidated financial statements
Management.
Discount and growth rates
In %
Global Wealth Management Americas
Global Wealth Management Switzerland and International
Asset Management
Investment Bank
USD million
HHiissttoorriiccaall ccoosstt
Additions
Disposals
Write-offs
Amortization
Impairment4
Disposals
Write-offs
Foreign currency translation
Balance at the end of the year
AAccccuummuullaatteedd aammoorrttiizzaattiioonn aanndd iimmppaaiirrmmeenntt
Balance at the beginning of the year
Foreign currency translation
Balance at the end of the year
NNeett bbooookk vvaalluuee aatt tthhee eenndd ooff tthhee yyeeaarr
of each CGU are tested for sensitivity by applying a reasonably
periods deviate from the current outlook, the value of goodwill
possible change to those assumptions. Forecast earnings
attributable to Global Wealth Management Americas, Global
available to shareholders were changed by 20%, the discount
Wealth Management Switzerland and International, and Asset
rates were changed by 1.5 percentage points and the long-term
Management may become impaired in the future, giving rise to
growth rates were changed by 0.75 percentage points. Under
losses in the income statement. Recognition of any impairment
all scenarios, reasonably possible changes in key assumptions
of goodwill would reduce IFRS equity and net profit. It would
did not result in an impairment of goodwill or intangible assets
not affect cash flows and, as goodwill is required to be deducted
reported by Global Wealth Management Americas, Global
from capital under the Basel III capital framework, no effect
Wealth Management Switzerland and International, and Asset
would be expected on the Group’s capital ratios.
Discount rates
Growth rates
3311..1122..2200
31.12.19
3311..1122..2200
31.12.19
99..55
88..55
88..55
1111..00
9.5
8.5
9.0
11.0
55..11
33..77
33..55
44..88
4.2
3.4
3.0
4.0
Goodwill
Intangible assets
Customer
relationships,
contractual
(158)3
69
6,182
6,182
760
730
30
760
0
788
1472
(35)
22
922
621
25
2
(35)
11
624
298
1,548
147
(35)
22
1,683
1,351
55
2
(35)
11
1,385
298
77,,886655
7,820
11,,335511
1,371
114477
((115588))
((3355))
9911
5555
22
00
((3355))
1111
11,,338855
66,,448800
11
(11)
(185)
(12)
65
0
(8)
(75)
(2)
1,351
6,469
11 Consists of the branch network intangible asset recognized in connection with the acquisition of PaineWebber Group, Inc. 22 Relates to the establishment of a banking partnership with Banco do Brasil. Refer to
Note 29 for more information. 33 Relates to the sale of a majority stake in Fondcenter AG. Refer to Note 29 for more information. 44 Impairment charges recorded in 2020 relate to assets for which the recoverable
amount was determined considering their value in use (recoverable amount of the impaired intangible assets in 2020 was USD 5 million).
324
325
325
Financial statements
Consolidated financial statements
Note 14 Other assets
a) Other financial assets measured at amortized cost
USD million
Debt securities
of which: government bills / bonds
Loans to financial advisors
Fee- and commission-related receivables
Finance lease receivables
Settlement and clearing accounts
Accrued interest income
Other
TToottaall ootthheerr ffiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt aammoorrttiizzeedd ccoosstt
b) Other non-financial assets
USD million
Precious metals and other physical commodities
Bail deposit1
Prepaid expenses
VAT and other tax receivables
Properties and other non-current assets held for sale
Other
TToottaall ootthheerr nnoonn--ffiinnaanncciiaall aasssseettss
11 Refer to item 1 in Note 18b for more information.
Note 15 Amounts due to banks and customer deposits
USD million
Amounts due to banks
Customer deposits
of which: demand deposits
of which: retail savings / deposits
of which: time deposits
of which: fiduciary deposits
TToottaall aammoouunnttss dduuee ttoo bbaannkkss aanndd ccuussttoommeerr ddeeppoossiittss
3311..1122..2200
1188,,880011
31.12.19
14,141
99,,778899
22,,556699
22,,001144
11,,444477
661144
559911
11,,115588
2277,,119944
8,492
2,877
1,521
1,444
587
742
1,669
22,980
3311..1122..2200
31.12.19
66,,226644
11,,441188
11,,008811
443333
224466
332266
4,597
1,293
927
493
199
346
99,,776688
7,856
3311..1122..2200
1111,,005500
552244,,660055
223366,,444477
222200,,889988
4400,,229900
2266,,997700
31.12.19
6,570
448,284
176,010
168,581
62,315
41,378
553355,,665555
454,854
Customer deposits increased by USD 76 billion, mainly in Switzerland and the Americas, of which USD 50 billion was in Global
Wealth Management and USD 26 billion in Personal & Corporate Banking, as a result of clients holding higher levels of cash, as well
as currency effects. Demand deposits and retail savings / deposits together increased by USD 113 billion, partly offset by decreases of
USD 36 billion in time deposits and fiduciary deposits.
326
326
441188
of which: life-to-date own credit (gain) / loss
92
11 Includes investment fund unit-linked instruments issued. 22 Issued by the legal entity UBS AG. Based on original contractual maturity without considering any early redemption features. 100% of the balance as of
31 December 2020 was unsecured (31 December 2019: more than 99% of the balance was unsecured).
Note 16 Debt issued designated at fair value
USD million
IIssssuueedd ddeebbtt iinnssttrruummeennttss
Equity-linked1
Rates-linked
Credit-linked
Fixed-rate
Commodity-linked
Other
of which: debt that contributes to total loss-absorbing capacity
TToottaall ddeebbtt iissssuueedd ddeessiiggnnaatteedd aatt ffaaiirr vvaalluuee
of which: issued by UBS AG with original maturity greater than one year2
3311..1122..2200
31.12.19
4411,,006699
1111,,003388
11,,993333
33,,660044
11,,449977
22,,110011
11,,119900
6611,,224433
4466,,442277
41,722
16,318
1,916
4,636
1,567
649
217
66,809
51,031
a) Other financial assets measured at amortized cost
Consolidated financial statements
Note 14 Other assets
USD million
Debt securities
of which: government bills / bonds
Loans to financial advisors
Fee- and commission-related receivables
Finance lease receivables
Settlement and clearing accounts
Accrued interest income
Other
TToottaall ootthheerr ffiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt aammoorrttiizzeedd ccoosstt
b) Other non-financial assets
Precious metals and other physical commodities
USD million
Bail deposit1
Prepaid expenses
VAT and other tax receivables
Properties and other non-current assets held for sale
Other
TToottaall ootthheerr nnoonn--ffiinnaanncciiaall aasssseettss
11 Refer to item 1 in Note 18b for more information.
USD million
Amounts due to banks
Customer deposits
of which: demand deposits
of which: retail savings / deposits
of which: time deposits
of which: fiduciary deposits
TToottaall aammoouunnttss dduuee ttoo bbaannkkss aanndd ccuussttoommeerr ddeeppoossiittss
Note 15 Amounts due to banks and customer deposits
3311..1122..2200
1188,,880011
31.12.19
14,141
99,,778899
22,,556699
22,,001144
11,,444477
661144
559911
11,,115588
2277,,119944
66,,226644
11,,441188
11,,008811
443333
224466
332266
8,492
2,877
1,521
1,444
587
742
1,669
22,980
4,597
1,293
927
493
199
346
3311..1122..2200
31.12.19
99,,776688
7,856
3311..1122..2200
1111,,005500
552244,,660055
223366,,444477
222200,,889988
4400,,229900
2266,,997700
31.12.19
6,570
448,284
176,010
168,581
62,315
41,378
553355,,665555
454,854
Customer deposits increased by USD 76 billion, mainly in Switzerland and the Americas, of which USD 50 billion was in Global
Wealth Management and USD 26 billion in Personal & Corporate Banking, as a result of clients holding higher levels of cash, as well
as currency effects. Demand deposits and retail savings / deposits together increased by USD 113 billion, partly offset by decreases of
USD 36 billion in time deposits and fiduciary deposits.
As of 31 December 2020 and 31 December 2019, the
contractual redemption amount at maturity of debt issued
designated at fair value through profit or loss was not materially
different from the carrying amount.
The table below shows the residual contractual maturity of
the carrying amount of debt issued designated at fair value, split
between fixed-rate and floating-rate instruments based on the
contractual terms, and does not consider any early redemption
features. Interest rate ranges for future interest payments related
to debt issued designated at fair value have not been included in
the table below, as the majority of the debt instruments issued
are structured products and therefore the future interest
payments are highly dependent upon the embedded derivative
and prevailing market conditions at the point in time that each
interest payment is made.
› Refer to Note 24 for maturity information on an undiscounted
cash flow basis
Contractual maturity of carrying amount
USD million
UUBBSS GGrroouupp AAGG11
Non-subordinated debt
Fixed-rate
UUBBSS AAGG22
Non-subordinated debt
Fixed-rate
Floating-rate
Subtotal
OOtthheerr ssuubbssiiddiiaarriieess33
Non-subordinated debt
Fixed-rate
Floating-rate
Subtotal
TToottaall
2021
2022
2023
2024
2025
2026–2030
Thereafter
TToottaall
3311..1122..2200
Total
31.12.19
0
0
0
0
0
0
1,375
11,,337755
217
4,144
18,145
22,289
1,473
8,758
10,231
1,112
5,915
7,027
512
1,727
2,239
318
6,454
6,772
88
41
129
7
185
192
0
126
126
0
0
0
0
0
0
227
6,058
6,286
422
0
422
1,623
2,471
4,094
99,,440099
4499,,552288
5588,,993377
10,368
55,299
65,668
22
39
61
553399
339922
993311
520
404
924
22,418
10,423
7,153
2,239
6,772
6,708
5,530
6611,,224433
66,809
11 Comprises instruments issued by the legal entity UBS Group AG. 22 Comprises instruments issued by the legal entity UBS AG. 33 Comprises instruments issued by subsidiaries of UBS AG.
326
327
327
Financial statements Consolidated financial statements
Note 17 Debt issued measured at amortized cost
USD million
Certificates of deposit
Commercial paper
Other short-term debt
SShhoorrtt--tteerrmm ddeebbtt11
Senior unsecured debt that contributes to total loss-absorbing capacity (TLAC)
Senior unsecured debt other than TLAC
of which: issued by UBS AG with original maturity greater than one year2
Covered bonds
Subordinated debt
of which: high-trigger loss-absorbing additional tier 1 capital instruments
of which: low-trigger loss-absorbing additional tier 1 capital instruments
of which: low-trigger loss-absorbing tier 2 capital instruments
of which: non-Basel III-compliant tier 2 capital instruments
Debt issued through the Swiss central mortgage institutions
Other long-term debt
LLoonngg--tteerrmm ddeebbtt33
3311..1122..2200
31.12.19
1155,,668800
2255,,447722
55,,551155
4466,,666666
3366,,661111
2211,,334400
1188,,446644
22,,779966
2222,,115577
1111,,883377
22,,557777
77,,220011
554433
99,,666600
33
5,190
14,413
2,235
21,837
30,105
25,569
22,349
2,633
21,775
11,931
2,414
6,892
540
8,574
4
9922,,556666
88,660
TToottaall ddeebbtt iissssuueedd mmeeaassuurreedd aatt aammoorrttiizzeedd ccoosstt44
11 Debt with an original contractual maturity of less than one year. 22 Issued by the legal entity UBS AG. Based on original contractual maturity without considering any early redemption features. As of 31 December
2020, 100% of the balance was unsecured (31 December 2019: 100% of the balance was unsecured). 33 Debt with an original maturity greater than or equal to one year. The classification of debt issued into
short-term and long-term does not consider any early redemption features. 44 Net of bifurcated embedded derivatives, the fair value of which was not material for the periods presented.
110,497
113399,,223322
The Group uses interest rate and foreign exchange derivatives to
manage the risks inherent in certain debt instruments held at
amortized cost. In some cases, the Group applies hedge
accounting for interest rate risk as discussed in item 2j in Note
1a and Note 25. As a result of applying hedge accounting, the
life-to-date adjustment to the carrying amount of debt issued
was an increase of USD 2,401 million as of 31 December 2020
and an increase of USD 1,099 million as of 31 December 2019,
reflecting changes in fair value due to interest rate movements.
328
328
Consolidated financial statements
USD million
Certificates of deposit
Commercial paper
Other short-term debt
SShhoorrtt--tteerrmm ddeebbtt11
Covered bonds
Subordinated debt
Senior unsecured debt that contributes to total loss-absorbing capacity (TLAC)
Senior unsecured debt other than TLAC
of which: issued by UBS AG with original maturity greater than one year2
of which: high-trigger loss-absorbing additional tier 1 capital instruments
of which: low-trigger loss-absorbing additional tier 1 capital instruments
of which: low-trigger loss-absorbing tier 2 capital instruments
of which: non-Basel III-compliant tier 2 capital instruments
Debt issued through the Swiss central mortgage institutions
Other long-term debt
LLoonngg--tteerrmm ddeebbtt33
TToottaall ddeebbtt iissssuueedd mmeeaassuurreedd aatt aammoorrttiizzeedd ccoosstt44
3311..1122..2200
31.12.19
1155,,668800
2255,,447722
55,,551155
4466,,666666
3366,,661111
2211,,334400
1188,,446644
22,,779966
2222,,115577
1111,,883377
22,,557777
77,,220011
554433
99,,666600
33
5,190
14,413
2,235
21,837
30,105
25,569
22,349
2,633
21,775
11,931
2,414
6,892
540
8,574
4
9922,,556666
113399,,223322
88,660
110,497
11 Debt with an original contractual maturity of less than one year. 22 Issued by the legal entity UBS AG. Based on original contractual maturity without considering any early redemption features. As of 31 December
2020, 100% of the balance was unsecured (31 December 2019: 100% of the balance was unsecured). 33 Debt with an original maturity greater than or equal to one year. The classification of debt issued into
short-term and long-term does not consider any early redemption features. 44 Net of bifurcated embedded derivatives, the fair value of which was not material for the periods presented.
The Group uses interest rate and foreign exchange derivatives to
life-to-date adjustment to the carrying amount of debt issued
amortized cost. In some cases, the Group applies hedge
and an increase of USD 1,099 million as of 31 December 2019,
accounting for interest rate risk as discussed in item 2j in Note
reflecting changes in fair value due to interest rate movements.
1a and Note 25. As a result of applying hedge accounting, the
Note 17 Debt issued measured at amortized cost
Note 17 Debt issued measured at amortized cost (continued)
Subordinated debt consists of unsecured debt obligations
that are contractually subordinated in right of payment to all
other present and future non-subordinated obligations of the
respective
the subordinated debt
instruments outstanding as of 31 December 2020 pay a fixed
rate of interest.
issuing entity. All of
The table below shows the residual contractual maturity of
the carrying amount of debt issued, split between fixed-rate and
floating-rate based on the contractual terms, and does not
consider any early redemption features. The effects from interest
rate swaps, which are used to hedge various fixed-rate debt
issuances by changing the repricing characteristics into those
similar to floating-rate debt, are also not considered in the table
below.
› Refer to Note 24 for maturity information on an undiscounted
cash flow basis
2021
2022
2023
2024
2025
2026–2030
Thereafter
TToottaall
3311..1122..2200
Total
31.12.19
Contractual maturity of carrying amount
USD million
UUBBSS GGrroouupp AAGG11
Non-subordinated debt
Fixed-rate
Floating-rate
Subordinated debt
Fixed-rate
Subtotal
UUBBSS AAGG22
1,856
1,001
3,894
2,638
4,086
2,251
0
0
0
5,522
5,355
12,864
0
0
0
0
0
0
2,857
6,532
6,337
5,522
5,355
12,864
0
0
14,413
14,413
1,309
0
0
1,309
3333,,557788
55,,889900
1144,,441133
5533,,888811
5522,,661188
1155,,229999
77,,774444
7755,,666611
27,306
6,012
14,344
47,662
33,696
13,119
7,431
54,247
3,580
3,580
19,106
674
674
99,,669900
99,,669900
8,588
8,588
16,397
113399,,223322
110,497
manage the risks inherent in certain debt instruments held at
was an increase of USD 2,401 million as of 31 December 2020
Non-subordinated debt
Fixed-rate
Floating-rate
Subordinated debt
Fixed-rate
Subtotal
OOtthheerr ssuubbssiiddiiaarriieess33
Non-subordinated debt
Fixed-rate
Subtotal
TToottaall
40,886
12,007
0
52,893
5,813
1,155
2,053
9,022
4,224
1,175
0
5,398
1,152
1,152
928
928
1,038
1,038
56,902
16,482
12,774
0
0
2,693
2,693
1,106
1,106
9,321
386
962
335
1,684
1,211
1,211
8,250
0
0
2,663
2,663
11 Comprises debt issued by the legal entity UBS Group AG. 22 Comprises debt issued by the legal entity UBS AG. 33 Comprises debt issued by subsidiaries of UBS AG.
328
329
329
Financial statements Consolidated financial statements
Note 18 Provisions and contingent liabilities
a) Provisions
The table below presents an overview of total provisions.
USD million
Provisions other than provisions for expected credit losses
Provisions for expected credit losses
TToottaall pprroovviissiioonnss
3311..1122..2200
22,,557711
225577
22,,882288
31.12.19
2,861
114
2,974
The following table presents additional information for provisions other than provisions for expected credit losses.
USD million
BBaallaannccee aatt tthhee bbeeggiinnnniinngg ooff tthhee yyeeaarr
Increase in provisions recognized in the income statement
Release of provisions recognized in the income statement
Provisions used in conformity with designated purpose
Capitalized reinstatement costs
Reclassifications
Foreign currency translation / unwind of discount
BBaallaannccee aatt tthhee eenndd ooff tthhee yyeeaarr
11 Comprises provisions for losses resulting from legal, liability and compliance risks. 22 Primarily consists of provisions for onerous contracts of USD 49 million as of 31 December 2020 (31 December 2019: USD 61
million) and personnel-related restructuring provisions of USD 18 million as of 31 December 2020 (31 December 2019: USD 40 million). 33 Mainly includes provisions related to real estate, employee benefits and
operational risks.
Restructuring
106
101
(13)
(113)
0
(14)
4
772222
Total 2019
3,245
404
(123)
(659)
1
0
(8)
22,,886611
TToottaall 22002200
22,,886611
447722
((9922))
((777700))
1111
00
8888
22,,557711
Other3
280
139
(47)
(54)
11
14
20
336633
Litigation,
regulatory and
similar matters1
2,475
233
(33)
(603)
0
0
64
22,,113355
Restructuring provisions primarily relate to onerous contracts
and severance payments. Onerous contracts for property are
recognized when UBS is committed to pay for non-lease
components, such as utilities, service charges, taxes and
maintenance, when a property is vacated or not fully recovered
from sub-tenants. Severance-related provisions are used within a
short time period but potential changes in amount may be
triggered when natural staff attrition reduces the number of
people affected by a restructuring event and therefore the
estimated costs.
Information about provisions and contingent liabilities in
respect of litigation, regulatory and similar matters, as a class, is
included in Note 18b. There are no material contingent liabilities
associated with the other classes of provisions.
b) Litigation, regulatory and similar matters
The Group operates in a legal and regulatory environment that
exposes it to significant litigation and similar risks arising from
disputes and regulatory proceedings. As a result, UBS (which for
purposes of this Note may refer to UBS Group AG and/or one or
more of its subsidiaries, as applicable) is involved in various
disputes and legal proceedings, including litigation, arbitration,
and regulatory and criminal investigations.
Such matters are subject to many uncertainties, and the
outcome and the timing of resolution are often difficult to
predict, particularly in the earlier stages of a case. There are also
situations where the Group may enter into a settlement
agreement. This may occur in order to avoid the expense,
management distraction or
implications of
continuing to contest liability, even for those matters for which
the Group believes it should be exonerated. The uncertainties
inherent in all such matters affect the amount and timing of any
potential outflows for both matters with respect to which
provisions have been established and other contingent liabilities.
The Group makes provisions for such matters brought against it
when, in the opinion of management after seeking legal advice,
it is more likely than not that the Group has a present legal or
reputational
constructive obligation as a result of past events, it is probable
that an outflow of resources will be required, and the amount
can be reliably estimated. Where these factors are otherwise
satisfied, a provision may be established for claims that have not
yet been asserted against the Group, but are nevertheless
expected to be, based on the Group’s experience with similar
asserted claims. If any of those conditions is not met, such
matters result in contingent liabilities. If the amount of an
obligation cannot be reliably estimated, a liability exists that is
not recognized even if an outflow of resources is probable.
Accordingly, no provision is established even if the potential
outflow of resources with respect to such matters could be
significant. Developments relating to a matter that occur after
the relevant reporting period, but prior to the issuance of
financial statements, which affect management’s assessment of
the provision for such matter (because, for example, the
developments provide evidence of conditions that existed at the
end of the reporting period), are adjusting events after the
reporting period under IAS 10 and must be recognized in the
financial statements for the reporting period.
330
330
and proceedings that involve unique fact patterns or novel legal
theories, that have not yet been initiated or are at early stages of
adjudication, or as to which alleged damages have not been
quantified by the claimants. Although UBS therefore cannot
provide a numerical estimate of the future losses that could arise
from litigation, regulatory and similar matters, UBS believes that
the aggregate amount of possible future losses from this class
that are more than remote substantially exceeds the level of
current provisions.
Litigation, regulatory and similar matters may also result in
non-monetary penalties and consequences. For example, the
non-prosecution agreement UBS entered into with the US
Department of Justice (DOJ), Criminal Division, Fraud Section in
connection with submissions of benchmark interest rates,
including, among others, the British Bankers’ Association
London Interbank Offered Rate (LIBOR), was terminated by the
DOJ based on its determination that UBS had committed a US
crime
foreign exchange matters. As a
consequence, UBS AG pleaded guilty to one count of wire fraud
for conduct in the LIBOR matter, paid a fine and was subject to
probation, which ended in January 2020.
Note 18 Provisions and contingent liabilities
Note 18 Provisions and contingent liabilities (continued)
Specific litigation, regulatory and other matters are described
below, including all such matters that management considers to
be material and others that management believes to be of
significance due to potential financial, reputational and other
effects. The amount of damages claimed, the size of a
transaction or other information is provided where available and
appropriate in order to assist users in considering the magnitude
of potential exposures.
to confidentiality obligations
In the case of certain matters below, we state that we have
established a provision, and for the other matters, we make no
such statement. When we make this statement and we expect
disclosure of the amount of a provision to prejudice seriously our
position with other parties in the matter because it would reveal
what UBS believes to be the probable and reliably estimable
outflow, we do not disclose that amount. In some cases we are
that preclude such
subject
disclosure. With respect to the matters for which we do not
state whether we have established a provision, either: (a) we
have not established a provision, in which case the matter is
treated as a contingent liability under the applicable accounting
standard; or (b) we have established a provision but expect
disclosure of that fact to prejudice seriously our position with
other parties in the matter because it would reveal the fact that
UBS believes an outflow of resources to be probable and reliably
estimable.
With respect to certain litigation, regulatory and similar
matters for which we have established provisions, we are able to
estimate the expected timing of outflows. However, the
aggregate amount of the expected outflows for those matters
for which we are able to estimate expected timing is immaterial
relative to our current and expected levels of liquidity over the
relevant time periods.
The aggregate amount provisioned for litigation, regulatory
and similar matters as a class is disclosed in the “Provisions”
table in Note 18a above. It is not practicable to provide an
aggregate estimate of liability for our litigation, regulatory and
similar matters as a class of contingent liabilities. Doing so would
require UBS to provide speculative legal assessments as to claims
Consolidated financial statements
a) Provisions
The table below presents an overview of total provisions.
USD million
Provisions other than provisions for expected credit losses
Provisions for expected credit losses
TToottaall pprroovviissiioonnss
USD million
BBaallaannccee aatt tthhee bbeeggiinnnniinngg ooff tthhee yyeeaarr
Increase in provisions recognized in the income statement
Release of provisions recognized in the income statement
Provisions used in conformity with designated purpose
Capitalized reinstatement costs
Reclassifications
Foreign currency translation / unwind of discount
BBaallaannccee aatt tthhee eenndd ooff tthhee yyeeaarr
operational risks.
The following table presents additional information for provisions other than provisions for expected credit losses.
3311..1122..2200
31.12.19
22,,557711
225577
22,,882288
2,861
114
2,974
Litigation,
regulatory and
similar matters1
2,475
233
(33)
(603)
0
0
64
22,,113355
Restructuring
Other3
TToottaall 22002200
Total 2019
22,,886611
3,245
106
101
(13)
(113)
(14)
0
4
772222
280
139
(47)
(54)
11
14
20
336633
447722
((9922))
((777700))
1111
00
8888
404
(123)
(659)
1
0
(8)
22,,557711
22,,886611
11 Comprises provisions for losses resulting from legal, liability and compliance risks. 22 Primarily consists of provisions for onerous contracts of USD 49 million as of 31 December 2020 (31 December 2019: USD 61
million) and personnel-related restructuring provisions of USD 18 million as of 31 December 2020 (31 December 2019: USD 40 million). 33 Mainly includes provisions related to real estate, employee benefits and
Restructuring provisions primarily relate to onerous contracts
triggered when natural staff attrition reduces the number of
and severance payments. Onerous contracts for property are
people affected by a restructuring event and therefore the
recognized when UBS is committed to pay for non-lease
estimated costs.
components, such as utilities, service charges, taxes and
Information about provisions and contingent liabilities in
maintenance, when a property is vacated or not fully recovered
respect of litigation, regulatory and similar matters, as a class, is
from sub-tenants. Severance-related provisions are used within a
included in Note 18b. There are no material contingent liabilities
short time period but potential changes in amount may be
associated with the other classes of provisions.
b) Litigation, regulatory and similar matters
The Group operates in a legal and regulatory environment that
constructive obligation as a result of past events, it is probable
exposes it to significant litigation and similar risks arising from
that an outflow of resources will be required, and the amount
disputes and regulatory proceedings. As a result, UBS (which for
can be reliably estimated. Where these factors are otherwise
purposes of this Note may refer to UBS Group AG and/or one or
satisfied, a provision may be established for claims that have not
disputes and legal proceedings, including litigation, arbitration,
expected to be, based on the Group’s experience with similar
and regulatory and criminal investigations.
asserted claims. If any of those conditions is not met, such
Such matters are subject to many uncertainties, and the
matters result in contingent liabilities. If the amount of an
outcome and the timing of resolution are often difficult to
obligation cannot be reliably estimated, a liability exists that is
predict, particularly in the earlier stages of a case. There are also
not recognized even if an outflow of resources is probable.
situations where the Group may enter into a settlement
Accordingly, no provision is established even if the potential
agreement. This may occur in order to avoid the expense,
outflow of resources with respect to such matters could be
management distraction or
reputational
implications of
significant. Developments relating to a matter that occur after
continuing to contest liability, even for those matters for which
the relevant reporting period, but prior to the issuance of
the Group believes it should be exonerated. The uncertainties
financial statements, which affect management’s assessment of
inherent in all such matters affect the amount and timing of any
the provision for such matter (because, for example, the
potential outflows for both matters with respect to which
developments provide evidence of conditions that existed at the
provisions have been established and other contingent liabilities.
end of the reporting period), are adjusting events after the
The Group makes provisions for such matters brought against it
reporting period under IAS 10 and must be recognized in the
when, in the opinion of management after seeking legal advice,
financial statements for the reporting period.
it is more likely than not that the Group has a present legal or
more of its subsidiaries, as applicable) is involved in various
yet been asserted against the Group, but are nevertheless
Provisions for litigation, regulatory and similar matters by business division and in Group Functions1
USD million
BBaallaannccee aatt tthhee bbeeggiinnnniinngg ooff tthhee yyeeaarr
Increase in provisions recognized in the income statement
Release of provisions recognized in the income statement
Provisions used in conformity with designated purpose
Reclassifications
Foreign currency translation / unwind of discount
BBaallaannccee aatt tthhee eenndd ooff tthhee yyeeaarr
Global
Wealth
Manage-
ment
782
213
(24)
(154)
0
44
886611
Personal &
Corporate
Banking
113
0
Asset
Manage-
ment
0
0
Investment
Bank
255
19
Group
Functions
1,325
1
TToottaall 22002200
22,,447755
223333
Total 2019
2,827
258
(6)
(1)
0
10
111155
0
0
0
0
00
(1)
(52)
(3)
10
222277
(2)
(395)
3
0
((3333))
((660033))
00
6644
(81)
(518)
0
(12)
993322
22,,113355
2,475
11 Provisions, if any, for matters described in this disclosure are recorded in Global Wealth Management (item 3 and item 4) and Group Functions (item 2). Provisions, if any, for the matters described in items 1 and 6
of this disclosure are allocated between Global Wealth Management and Personal & Corporate Banking, and provisions, if any, for the matters described in this disclosure in item 5 are allocated between the
Investment Bank and Group Functions.
330
331
331
A guilty plea to, or conviction of, a crime could have material
consequences for UBS. Resolution of regulatory proceedings
may require UBS to obtain waivers of regulatory disqualifications
to maintain certain operations, may entitle regulatory authorities
to
regulatory
terminate
authorizations, and may permit financial market utilities to limit,
suspend or terminate UBS’s participation in such utilities. Failure
to obtain such waivers, or any limitation, suspension or
termination of licenses, authorizations or participations, could
have material consequences for UBS.
The risk of loss associated with litigation, regulatory and
similar matters is a component of operational risk for purposes
of determining capital requirements. Information concerning our
capital requirements and the calculation of operational risk for
this purpose is included in the “Capital, liquidity and funding,
and balance sheet” section of this report.
limit, suspend or
licenses and
relation
to
in
Financial statements Consolidated financial statements
Note 18 Provisions and contingent liabilities (continued)
1. Inquiries regarding cross-border wealth management
businesses
Tax and regulatory authorities in a number of countries have
made inquiries, served requests for information or examined
employees located in their respective jurisdictions relating to the
cross-border wealth management services provided by UBS and
other financial institutions. It is possible that the implementation
of automatic tax information exchange and other measures
relating to cross-border provision of financial services could give
rise to further inquiries in the future. UBS has received disclosure
orders from the Swiss Federal Tax Administration (FTA) to
transfer
international
administrative assistance in tax matters. The requests concern a
number of UBS account numbers pertaining to current and
former clients and are based on data from 2006 and 2008. UBS
the
has
administrative assistance proceedings and their procedural
rights, including the right to appeal. The requests are based on
data received from the German authorities, who seized certain
data related to UBS clients booked in Switzerland during their
investigations and have apparently shared this data with other
European countries. UBS expects additional countries to file
similar requests.
information based on requests for
inform affected clients about
taken steps
to
The Swiss Federal Administrative Court ruled in 2016 that, in
the administrative assistance proceedings related to a French
bulk request, UBS has the right to appeal all final FTA client data
disclosure orders. On 30 July 2018,
the Swiss Federal
Administrative Court granted UBS’s appeal by holding the
French administrative assistance request inadmissible. The FTA
filed a final appeal with the Swiss Federal Supreme Court. On
26 July 2019, the Supreme Court reversed the decision of the
Federal Administrative Court. In December 2019, the court
released its written decision. The decision requires the FTA to
obtain confirmation from the French authorities that transmitted
data will be used only for the purposes stated in their request
before transmitting any data. The stated purpose of the original
request was to obtain information relating to taxes owed by
account holders. Accordingly, any information transferred to the
French authorities must not be passed to criminal authorities or
used in connection with the ongoing case against UBS discussed
in this item. In February 2020, the FTA ordered that UBS would
not be granted party status in the French administrative
assistance proceedings. UBS appealed this decision to the
Federal Administrative Court. On 15
the Federal
Administrative Court upheld the FTA’s decision, holding that
UBS will no longer have party status in these proceedings. The
Swiss Federal Supreme Court has determined that it will not
hear UBS’s appeal of this decision.
July,
Since 2013, UBS (France) S.A., UBS AG and certain former
employees have been under investigation in France for alleged
complicity in unlawful solicitation of clients on French territory,
regarding the laundering of proceeds of tax fraud, and banking
and financial solicitation by unauthorized persons. In connection
with this investigation, the investigating judges ordered UBS AG
to provide bail (“caution”) of EUR 1.1 billion and UBS (France)
S.A. to post bail of EUR 40 million, which was reduced on
appeal to EUR 10 million.
332
332
A trial in the court of first instance took place from 8 October
2018 until 15 November 2018. On 20 February 2019, the court
announced a verdict finding UBS AG guilty of unlawful
solicitation of clients on French territory and aggravated
laundering of the proceeds of tax fraud, and UBS (France) S.A.
guilty of aiding and abetting unlawful solicitation and laundering
the proceeds of tax fraud. The court imposed fines aggregating
EUR 3.7 billion on UBS AG and UBS (France) S.A. and awarded
EUR 800 million of civil damages to the French state. UBS has
appealed the decision. Under French law, the judgment is
suspended while the appeal is pending. The trial originally
scheduled for 2 June 2020 has been rescheduled to 8-24 March
2021. The Court of Appeal will retry the case de novo as to both
the law and the facts, and the fines and penalties can be greater
than or less than those imposed by the court of first instance. A
subsequent appeal to the Cour de Cassation, France’s highest
court, is possible with respect to questions of law.
UBS believes that based on both the law and the facts the
judgment of the court of first instance should be reversed. UBS
believes it followed its obligations under Swiss and French law as
well as the European Savings Tax Directive. Even assuming
liability, which it contests, UBS believes the penalties and
damage amounts awarded greatly exceed the amounts that
could be supported by the law and the facts. In particular, UBS
believes the court incorrectly based the penalty on the total
regularized assets rather than on any unpaid taxes on those
assets for which a fraud has been characterized and further
incorrectly awarded damages based on costs that were not
proven by the civil party. Notwithstanding that UBS believes it
should be acquitted, our balance sheet at 31 December 2020
reflected provisions with respect to this matter in an amount of
EUR 450 million (USD 549 million at 31 December 2020). The
wide range of possible outcomes in this case contributes to a
high degree of estimation uncertainty. The provision reflected on
our balance sheet at 31 December 2020 reflects our best
estimate of possible financial
is
reasonably possible that actual penalties and civil damages could
exceed the provision amount.
implications, although
it
In 2016, UBS was notified by the Belgian investigating judge
that it is under formal investigation (“inculpé”) regarding the
laundering of proceeds of tax fraud, of banking and financial
solicitation by unauthorized persons, and of serious tax fraud.
Our balance sheet at 31 December 2020 reflected provisions
with respect to matters described in this item 1 in an amount
that UBS believes to be appropriate under the applicable
accounting standard. As in the case of other matters for which
we have established provisions, the future outflow of resources
in respect of such matters cannot be determined with certainty
based on currently available information and accordingly may
ultimately prove to be substantially greater (or may be less) than
the provision that we have recognized.
Consolidated financial statements
1. Inquiries regarding cross-border wealth management
A trial in the court of first instance took place from 8 October
businesses
2018 until 15 November 2018. On 20 February 2019, the court
Tax and regulatory authorities in a number of countries have
announced a verdict finding UBS AG guilty of unlawful
made inquiries, served requests for information or examined
solicitation of clients on French territory and aggravated
employees located in their respective jurisdictions relating to the
laundering of the proceeds of tax fraud, and UBS (France) S.A.
cross-border wealth management services provided by UBS and
guilty of aiding and abetting unlawful solicitation and laundering
other financial institutions. It is possible that the implementation
the proceeds of tax fraud. The court imposed fines aggregating
of automatic tax information exchange and other measures
EUR 3.7 billion on UBS AG and UBS (France) S.A. and awarded
relating to cross-border provision of financial services could give
EUR 800 million of civil damages to the French state. UBS has
rise to further inquiries in the future. UBS has received disclosure
appealed the decision. Under French law, the judgment is
orders from the Swiss Federal Tax Administration (FTA) to
suspended while the appeal is pending. The trial originally
transfer
information based on requests for
international
scheduled for 2 June 2020 has been rescheduled to 8-24 March
administrative assistance in tax matters. The requests concern a
2021. The Court of Appeal will retry the case de novo as to both
number of UBS account numbers pertaining to current and
the law and the facts, and the fines and penalties can be greater
former clients and are based on data from 2006 and 2008. UBS
than or less than those imposed by the court of first instance. A
has
taken steps
to
inform affected clients about
the
subsequent appeal to the Cour de Cassation, France’s highest
administrative assistance proceedings and their procedural
court, is possible with respect to questions of law.
rights, including the right to appeal. The requests are based on
UBS believes that based on both the law and the facts the
data received from the German authorities, who seized certain
judgment of the court of first instance should be reversed. UBS
data related to UBS clients booked in Switzerland during their
believes it followed its obligations under Swiss and French law as
investigations and have apparently shared this data with other
well as the European Savings Tax Directive. Even assuming
European countries. UBS expects additional countries to file
liability, which it contests, UBS believes the penalties and
similar requests.
damage amounts awarded greatly exceed the amounts that
The Swiss Federal Administrative Court ruled in 2016 that, in
could be supported by the law and the facts. In particular, UBS
the administrative assistance proceedings related to a French
believes the court incorrectly based the penalty on the total
bulk request, UBS has the right to appeal all final FTA client data
regularized assets rather than on any unpaid taxes on those
disclosure orders. On 30 July 2018,
the Swiss Federal
assets for which a fraud has been characterized and further
Administrative Court granted UBS’s appeal by holding the
incorrectly awarded damages based on costs that were not
French administrative assistance request inadmissible. The FTA
proven by the civil party. Notwithstanding that UBS believes it
filed a final appeal with the Swiss Federal Supreme Court. On
should be acquitted, our balance sheet at 31 December 2020
26 July 2019, the Supreme Court reversed the decision of the
reflected provisions with respect to this matter in an amount of
Federal Administrative Court. In December 2019, the court
EUR 450 million (USD 549 million at 31 December 2020). The
released its written decision. The decision requires the FTA to
wide range of possible outcomes in this case contributes to a
obtain confirmation from the French authorities that transmitted
high degree of estimation uncertainty. The provision reflected on
data will be used only for the purposes stated in their request
our balance sheet at 31 December 2020 reflects our best
before transmitting any data. The stated purpose of the original
estimate of possible financial
implications, although
it
is
request was to obtain information relating to taxes owed by
reasonably possible that actual penalties and civil damages could
account holders. Accordingly, any information transferred to the
exceed the provision amount.
French authorities must not be passed to criminal authorities or
In 2016, UBS was notified by the Belgian investigating judge
used in connection with the ongoing case against UBS discussed
that it is under formal investigation (“inculpé”) regarding the
in this item. In February 2020, the FTA ordered that UBS would
laundering of proceeds of tax fraud, of banking and financial
not be granted party status in the French administrative
solicitation by unauthorized persons, and of serious tax fraud.
assistance proceedings. UBS appealed this decision to the
Our balance sheet at 31 December 2020 reflected provisions
Federal Administrative Court. On 15
July,
the Federal
with respect to matters described in this item 1 in an amount
Administrative Court upheld the FTA’s decision, holding that
that UBS believes to be appropriate under the applicable
UBS will no longer have party status in these proceedings. The
accounting standard. As in the case of other matters for which
Swiss Federal Supreme Court has determined that it will not
we have established provisions, the future outflow of resources
hear UBS’s appeal of this decision.
in respect of such matters cannot be determined with certainty
Since 2013, UBS (France) S.A., UBS AG and certain former
based on currently available information and accordingly may
employees have been under investigation in France for alleged
ultimately prove to be substantially greater (or may be less) than
complicity in unlawful solicitation of clients on French territory,
the provision that we have recognized.
regarding the laundering of proceeds of tax fraud, and banking
and financial solicitation by unauthorized persons. In connection
with this investigation, the investigating judges ordered UBS AG
to provide bail (“caution”) of EUR 1.1 billion and UBS (France)
S.A. to post bail of EUR 40 million, which was reduced on
appeal to EUR 10 million.
Note 18 Provisions and contingent liabilities (continued)
Note 18 Provisions and contingent liabilities (continued)
2. Claims related to sales of residential mortgage-backed
securities and mortgages
From 2002 through 2007, prior to the crisis in the US residential
loan market, UBS was a substantial issuer and underwriter of US
residential mortgage-backed securities
(RMBS) and was a
purchaser and seller of US residential mortgages.
In November 2018, the DOJ filed a civil complaint in the
District Court for the Eastern District of New York. The
complaint seeks unspecified civil monetary penalties under the
Financial Institutions Reform, Recovery and Enforcement Act of
1989 related to UBS’s issuance, underwriting and sale of 40
RMBS transactions in 2006 and 2007. UBS moved to dismiss the
civil complaint on 6 February 2019. On 10 December 2019, the
district court denied UBS’s motion to dismiss.
Our balance sheet at 31 December 2020 reflected a provision
with respect to matters described in this item 2 in an amount
that UBS believes to be appropriate under the applicable
accounting standard. As in the case of other matters for which
we have established provisions, the future outflow of resources
in respect of this matter cannot be determined with certainty
based on currently available information and accordingly may
ultimately prove to be substantially greater (or may be less) than
the provision that we have recognized.
3. Madoff
In relation to the Bernard L. Madoff Investment Securities LLC
(BMIS) investment fraud, UBS AG, UBS (Luxembourg) S.A. (now
UBS Europe SE, Luxembourg branch) and certain other UBS
subsidiaries have been subject to inquiries by a number of
regulators, including the Swiss Financial Market Supervisory
Authority
(FINMA) and the Luxembourg Commission de
Surveillance du Secteur Financier. Those inquiries concerned two
law,
established under
third-party
substantially all assets of which were with BMIS, as well as
certain funds established in offshore jurisdictions with either
direct or indirect exposure to BMIS. These funds faced severe
losses, and the Luxembourg funds are in liquidation. The
documentation establishing both funds identifies UBS entities in
various roles, including custodian, administrator, manager,
distributor and promoter, and indicates that UBS employees
serve as board members.
Luxembourg
funds
In 2009 and 2010, the liquidators of the two Luxembourg
funds filed claims against UBS entities, non-UBS entities and
certain individuals, including current and former UBS employees,
seeking amounts totaling approximately EUR 2.1 billion, which
includes amounts that the funds may be held liable to pay the
trustee for the liquidation of BMIS (BMIS Trustee).
A large number of alleged beneficiaries have filed claims
against UBS entities (and non-UBS entities) for purported losses
relating to the Madoff fraud. The majority of these cases have
been filed in Luxembourg, where decisions that the claims in
eight test cases were inadmissible have been affirmed by the
Luxembourg Court of Appeal, and the Luxembourg Supreme
Court has dismissed a further appeal in one of the test cases.
In the US, the BMIS Trustee filed claims against UBS entities,
among others, in relation to the two Luxembourg funds and one
of the offshore funds. The total amount claimed against all
defendants in these actions was not less than USD 2 billion. In
2014, the US Supreme Court rejected the BMIS Trustee’s motion
for leave to appeal decisions dismissing all claims except those
for the recovery of approximately USD 125 million of payments
alleged to be fraudulent conveyances and preference payments.
In 2016, the bankruptcy court dismissed these claims against the
UBS entities. In February 2019, the Court of Appeals reversed
the dismissal of the BMIS Trustee’s remaining claims, and the US
Supreme Court subsequently denied a petition seeking review of
the Court of Appeals’ decision. The case has been remanded to
the Bankruptcy Court for further proceedings.
4. Puerto Rico
Declines since 2013 in the market prices of Puerto Rico
municipal bonds and of closed-end funds (funds) that are sole-
managed and co-managed by UBS Trust Company of Puerto
Rico and distributed by UBS Financial Services Incorporated of
Puerto Rico (UBS PR) led to multiple regulatory inquiries, which
in 2014 and 2015, led to settlements with the Office of the
Commissioner of Financial Institutions for the Commonwealth of
Puerto Rico, the US Securities and Exchange Commission (SEC)
and the Financial Industry Regulatory Authority in relation to
their examinations of UBS’s operations.
Since that time UBS has received customer complaints and
arbitrations with aggregate claimed damages of USD 3.4 billion,
of which claims with aggregate claimed damages of USD 2.8
billion have been resolved through settlements, arbitration or
withdrawal of the claim. The claims have been filed by clients in
Puerto Rico who own the funds or Puerto Rico municipal bonds
and/or who used their UBS account assets as collateral for UBS
non-purpose
loans; customer complaint and arbitration
allegations include fraud, misrepresentation and unsuitability of
the funds and of the loans.
A shareholder derivative action was filed in 2014 against
various UBS entities and current and certain former directors of
the funds, alleging hundreds of millions of US dollars in losses in
the funds. In 2015, defendants’ motion to dismiss was denied
and a request for permission to appeal that ruling was denied by
the Puerto Rico Supreme Court.
In 2011, a purported derivative action was filed on behalf of
the Employee Retirement System of the Commonwealth of
Puerto Rico (System) against over 40 defendants, including UBS
PR, which was named in connection with its underwriting and
consulting services. Plaintiffs alleged that defendants violated
their purported fiduciary duties and contractual obligations in
connection with the issuance and underwriting of USD 3 billion
of bonds by the System in 2008 and sought damages of over
USD 800 million. In 2016, the court granted the System’s
request to join the action as a plaintiff, but ordered that
plaintiffs must file an amended complaint. In 2017, the court
denied defendants’ motion to dismiss the amended complaint.
In 2020, the court denied plaintiffs’ motion for summary
judgment.
332
333
333
Financial statements Consolidated financial statements
Note 18 Provisions and contingent liabilities (continued)
Beginning in 2015, certain agencies and public corporations
of the Commonwealth of Puerto Rico
(Commonwealth)
defaulted on certain interest payments on Puerto Rico bonds. In
2016, US federal legislation created an oversight board with
power to oversee Puerto Rico’s finances and to restructure its
debt. The oversight board has imposed a stay on the exercise of
certain creditors’ rights. In 2017, the oversight board placed
certain of the bonds into a bankruptcy-like proceeding under the
supervision of a Federal District Judge.
In May 2019, the oversight board filed complaints in Puerto
Rico federal district court bringing claims against financial, legal
and accounting firms that had participated in Puerto Rico
municipal bond offerings, including UBS, seeking a return of
underwriting and swap fees paid in connection with those
offerings. UBS estimates that it received approximately USD 125
million in fees in the relevant offerings.
In August 2019, and February and November 2020, four US
insurance companies that insured issues of Puerto Rico municipal
bonds sued UBS and several other underwriters of Puerto Rico
municipal bonds. The actions collectively seek recovery of an
aggregate of USD 955 million in damages from the defendants.
The plaintiffs in these cases claim that defendants failed to
reasonably investigate financial statements in the offering
materials for the insured Puerto Rico bonds issued between
2002 and 2007, which plaintiffs argue they relied upon in
agreeing to insure the bonds notwithstanding that they had no
contractual relationship with the underwriters.
Our balance sheet at 31 December 2020 reflected provisions
with respect to matters described in this item 4 in amounts that
UBS believes to be appropriate under the applicable accounting
standard. As in the case of other matters for which we have
established provisions, the future outflow of resources in respect
of such matters cannot be determined with certainty based on
currently available information and accordingly may ultimately
prove to be substantially greater (or may be less) than the
provisions that we have recognized.
5. Foreign exchange, LIBOR and benchmark rates, and other
trading practices
Foreign exchange-related regulatory matters: Beginning in 2013,
numerous authorities commenced investigations concerning
possible manipulation of foreign exchange markets and precious
metals prices. As a result of these investigations, UBS entered
into resolutions with the UK Financial Conduct Authority (FCA),
the US Commodity Futures Trading Commission (CFTC), FINMA,
the Board of Governors of the Federal Reserve System (Federal
Reserve Board) and the Connecticut Department of Banking, the
DOJ’s Criminal Division and the European Commission. UBS has
ongoing obligations under the Cease and Desist Order of the
Federal Reserve Board and the Office of the Comptroller of the
Currency (as successor to the Connecticut Department of
Banking), and to cooperate with relevant authorities and to
undertake certain remediation measures. UBS has also been
granted conditional immunity by the Antitrust Division of the
DOJ and by authorities in other jurisdictions in connection with
potential competition law violations relating to foreign exchange
and precious metals businesses. Investigations relating to foreign
exchange matters by certain authorities remain ongoing
notwithstanding these resolutions.
334
334
Foreign exchange-related civil litigation: Putative class actions
have been filed since 2013 in US federal courts and in other
jurisdictions against UBS and other banks on behalf of putative
classes of persons who engaged in foreign currency transactions
with any of the defendant banks. UBS has resolved US federal
court class actions relating to foreign currency transactions with
the defendant banks and persons who transacted in foreign
exchange futures contracts and options on such futures under a
settlement agreement that provides for UBS to pay an aggregate
of USD 141 million and provide cooperation to the settlement
classes. Certain class members have excluded themselves from
that settlement and have filed individual actions in US and
English courts against UBS and other banks, alleging violations
of US and European competition laws and unjust enrichment.
In 2015, a putative class action was filed in federal court
against UBS and numerous other banks on behalf of persons
and businesses in the US who directly purchased foreign
currency from the defendants and alleged co-conspirators for
their own end use. In March 2017, the court granted UBS’s (and
the other banks’) motions to dismiss the complaint. The plaintiffs
filed an amended complaint in August 2017. In March 2018, the
court denied the defendants’ motions to dismiss the amended
complaint.
In 2017, two putative class actions were filed in federal court
in New York against UBS and numerous other banks on behalf
of persons and entities who had indirectly purchased foreign
exchange instruments from a defendant or co-conspirator in the
US, and a consolidated complaint was filed in June 2017. In
March 2018, the court dismissed the consolidated complaint. In
October 2018, the court granted plaintiffs’ motion seeking leave
to file an amended complaint. UBS and 11 other banks have
reached an agreement with the plaintiffs to settle the class
action for a total of USD 10 million. The court approved the
settlement in November 2020.
LIBOR and other benchmark-related regulatory matters:
Numerous government agencies, including the SEC, the CFTC,
the DOJ, the FCA, the UK Serious Fraud Office, the Monetary
Authority of Singapore, the Hong Kong Monetary Authority,
FINMA, various state attorneys general in the US and competition
authorities in various jurisdictions, have conducted investigations
regarding potential improper attempts by UBS, among others, to
manipulate LIBOR and other benchmark rates at certain times.
UBS reached settlements or otherwise concluded investigations
relating to benchmark interest rates with the investigating
authorities. UBS has ongoing obligations to cooperate with the
authorities with whom we have reached resolutions and to
undertake certain
to
benchmark interest rate submissions. UBS has been granted
conditional leniency or conditional immunity from authorities in
certain jurisdictions, including the Antitrust Division of the DOJ
and the Swiss Competition Commission (WEKO), in connection
with potential antitrust or competition law violations related to
certain rates. However, UBS has not reached a final settlement
with WEKO, as the Secretariat of WEKO has asserted that UBS
does not qualify for full immunity.
remediation measures with
respect
Consolidated financial statements
Beginning in 2015, certain agencies and public corporations
Foreign exchange-related civil litigation: Putative class actions
of the Commonwealth of Puerto Rico
(Commonwealth)
have been filed since 2013 in US federal courts and in other
defaulted on certain interest payments on Puerto Rico bonds. In
jurisdictions against UBS and other banks on behalf of putative
2016, US federal legislation created an oversight board with
classes of persons who engaged in foreign currency transactions
power to oversee Puerto Rico’s finances and to restructure its
with any of the defendant banks. UBS has resolved US federal
debt. The oversight board has imposed a stay on the exercise of
court class actions relating to foreign currency transactions with
certain creditors’ rights. In 2017, the oversight board placed
the defendant banks and persons who transacted in foreign
certain of the bonds into a bankruptcy-like proceeding under the
exchange futures contracts and options on such futures under a
supervision of a Federal District Judge.
settlement agreement that provides for UBS to pay an aggregate
In May 2019, the oversight board filed complaints in Puerto
of USD 141 million and provide cooperation to the settlement
Rico federal district court bringing claims against financial, legal
classes. Certain class members have excluded themselves from
and accounting firms that had participated in Puerto Rico
that settlement and have filed individual actions in US and
municipal bond offerings, including UBS, seeking a return of
English courts against UBS and other banks, alleging violations
underwriting and swap fees paid in connection with those
of US and European competition laws and unjust enrichment.
offerings. UBS estimates that it received approximately USD 125
In 2015, a putative class action was filed in federal court
million in fees in the relevant offerings.
against UBS and numerous other banks on behalf of persons
In August 2019, and February and November 2020, four US
and businesses in the US who directly purchased foreign
insurance companies that insured issues of Puerto Rico municipal
currency from the defendants and alleged co-conspirators for
bonds sued UBS and several other underwriters of Puerto Rico
their own end use. In March 2017, the court granted UBS’s (and
municipal bonds. The actions collectively seek recovery of an
the other banks’) motions to dismiss the complaint. The plaintiffs
aggregate of USD 955 million in damages from the defendants.
filed an amended complaint in August 2017. In March 2018, the
The plaintiffs in these cases claim that defendants failed to
court denied the defendants’ motions to dismiss the amended
reasonably investigate financial statements in the offering
complaint.
materials for the insured Puerto Rico bonds issued between
In 2017, two putative class actions were filed in federal court
2002 and 2007, which plaintiffs argue they relied upon in
in New York against UBS and numerous other banks on behalf
agreeing to insure the bonds notwithstanding that they had no
of persons and entities who had indirectly purchased foreign
contractual relationship with the underwriters.
exchange instruments from a defendant or co-conspirator in the
Our balance sheet at 31 December 2020 reflected provisions
US, and a consolidated complaint was filed in June 2017. In
with respect to matters described in this item 4 in amounts that
March 2018, the court dismissed the consolidated complaint. In
UBS believes to be appropriate under the applicable accounting
October 2018, the court granted plaintiffs’ motion seeking leave
standard. As in the case of other matters for which we have
to file an amended complaint. UBS and 11 other banks have
established provisions, the future outflow of resources in respect
reached an agreement with the plaintiffs to settle the class
of such matters cannot be determined with certainty based on
action for a total of USD 10 million. The court approved the
currently available information and accordingly may ultimately
settlement in November 2020.
prove to be substantially greater (or may be less) than the
LIBOR and other benchmark-related regulatory matters:
provisions that we have recognized.
Numerous government agencies, including the SEC, the CFTC,
the DOJ, the FCA, the UK Serious Fraud Office, the Monetary
5. Foreign exchange, LIBOR and benchmark rates, and other
Authority of Singapore, the Hong Kong Monetary Authority,
trading practices
FINMA, various state attorneys general in the US and competition
Foreign exchange-related regulatory matters: Beginning in 2013,
authorities in various jurisdictions, have conducted investigations
numerous authorities commenced investigations concerning
regarding potential improper attempts by UBS, among others, to
possible manipulation of foreign exchange markets and precious
manipulate LIBOR and other benchmark rates at certain times.
metals prices. As a result of these investigations, UBS entered
UBS reached settlements or otherwise concluded investigations
into resolutions with the UK Financial Conduct Authority (FCA),
relating to benchmark interest rates with the investigating
the US Commodity Futures Trading Commission (CFTC), FINMA,
authorities. UBS has ongoing obligations to cooperate with the
the Board of Governors of the Federal Reserve System (Federal
authorities with whom we have reached resolutions and to
Reserve Board) and the Connecticut Department of Banking, the
undertake certain
remediation measures with
respect
to
DOJ’s Criminal Division and the European Commission. UBS has
benchmark interest rate submissions. UBS has been granted
ongoing obligations under the Cease and Desist Order of the
conditional leniency or conditional immunity from authorities in
Federal Reserve Board and the Office of the Comptroller of the
certain jurisdictions, including the Antitrust Division of the DOJ
Currency (as successor to the Connecticut Department of
and the Swiss Competition Commission (WEKO), in connection
Banking), and to cooperate with relevant authorities and to
with potential antitrust or competition law violations related to
undertake certain remediation measures. UBS has also been
certain rates. However, UBS has not reached a final settlement
granted conditional immunity by the Antitrust Division of the
with WEKO, as the Secretariat of WEKO has asserted that UBS
DOJ and by authorities in other jurisdictions in connection with
does not qualify for full immunity.
potential competition law violations relating to foreign exchange
and precious metals businesses. Investigations relating to foreign
exchange matters by certain authorities remain ongoing
notwithstanding these resolutions.
334
Note 18 Provisions and contingent liabilities (continued)
Note 18 Provisions and contingent liabilities (continued)
LIBOR and other benchmark-related civil litigation: A number
of putative class actions and other actions are pending in the
federal courts in New York against UBS and numerous other
banks on behalf of parties who transacted in certain interest rate
benchmark-based derivatives. Also pending in the US and in
other jurisdictions are a number of other actions asserting losses
related to various products whose interest rates were linked to
LIBOR and other benchmarks,
rate
mortgages, preferred and debt securities, bonds pledged as
collateral, loans, depository accounts, investments and other
allege
interest-bearing
manipulation, through various means, of certain benchmark
interest rates, including USD LIBOR, Euroyen TIBOR, Yen LIBOR,
EURIBOR, CHF LIBOR, GBP LIBOR, SGD SIBOR and SOR and
Australian BBSW, and seek unspecified compensatory and other
damages under varying legal theories.
including adjustable
instruments.
complaints
The
USD LIBOR class and individual actions in the US: In 2013 and
2015, the district court in the USD LIBOR actions dismissed, in
whole or in part, certain plaintiffs’ antitrust claims, federal
racketeering claims, CEA claims, and state common law claims.
Although the Second Circuit vacated the district court’s
judgment dismissing antitrust claims, the district court again
dismissed antitrust claims against UBS in 2016. Certain plaintiffs
have appealed that decision to the Second Circuit. Separately, in
2018, the Second Circuit reversed in part the district court’s
2015 decision dismissing certain individual plaintiffs’ claims and
certain of these actions are now proceeding. UBS entered into
an agreement in 2016 with representatives of a class of
bondholders to settle their USD LIBOR class action. The
agreement has received final court approval. In 2018, the district
court denied plaintiffs’ motions for class certification in the
USD class actions for claims pending against UBS, and plaintiffs
sought permission to appeal that ruling to the Second Circuit. In
July 2018, the Second Circuit denied the petition to appeal of
the class of USD lenders and in November 2018 denied the
petition of the USD exchange class. In December 2019, UBS
entered into an agreement with representatives of the class of
USD lenders to settle their USD LIBOR class action. The
agreement has received final court approval. In January 2019, a
putative class action was filed in the District Court for the
Southern District of New York against UBS and numerous other
banks on behalf of US residents who, since 1 February 2014,
directly transacted with a defendant bank
in USD LIBOR
instruments. The complaint asserts antitrust claims. The
defendants moved to dismiss the complaint in August 2019. On
26 March 2020 the court granted defendants’ motion to dismiss
the complaint in its entirety. Plaintiffs have appealed the
dismissal. In August 2020, an individual action was filed in the
Northern District of California against UBS and numerous other
banks alleging that the defendants conspired to fix the interest
rate used as the basis for loans to consumers by jointly setting
the USD LIBOR rate and monopolized the market for LIBOR-
based consumer loans and credit cards.
Other benchmark class actions in the US: In 2014, 2015 and
2017, the court in one of the Euroyen TIBOR lawsuits dismissed
certain of the plaintiffs’ claims, including plaintiffs’ federal
antitrust and racketeering claims. In August 2020, the court
granted defendants’ motion for judgment on the pleadings and
dismissed the lone remaining claim in the action as impermissibly
extraterritorial. Plaintiffs have appealed. In 2017, the court
dismissed the other Yen LIBOR / Euroyen TIBOR action in its
entirety on standing grounds. In April 2020, the appeals court
reversed the dismissal and in August 2020 plaintiffs in that
action filed an amended complaint. Defendants moved to
dismiss the amended complaint in October 2020. In 2017, the
court dismissed the CHF LIBOR action on standing grounds and
failure to state a claim. Plaintiffs filed an amended complaint
following the dismissal, and the court granted a renewed
motion to dismiss in September 2019. Plaintiffs have appealed.
Also in 2017, the court in the EURIBOR lawsuit dismissed the
case as to UBS and certain other foreign defendants for lack of
personal jurisdiction. Plaintiffs have appealed. In October 2018,
the court in the SIBOR / SOR action dismissed all but one of
plaintiffs’ claims against UBS. Plaintiffs filed an amended
complaint following the dismissal, and the courts granted a
renewed motion to dismiss in July 2019. Plaintiffs have
appealed. In November 2018, the court in the BBSW lawsuit
dismissed the case as to UBS and certain other foreign
defendants for lack of personal jurisdiction. Following that
dismissal, plaintiffs filed an amended complaint in April 2019,
which UBS and other defendants named in the amended
complaint moved to dismiss. In February 2020, the court in the
BBSW action granted in part and denied in part defendants’
motions to dismiss the amended complaint. In August 2020,
UBS and other BBSW defendants joined a motion for judgment
on the pleadings. The court dismissed the GBP LIBOR action in
August 2019. Plaintiffs have appealed.
Government bonds: Putative class actions have been filed since
2015 in US federal courts against UBS and other banks on behalf
of persons who participated in markets for US Treasury securities
since 2007. A consolidated complaint was filed in 2017 in the US
District Court for the Southern District of New York alleging that
the banks colluded with respect to, and manipulated prices of, US
Treasury securities sold at auction and in the secondary market
and asserting claims under the antitrust laws and for unjust
enrichment. Defendants’ motions to dismiss the consolidated
complaint are pending. Similar class actions have been filed
concerning European government bonds and other government
bonds.
UBS and
reportedly other banks are
to
investigations and requests for
information from various
authorities regarding government bond trading practices. As a
result of its review to date, UBS has taken appropriate action.
responding
With respect to additional matters and jurisdictions not
encompassed by the settlements and orders referred to above,
our balance sheet at 31 December 2020 reflected a provision in
an amount that UBS believes to be appropriate under the
applicable accounting standard. As in the case of other matters
for which we have established provisions, the future outflow of
resources in respect of such matters cannot be determined with
certainty based on currently available
information and
accordingly may ultimately prove to be substantially greater (or
may be less) than the provision that we have recognized.
335
335
Financial statements Consolidated financial statements
Note 18 Provisions and contingent liabilities (continued)
6. Swiss retrocessions
The Federal Supreme Court of Switzerland ruled in 2012, in a
test case against UBS, that distribution fees paid to a firm for
distributing third-party and intra-group investment funds and
structured products must be disclosed and surrendered to clients
who have entered into a discretionary mandate agreement with
the firm, absent a valid waiver. FINMA issued a supervisory note
to all Swiss banks in response to the Supreme Court decision.
UBS has met the FINMA requirements and has notified all
potentially affected clients.
The Supreme Court decision has resulted, and may continue
to result, in a number of client requests for UBS to disclose and
potentially surrender retrocessions. Client requests are assessed
on a case-by-case basis. Considerations taken into account when
assessing these cases include, among other things, the existence
of a discretionary mandate and whether or not the client
documentation contained a valid waiver with respect to
distribution fees.
Our balance sheet at 31 December 2020 reflected a provision
with respect to matters described in this item 6 in an amount
that UBS believes to be appropriate under the applicable
accounting standard. The ultimate exposure will depend on
client requests and the resolution thereof, factors that are
difficult to predict and assess. Hence, as in the case of other
matters for which we have established provisions, the future
outflow of resources in respect of such matters cannot be
determined with certainty based on currently available
information and accordingly may ultimately prove to be
substantially greater (or may be less) than the provision that we
have recognized.
Note 19 Other liabilities
a) Other financial liabilities measured at amortized cost
USD million
Other accrued expenses
Accrued interest expenses
Settlement and clearing accounts
Lease liabilities
Other
TToottaall ootthheerr ffiinnaanncciiaall lliiaabbiilliittiieess mmeeaassuurreedd aatt aammoorrttiizzeedd ccoosstt
b) Other financial liabilities designated at fair value
USD million
Financial liabilities related to unit-linked investment contracts
Securities financing transactions
Over-the-counter debt instruments
Other
TToottaall ootthheerr ffiinnaanncciiaall lliiaabbiilliittiieess ddeessiiggnnaatteedd aatt ffaaiirr vvaalluuee
of which: life-to-date own credit (gain) / loss
c) Other non-financial liabilities
USD million
Compensation-related liabilities1,2
of which: Deferred Contingent Capital Plan
of which: financial advisor compensation plans 2
of which: other compensation plans
of which: net defined benefit liability
of which: other compensation-related liabilities 3
Deferred tax liabilities
Current tax liabilities
VAT and other tax payables
Deferred income
Other
TToottaall ootthheerr nnoonn--ffiinnaanncciiaall lliiaabbiilliittiieess
3311..1122..2200
31.12.19
11,,669966
11,,335555
11,,119999
33,,992277
11,,555533
99,,772299
3311..1122..2200
2200,,997755
77,,331177
22,,006600
3355
3300,,338877
((3366))
1,928
1,562
1,379
3,943
900
9,712
31.12.19
28,145
5,742
2,022
31
35,940
(4)
3311..1122..2200
31.12.19
77,,446688
11,,885588
11,,550000
22,,774400
772222
664488
556644
11,,000099
552233
222288
6611
6,855
1,855
1,506
2,310
633
552
311
852
475
141
202
99,,885544
8,837
11 In 2020, UBS modified the conditions for continued vesting of certain outstanding deferred compensation awards for qualifying employees. Refer to Note 1b for more information. 22 Comparative-period
information has been restated. Refer to Note 1b for more information. 33 Includes liabilities for payroll taxes and untaken vacation.
336
336
Consolidated financial statements
Note 18 Provisions and contingent liabilities (continued)
Additional information
6. Swiss retrocessions
of a discretionary mandate and whether or not the client
The Federal Supreme Court of Switzerland ruled in 2012, in a
documentation contained a valid waiver with respect to
test case against UBS, that distribution fees paid to a firm for
distribution fees.
distributing third-party and intra-group investment funds and
Our balance sheet at 31 December 2020 reflected a provision
structured products must be disclosed and surrendered to clients
with respect to matters described in this item 6 in an amount
who have entered into a discretionary mandate agreement with
that UBS believes to be appropriate under the applicable
the firm, absent a valid waiver. FINMA issued a supervisory note
accounting standard. The ultimate exposure will depend on
to all Swiss banks in response to the Supreme Court decision.
client requests and the resolution thereof, factors that are
UBS has met the FINMA requirements and has notified all
difficult to predict and assess. Hence, as in the case of other
potentially affected clients.
matters for which we have established provisions, the future
The Supreme Court decision has resulted, and may continue
outflow of resources in respect of such matters cannot be
to result, in a number of client requests for UBS to disclose and
determined with certainty based on currently available
potentially surrender retrocessions. Client requests are assessed
information and accordingly may ultimately prove to be
on a case-by-case basis. Considerations taken into account when
substantially greater (or may be less) than the provision that we
assessing these cases include, among other things, the existence
have recognized.
a) Other financial liabilities measured at amortized cost
Note 19 Other liabilities
USD million
Other accrued expenses
Accrued interest expenses
Settlement and clearing accounts
Lease liabilities
Other
TToottaall ootthheerr ffiinnaanncciiaall lliiaabbiilliittiieess mmeeaassuurreedd aatt aammoorrttiizzeedd ccoosstt
b) Other financial liabilities designated at fair value
USD million
Financial liabilities related to unit-linked investment contracts
Securities financing transactions
Over-the-counter debt instruments
Other
TToottaall ootthheerr ffiinnaanncciiaall lliiaabbiilliittiieess ddeessiiggnnaatteedd aatt ffaaiirr vvaalluuee
of which: life-to-date own credit (gain) / loss
c) Other non-financial liabilities
USD million
Compensation-related liabilities1,2
of which: Deferred Contingent Capital Plan
of which: financial advisor compensation plans 2
of which: other compensation plans
of which: net defined benefit liability
of which: other compensation-related liabilities 3
Deferred tax liabilities
Current tax liabilities
VAT and other tax payables
Deferred income
Other
TToottaall ootthheerr nnoonn--ffiinnaanncciiaall lliiaabbiilliittiieess
336
11 In 2020, UBS modified the conditions for continued vesting of certain outstanding deferred compensation awards for qualifying employees. Refer to Note 1b for more information. 22 Comparative-period
information has been restated. Refer to Note 1b for more information. 33 Includes liabilities for payroll taxes and untaken vacation.
99,,885544
8,837
Note 20 Expected credit loss measurement
a) Expected credit losses in the period
Total net credit loss expenses were USD 694 million in 2020,
reflecting net credit loss expenses of USD 266 million related to
stage 1 and 2 positions and USD 429 million net credit loss
expenses related to credit-impaired (stage 3) positions.
Stage 1 and 2 net credit loss expenses of USD 266 million
were primarily driven by a net expense of USD 200 million from
updating the forward-looking scenarios and their associated
weightings, factoring in updated macroeconomic assumptions
to reflect the effects of the COVID-19 pandemic, with
approximately half from the baseline scenario and half from the
severe downside scenario. The main drivers included updated
GDP and unemployment assumptions in Switzerland and the US,
primarily impacting Large corporate clients and, to a lesser
extent, Private clients with mortgages, Real estate financing and
SME clients. These scenario updates impacted remeasurements
for stage 1 and 2 positions without stage transfers and triggered
exposure movements between stages, primarily from stage 1 to
stage 2 as probabilities of default increased.
In addition to the scenario related effects, stage 1 and 2
expenses of USD 73 million arose from new transactions, net of
releases from derecognized transactions, primarily from Large
corporate clients and SME clients. A further USD 32 million
stage 1 and 2 net release of expenses resulted from a number of
model updates, primarily impacting Financial intermediaries, Real
estate financing and SME clients. The remaining stage 1 and 2
expenses of USD 24 million mainly reflect the effects of post-
model adjustments for selected exposures to Swiss SME clients,
as well as remeasurements within the loan book, mainly in the
Investment Bank.
Credit loss (expense) / release
The changes in the macroeconomic environment in the
second half of 2020 generally included more optimistic forward-
looking assumptions for both the baseline and severe downside
scenarios compared with those applied in the first half of the
year. Management applied a post-model expense adjustment of
USD 117 million to offset the stage 1 and 2 releases that would
have otherwise arisen, deeming them to be premature given the
high degree of prevailing uncertainties and the wide range of
reasonable possible outcomes.
› Refer to Note 20b for more information
Stage 3 net expenses of USD 429 million were recognized
across a number of defaulted positions. In the Investment Bank,
stage 3 net expenses of USD 217 million were recognized, of
which USD 81 million related to an exposure to a client in the
travel sector. In Personal & Corporate Banking, stage 3 net
expenses of USD 128 million were recognized, of which USD 59
million related to a case of fraud at a commodity trade finance
counterparty, which affected a number of lenders, including
UBS. In Global Wealth Management, stage 3 net expenses of
USD 40 million were recognized, primarily across a small number
of collateralized and securities-based lending positions. In Group
Functions, stage 3 expenses of USD 42 million were recognized
from one energy-related exposure in the Non-core and Legacy
Portfolio.
USD million
FFoorr tthhee yyeeaarr eennddeedd 3311..1122..2200
Stages 1 and 2
Stage 3
TToottaall ccrreeddiitt lloossss ((eexxppeennssee)) // rreelleeaassee
FFoorr tthhee yyeeaarr eennddeedd 3311..1122..1199
Stages 1 and 2
Stage 3
TToottaall ccrreeddiitt lloossss ((eexxppeennssee)) // rreelleeaassee
FFoorr tthhee yyeeaarr eennddeedd 3311..1122..1188
Stages 1 and 2
Stage 3
TToottaall ccrreeddiitt lloossss ((eexxppeennssee)) // rreelleeaassee
Global
Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group
Functions
((4488))
((4400))
((8888))
3
(23)
((2200))
0
(15)
((1155))
((112299))
((112288))
((225577))
23
(44)
((2211))
0
(56)
((5566))
00
((22))
((22))
0
0
00
0
0
00
((8888))
((221177))
((330055))
(4)
(26)
((3300))
(9)
(29)
((3388))
00
((4422))
((4422))
0
(7)
((77))
(1)
(8)
((88))
Total
((226666))
((442299))
((669944))
22
(100)
((7788))
(9)
(109)
((111188))
337
337
3311..1122..2200
31.12.19
11,,669966
11,,335555
11,,119999
33,,992277
11,,555533
99,,772299
3311..1122..2200
2200,,997755
77,,331177
22,,006600
3355
3300,,338877
((3366))
77,,446688
11,,885588
11,,550000
22,,774400
772222
664488
556644
11,,000099
552233
222288
6611
1,928
1,562
1,379
3,943
900
9,712
31.12.19
28,145
5,742
2,022
31
35,940
(4)
6,855
1,855
1,506
2,310
633
552
311
852
475
141
202
3311..1122..2200
31.12.19
Financial statements
Consolidated financial statements
Note 20 Expected credit loss measurement (continued)
b) Changes to ECL models, scenarios, scenario weights and key inputs
stress scenario, were updated throughout 2020 using the most
recent available macroeconomic and market information.
The baseline scenario updates during the first half of 2020
assumed a deterioration of GDP in relevant markets, especially in
the US and in Switzerland, increasing unemployment, including
a sharp increase in the US to previously unseen levels, lower
equity prices and higher market volatility. House prices were
assumed to be largely flat in Switzerland over 2020 but to
decrease
the US. Overall, only modest economic
improvements were expected from the second half of 2020. The
severe downside assumptions were considered to be consistent
with assumptions for COVID-19-related disruption but to a
significantly more adverse degree than what was considered
under the baseline scenario, with a full year contraction
expected to continue into 2021 and only a moderate recovery
starting from the end of 2021.
in
in
Improvements
macroeconomic
forward-looking
assumptions started from the third quarter 2020, with the
fourth quarter 2020 in particular including more optimistic
assumptions for the baseline, with increased GDP growth
forecasts and lower unemployment levels in the US and in
Switzerland in particular, given improvements in economic
activity as well as greater optimism regarding the availability and
effective distribution of vaccines and continued government
support. In addition, the assumptions for the severe downside
scenario were made less pessimistic in the second half of 2020.
The table on the following page details the key assumptions
for the baseline and severe downside scenarios applied as of
31 December 2020. The outlook of the one-year and three-year
cumulative GDP growth rates in the baseline are significantly
higher than those seen at the end of 2019, as the economy is
expected to recover from the sharp contractions seen in mid-
2020. However, GDP levels are expected to remain below
31 December 2019 levels until 2022 in the US and Switzerland,
and until 2023 in the Eurozone. The GDP growth rates in the
severe downside scenario are also higher, to reflect the recovery
from the weaker starting levels. Under the baseline scenario, US
unemployment is expected to decline to 5.5% by the end of the
first year and to 4.5% by the end of the third year.
Unemployment rates in the Eurozone and Switzerland are
expected to rise modestly in the first year in the baseline
scenario but to recover by the end of the third year. The severe
downside scenario includes marked increases in unemployment.
Refer to Note 1a for information about the principles governing
ECL models, scenarios, scenario weights and key inputs applied.
During 2020, management carefully considered guidance
issued by supervisory authorities concerning the interpretation of
key elements of IFRS 9, Financial instruments, in the context of
COVID-19.
Governance
Comprehensive cross-functional and cross-divisional governance
processes are in place and used to discuss and approve scenario
updates and weights, to assess whether significant increases in
credit risk resulted in stage transfers, to review model outputs
and to reach conclusions regarding post-model adjustments.
Model changes
During 2020, the probability of default (PD) and loss given
default (LGD) models applied to Financial intermediaries, Large
corporate clients, Real estate financing and SME clients were
revised to reflect updates to PD and LGD risk drivers and
macroeconomic dependencies.
The model updates resulted in a USD 32 million decrease in
ECL allowances, primarily in Personal & Corporate Banking
across Financial intermediaries, Real estate financing and SME
clients.
Scenario and key input updates
During 2020, the four scenarios and related macroeconomic
factors that were applied at the end of 2019 were reviewed in
light of the economic and political conditions and prevailing
uncertainties through a series of governance meetings, with
input from UBS risk and finance experts across the regions and
business divisions. Scenario assumptions are benchmarked
against external data, e.g., from Bloomberg Consensus, Oxford
Economics and
International Monetary Fund World
Economic Outlook (IMF WEO). The hypothetical scenarios, in
particular the upside and mild downside scenarios, were viewed
less plausible. Given the considerable uncertainties associated
with the economic conditions, an exceptional interim design of
these scenarios was not deemed appropriate. Therefore,
management concluded that the probability weights of the
upside and the mild downside scenarios would be set to zero.
the
The baseline scenario, which is aligned to the economic and
market assumptions used for UBS’s business planning purposes,
and the severe downside scenario, which is the Group’s binding
338
338
Note 20 Expected credit loss measurement (continued)
Note 20 Expected credit loss measurement (continued)
Scenario weights and post-model adjustments
As a consequence of the exceptional circumstances and
prevailing uncertainties during 2020 and as at 31 December
2020, the weight allocations shifted significantly since 2019,
with the baseline scenario weighted at 70% and the severe
downside scenario at 30% through the end of the third quarter
of 2020, to best reflect management’s sentiment regarding the
boundaries of economic outcomes. During the fourth quarter of
2020, changes in the macro-economic environment generally
included more optimistic forward-looking assumptions as stated
above. However, developments as at 31 December 2020,
including an increase in infection and hospitalization rates, as
well as strict lockdowns in many jurisdictions, led to a continued
high level of uncertainty in relation to the effects of the
pandemic and its impact on the global economy. These
developments gave rise to questions around whether the
Scenario assumptions
3311..1122..2200
RReeaall GGDDPP ggrroowwtthh ((%% cchhaannggee))
United States
Eurozone
Switzerland
CCoonnssuummeerr pprriiccee iinnddeexx ((%% cchhaannggee))
United States
Eurozone
Switzerland
UUnneemmppllooyymmeenntt rraattee ((eenndd--ooff--ppeerriioodd lleevveell,, %%))11
United States
Eurozone
Switzerland
FFiixxeedd iinnccoommee:: 1100--yyeeaarr ggoovveerrnnmmeenntt bboonnddss ((cchhaannggee iinn yyiieellddss,, bbaassiiss ppooiinnttss))
USD
EUR
CHF
against external data, e.g., from Bloomberg Consensus, Oxford
2020. However, GDP levels are expected to remain below
EEqquuiittyy iinnddiicceess ((%% cchhaannggee))
S&P 500
EuroStoxx 50
SPI
SSwwiissss rreeaall eessttaattee ((%% cchhaannggee))
Single-Family Homes
OOtthheerr rreeaall eessttaattee ((%% cchhaannggee))
assumptions will play out as forecasted. As a consequence, in
the fourth quarter 2020, management decreased the weight
placed on the baseline scenario from 70% to 60% and
increased the weight placed on the severe downside scenario
from 30% to 40%, and applied additionally a post-model
adjustment of USD 117 million to offset the stage 1 and 2 ECL
releases which would have otherwise arisen from the scenario
update effects.
ECL scenario
Assigned weights in %
31.12.20
31.12.19
Upside
Baseline
Mild downside
Severe downside
0.0
60.0
0.0
40.0
7.5
42.5
35.0
15.0
OOnnee yyeeaarr
TThhrreeee yyeeaarrss ccuummuullaattiivvee
BBaasseelliinnee SSeevveerree ddoowwnnssiiddee
BBaasseelliinnee SSeevveerree ddoowwnnssiiddee
2.7
2.5
3.3
1.7
1.4
0.3
5.5
9.5
3.8
22.0
4.0
13.0
(2.9)
3.8
(0.8)
3.4
(5.9)
(8.7)
(6.6)
(1.2)
(1.3)
(1.8)
12.1
14.1
6.1
(50.0)
(35.0)
(70.0)
(50.2)
(57.6)
(53.6)
(17.0)
9.1
9.9
9.0
5.5
3.9
0.9
4.5
8.0
3.2
46.0
21.0
31.0
(1.7)
13.5
5.8
7.1
(3.8)
(10.3)
(5.7)
0.4
(1.7)
(1.6)
9.9
16.4
6.8
(15.0)
(25.0)
(35.0)
(40.1)
(50.4)
(44.2)
(30.0)
Consolidated financial statements
b) Changes to ECL models, scenarios, scenario weights and key inputs
Refer to Note 1a for information about the principles governing
stress scenario, were updated throughout 2020 using the most
ECL models, scenarios, scenario weights and key inputs applied.
recent available macroeconomic and market information.
During 2020, management carefully considered guidance
The baseline scenario updates during the first half of 2020
issued by supervisory authorities concerning the interpretation of
assumed a deterioration of GDP in relevant markets, especially in
key elements of IFRS 9, Financial instruments, in the context of
the US and in Switzerland, increasing unemployment, including
COVID-19.
Governance
Model changes
a sharp increase in the US to previously unseen levels, lower
equity prices and higher market volatility. House prices were
assumed to be largely flat in Switzerland over 2020 but to
Comprehensive cross-functional and cross-divisional governance
decrease
in
the US. Overall, only modest economic
processes are in place and used to discuss and approve scenario
improvements were expected from the second half of 2020. The
updates and weights, to assess whether significant increases in
severe downside assumptions were considered to be consistent
credit risk resulted in stage transfers, to review model outputs
with assumptions for COVID-19-related disruption but to a
and to reach conclusions regarding post-model adjustments.
significantly more adverse degree than what was considered
under the baseline scenario, with a full year contraction
expected to continue into 2021 and only a moderate recovery
During 2020, the probability of default (PD) and loss given
starting from the end of 2021.
default (LGD) models applied to Financial intermediaries, Large
Improvements
in
macroeconomic
forward-looking
corporate clients, Real estate financing and SME clients were
assumptions started from the third quarter 2020, with the
revised to reflect updates to PD and LGD risk drivers and
fourth quarter 2020 in particular including more optimistic
macroeconomic dependencies.
assumptions for the baseline, with increased GDP growth
The model updates resulted in a USD 32 million decrease in
forecasts and lower unemployment levels in the US and in
ECL allowances, primarily in Personal & Corporate Banking
Switzerland in particular, given improvements in economic
across Financial intermediaries, Real estate financing and SME
activity as well as greater optimism regarding the availability and
clients.
Scenario and key input updates
effective distribution of vaccines and continued government
support. In addition, the assumptions for the severe downside
scenario were made less pessimistic in the second half of 2020.
During 2020, the four scenarios and related macroeconomic
The table on the following page details the key assumptions
factors that were applied at the end of 2019 were reviewed in
for the baseline and severe downside scenarios applied as of
light of the economic and political conditions and prevailing
31 December 2020. The outlook of the one-year and three-year
uncertainties through a series of governance meetings, with
cumulative GDP growth rates in the baseline are significantly
input from UBS risk and finance experts across the regions and
higher than those seen at the end of 2019, as the economy is
business divisions. Scenario assumptions are benchmarked
expected to recover from the sharp contractions seen in mid-
Economics and
the
International Monetary Fund World
31 December 2019 levels until 2022 in the US and Switzerland,
Economic Outlook (IMF WEO). The hypothetical scenarios, in
and until 2023 in the Eurozone. The GDP growth rates in the
particular the upside and mild downside scenarios, were viewed
severe downside scenario are also higher, to reflect the recovery
less plausible. Given the considerable uncertainties associated
from the weaker starting levels. Under the baseline scenario, US
with the economic conditions, an exceptional interim design of
unemployment is expected to decline to 5.5% by the end of the
these scenarios was not deemed appropriate. Therefore,
first year and to 4.5% by the end of the third year.
management concluded that the probability weights of the
Unemployment rates in the Eurozone and Switzerland are
upside and the mild downside scenarios would be set to zero.
expected to rise modestly in the first year in the baseline
The baseline scenario, which is aligned to the economic and
scenario but to recover by the end of the third year. The severe
market assumptions used for UBS’s business planning purposes,
downside scenario includes marked increases in unemployment.
and the severe downside scenario, which is the Group’s binding
(28.7)
(35.4)
11 2020 unemployment rate is presented as an end-of-period level. 2019 unemployment rate was presented as a change in levels. The 2020 change in level would have been: One year shock in the baseline scenario:
United States: -3.5%, Eurozone: 0.4% and Switzerland: 0.4% and for the global crisis scenario: United States: 3.1%, Eurozone: 5.0% and Switzerland: 2.6%. Three year shock in the baseline scenario: United
States: -4.5%, Eurozone: -1.2% and Switzerland: -0.2% and for the global crisis scenario: United States: 0.9%, Eurozone: 7.2% and Switzerland: 3.4%
United States (S&P / Case-Shiller)
Eurozone (House Price Index)
(15.3)
(22.9)
2.5
1.1
9.2
7.2
338
339
339
Financial statements Consolidated financial statements
Note 20 Expected credit loss measurement (continued)
Scenario assumptions
3311..1122..1199
RReeaall GGDDPP ggrroowwtthh ((%% cchhaannggee))
United States
Eurozone
Switzerland
CCoonnssuummeerr pprriiccee iinnddeexx ((%% cchhaannggee))
United States
Eurozone
Switzerland
UUnneemmppllooyymmeenntt rraattee ((cchhaannggee,, ppeerrcceennttaaggee ppooiinnttss))
United States
Eurozone
Switzerland
FFiixxeedd iinnccoommee:: 1100--yyeeaarr ggoovveerrnnmmeenntt bboonnddss ((cchhaannggee iinn yyiieellddss,, bbaassiiss ppooiinnttss))
USD
EUR
CHF
EEqquuiittyy iinnddiicceess ((%% cchhaannggee))
S&P 500
EuroStoxx 50
SPI
SSwwiissss rreeaall eessttaattee ((%% cchhaannggee))
Single-Family Homes
OOtthheerr rreeaall eessttaattee ((%% cchhaannggee))
United States (S&P / Case-Shiller)
Eurozone (House Price Index)
c) Development of ECL allowances and provisions
The ECL allowances and provisions recognized in the period are
impacted by a variety of factors, such as:
– origination of new instruments during the period;
– effect of passage of time as the ECLs on an instrument for
the remaining lifetime decrease (all other factors remaining
the same);
– discount unwind within ECLs as it is measured on a present
value basis;
– derecognition of instruments in the period;
– change in individual asset quality of instruments;
– effect of updating forward-looking scenarios and the
respective weights;
OOnnee yyeeaarr
TThhrreeee yyeeaarrss ccuummuullaattiivvee
BBaasseelliinnee SSeevveerree ddoowwnnssiiddee
BBaasseelliinnee SSeevveerree ddoowwnnssiiddee
1.9
1.0
1.5
1.8
1.3
0.8
(0.4)
(0.1)
0.1
0.2
8.4
9.5
3.5
0.5
1.4
0.1
4.0
1.2
(6.4)
(9.1)
(7.0)
(1.2)
(1.3)
(1.8)
5.7
5.6
2.6
(100.0)
(30.0)
(70.0)
(53.0)
(60.0)
(56.2)
(15.2)
(13.3)
(23.0)
6.4
2.8
4.8
6.2
4.3
2.7
(0.5)
(0.2)
0.3
10.1
28.2
30.0
9.5
4.4
5.3
2.3
16.7
2.2
(4.3)
(10.8)
(6.2)
0.4
(1.7)
(1.6)
5.6
7.9
3.6
(75.0)
(20.0)
(35.0)
(42.9)
(52.9)
(46.8)
(27.0)
(23.4)
(33.2)
– movements from a maximum 12-month ECL to the
recognition of lifetime ECLs (and vice versa) following
transfers between stages 1 and 2;
– movements from stages 1 and 2 to stage 3 (credit-impaired
status) when default has become certain and probability of
default (PD) increases to 100% (or vice versa);
– changes in models or updates to model parameters; and
– foreign exchange translations for assets denominated in
foreign currencies and other movements.
340
340
Consolidated financial statements
UUnneemmppllooyymmeenntt rraattee ((cchhaannggee,, ppeerrcceennttaaggee ppooiinnttss))
FFiixxeedd iinnccoommee:: 1100--yyeeaarr ggoovveerrnnmmeenntt bboonnddss ((cchhaannggee iinn yyiieellddss,, bbaassiiss ppooiinnttss))
Scenario assumptions
3311..1122..1199
RReeaall GGDDPP ggrroowwtthh ((%% cchhaannggee))
CCoonnssuummeerr pprriiccee iinnddeexx ((%% cchhaannggee))
United States
Eurozone
Switzerland
United States
Eurozone
Switzerland
United States
Eurozone
Switzerland
USD
EUR
CHF
S&P 500
EuroStoxx 50
SPI
EEqquuiittyy iinnddiicceess ((%% cchhaannggee))
SSwwiissss rreeaall eessttaattee ((%% cchhaannggee))
Single-Family Homes
OOtthheerr rreeaall eessttaattee ((%% cchhaannggee))
United States (S&P / Case-Shiller)
Eurozone (House Price Index)
1.9
1.0
1.5
1.8
1.3
0.8
(0.4)
(0.1)
0.1
0.2
8.4
9.5
3.5
0.5
1.4
0.1
4.0
1.2
(6.4)
(9.1)
(7.0)
(1.2)
(1.3)
(1.8)
5.7
5.6
2.6
(100.0)
(30.0)
(70.0)
(53.0)
(60.0)
(56.2)
(15.2)
(13.3)
(23.0)
6.4
2.8
4.8
6.2
4.3
2.7
(0.5)
(0.2)
0.3
10.1
28.2
30.0
9.5
4.4
5.3
2.3
16.7
2.2
(4.3)
(10.8)
(6.2)
0.4
(1.7)
(1.6)
5.6
7.9
3.6
(75.0)
(20.0)
(35.0)
(42.9)
(52.9)
(46.8)
(27.0)
(23.4)
(33.2)
c) Development of ECL allowances and provisions
The ECL allowances and provisions recognized in the period are
– movements from a maximum 12-month ECL to the
impacted by a variety of factors, such as:
recognition of lifetime ECLs (and vice versa) following
– origination of new instruments during the period;
transfers between stages 1 and 2;
– effect of passage of time as the ECLs on an instrument for
– movements from stages 1 and 2 to stage 3 (credit-impaired
the remaining lifetime decrease (all other factors remaining
status) when default has become certain and probability of
– discount unwind within ECLs as it is measured on a present
– changes in models or updates to model parameters; and
default (PD) increases to 100% (or vice versa);
the same);
value basis;
– foreign exchange translations for assets denominated in
foreign currencies and other movements.
– derecognition of instruments in the period;
– change in individual asset quality of instruments;
– effect of updating forward-looking scenarios and the
respective weights;
Note 20 Expected credit loss measurement (continued)
Note 20 Expected credit loss measurement (continued)
OOnnee yyeeaarr
TThhrreeee yyeeaarrss ccuummuullaattiivvee
BBaasseelliinnee SSeevveerree ddoowwnnssiiddee
BBaasseelliinnee SSeevveerree ddoowwnnssiiddee
The following table explains the changes in the ECL allowances and provisions for on- and off-balance sheet financial instruments
and other credit lines in scope of ECL requirements between the beginning and the end of the period due to the factors listed on the
previous page.
RReemmeeaassuurreemmeennttss wwiitthh ssttaaggee ttrraannssffeerrss22
Development of ECL allowances and provisions
USD million
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22001199
NNeett mmoovveemmeenntt ffrroomm nneeww aanndd ddeerreeccooggnniizzeedd ttrraannssaaccttiioonnss11
of which: Securities financing transactions REIT
of which: Loans to financial advisors
of which: Lombard loans
of which Financial intermediaries
of which: Private clients with mortgages
of which: Real estate financing
of which: Large corporate clients
of which: SME clients
of which: Other
of which: Private clients with mortgages
of which: Real estate financing
of which: Large corporate clients
of which: SME clients
of which: Other
SSttaaggee 33
((668888))
4466
0
0
0
0
46
17
0
29
0
((333388))
0
0
(175)
(31)
(131)
(19)
(11)
(36)
(59)
((113366))
(7)
1
(79)
(6)
(44)
(3)
(9)
(12)
MMooddeell cchhaannggeess44
00
TToottaall EECCLL aalllloowwaannccee mmoovveemmeennttss wwiitthh pprrooffiitt oorr lloossss iimmppaacctt55
((442299))
WWrriittee--ooffffss,, FFXX aanndd ootthheerr mmoovveemmeennttss ((wwiitthhoouutt pprrooffiitt oorr lloossss iimmppaacctt))66
228877
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22002200
((882299))
11 Represents the increase and decrease in allowances and provisions resulting from financial instruments (including guarantees and facilities) that were newly originated, purchased or renewed and from the final
derecognition of loans or facilities on their maturity date or earlier. 22 Represents the remeasurement between 12-month and lifetime ECL due to stage transfers. 33 Represents the change in allowances and
provisions related to changes in model inputs or assumptions, including changes in forward-looking macroeconomic conditions, changes in the exposure profile, PD and LGD changes, and unwinding of the time
value. 44 Represents the change in the allowances and provisions related to changes in models and methodologies. 55 Includes ECL movements from new and derecognized transactions, remeasurement changes,
model and methodology changes. 66 Represents the decrease in allowances and provisions resulting from write-offs of the ECL allowance against the gross carrying amount when all or part of a financial asset is
deemed uncollectible or forgiven and movements in foreign exchange rates.
TToottaall
((11,,002299))
((2288))
(2)
(3)
(32)
(16)
26
32
9
23
(20)
((442277))
(19)
(6)
(224)
(43)
(134)
(36)
(12)
(36)
(59)
((227711))
(34)
(14)
(149)
(13)
(60)
(18)
(3)
(12)
3322
((669944))
225544
((11,,446688))
SSttaaggee 22
((116600))
1177
2
2
(4)
(3)
20
15
9
0
(5)
((113344))
(17)
(9)
(83)
(11)
(14)
(18)
(7)
0
0
((4477))
(8)
(11)
(17)
(7)
(4)
(3)
0
0
1111
((115544))
((1199))
((333333))
SSttaaggee 11
((118811))
((9900))
(3)
(5)
(29)
(14)
(39)
(1)
(1)
(6)
(15)
4455
(2)
3
34
(1)
11
0
7
0
0
((8888))
(19)
(4)
(53)
0
(11)
(12)
6
0
2211
((111122))
((1144))
((330066))
of which: Securities financing transactions REIT
of which: Loans to financial advisors
of which: Lombard loans
of which Commodity Trade Finance
RReemmeeaassuurreemmeennttss wwiitthhoouutt ssttaaggee ttrraannssffeerrss33
of which: Private clients with mortgages
of which: Real estate financing
of which: Large corporate clients
of which: SME clients
of which: Other
of which: Loans to financial advisors
of which: Lombard loans
of which: Credit cards
In 2020, ECL allowances and provisions increased by USD 694
million from net credit loss expenses impacting profit or loss:
– a USD 28 million net increase from new and derecognized
transactions that resulted from a USD 90 million stage 1
increase primarily in Large corporate clients and SME clients,
offset by a USD 63 million net release from stage 2 and 3
transactions, driven by transactions that were terminated
before their contractual maturity, mainly in Lombard lending
and Securities financing transactions Real estate investment
trusts (SFT-REITs);
– a USD 697 million net increase from book quality movements
that resulted from a USD 427 million net increase from
transactions moving from stages 1 and 2 into stages 2 and 3,
respectively, of which approximately half related to Large
corporate clients, with further substantial effects from
Commodity trade finance, SME clients, SFT REITs and
Lombard loans, and USD 271 million from remeasurements
without stage transfers, approximately half relating to Large
corporate clients, and another significant portion relating to
real estate related lending, primarily due to the updates of
macroeconomic factors;
– a USD 32 million net decrease that resulted from a number of
model revisions, primarily impacting Financial intermediaries,
Real estate financing and SME clients, from updates to the PD
and LGD risk drivers and macroeconomic dependencies.
In addition to the movements impacting profit or loss,
allowances decreased by USD 346 million as a result of a
number of write offs. A further USD 75 million allowance
increase resulted from foreign exchange movements, almost
entirely due to the Swiss franc strengthening against the US
dollar.
340
341
341
Financial statements Consolidated financial statements
Note 20 Expected credit loss measurement (continued)
The following table explains the changes in the ECL allowances and provisions for on- and off-balance sheet financial instruments
and other credit lines in scope of ECL requirements between the beginning and the end of the prior period due to the factors listed
earlier in this note.
RReemmeeaassuurreemmeennttss wwiitthh ssttaaggee ttrraannssffeerrss22
RReemmeeaassuurreemmeennttss wwiitthhoouutt ssttaaggee ttrraannssffeerrss33
USD million
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22001188
NNeett mmoovveemmeenntt ffrroomm nneeww aanndd ddeerreeccooggnniizzeedd ttrraannssaaccttiioonnss11
of which: Private clients with mortgages
of which: Real estate financing
of which: Large corporate clients
of which: SME clients
of which: Private clients with mortgages
of which: Real estate financing
of which: Large corporate clients
of which: SME clients
Stage 3
((669955))
33
0
0
0
0
((110055))
(1)
0
(38)
(55)
11
(9)
1
(14)
17
MMooddeell cchhaannggeess44
00
TToottaall EECCLL aalllloowwaannccee mmoovveemmeennttss wwiitthh pprrooffiitt oorr lloossss iimmppaacctt55
((110000))
WWrriittee--ooffffss,, FFXX aanndd ootthheerr mmoovveemmeennttss ((wwiitthhoouutt pprrooffiitt oorr lloossss iimmppaacctt))66
110088
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22001199
((668888))
11 Represents the increase and decrease in allowances and provisions resulting from financial instruments (including guarantees and facilities) that were newly originated, purchased or renewed and from the final
derecognition of loans or facilities on their maturity date or earlier. 22 Represents the remeasurement between 12-month and lifetime ECL due to stage transfers. 33 Represents the change in allowances and
provisions related to changes in model inputs or assumptions, including changes in forward-looking macroeconomic conditions, changes in the exposure profile, PD and LGD changes, and unwinding of the time
value. 44 Represents the change in the allowances and provisions related to changes in models and methodologies. 55 To align to the table format for the 2020 ECL allowance and provision movement, UBS has
adjusted the 2019 table format. Includes ECL movements from new and derecognized transactions, remeasurement changes, model and methodology changes. 66 Represents the decrease in allowances and
provisions resulting from write-offs of the ECL allowance against the gross carrying amount when all or part of a financial asset is deemed uncollectible or forgiven and movements in foreign exchange rates.
Total
((11,,005544))
((5533))
(1)
(3)
(6)
(16)
((112255))
(5)
5
(45)
(64)
7733
22
1
(24)
35
2266
((7788))
110055
((11,,002299))
Stage 1
((117766))
((6666))
(4)
(5)
(14)
(14)
1144
1
4
4
2
3311
2
0
(10)
9
1177
((44))
((11))
((118811))
Stage 2
((118833))
1100
3
2
8
(2)
((3355))
(5)
1
(11)
(11)
4411
30
0
0
10
99
2255
((22))
((116600))
of which: Private clients with mortgages
of which: Real estate financing
of which: Large corporate clients
of which: SME clients
As explained in Note 1a, the assessment of an SICR considers a
number of qualitative and quantitative factors to determine
whether a stage transfer between stage 1 and stage 2 is
in
required. The primary assessment considers changes
probability of default (PD) based on rating analyses and
economic outlook. Additionally, UBS considers counterparties
that have moved to a credit watch list and those with payments
that are at least 30 days past due.
Stage 2 classification by trigger
EECCLL aalllloowwaanncceess // pprroovviissiioonnss aass ooff 3311 DDeecceemmbbeerr 22002200
SSttaaggee 22
(333)
(93)
(53)
(110)
(38)
(19)
(5)
(14)
(2)
of which:
PD layer
(252)
(83)
(45)
(89)
(16)
(19)
0
0
0
of which:
watch list
(41)
0
(2)
(20)
(16)
0
(1)
0
(2)
of which:
≥30 days
past due
(40)
(11)
(6)
0
(5)
0
(4)
(14)
0
USD million
On-and off-balance sheet
of which: Private clients with mortgages
of which: Real estate financing
of which: Large corporate clients
of which: SME clients
of which: Financial intermediaries and hedge funds
of which: Loans to financial advisors
of which: Credit cards
of which: Other
342
342
The following table explains the changes in the ECL allowances and provisions for on- and off-balance sheet financial instruments
and other credit lines in scope of ECL requirements between the beginning and the end of the prior period due to the factors listed
Consolidated financial statements
earlier in this note.
USD million
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22001188
NNeett mmoovveemmeenntt ffrroomm nneeww aanndd ddeerreeccooggnniizzeedd ttrraannssaaccttiioonnss11
of which: Private clients with mortgages
of which: Real estate financing
of which: Large corporate clients
of which: SME clients
RReemmeeaassuurreemmeennttss wwiitthh ssttaaggee ttrraannssffeerrss22
of which: Private clients with mortgages
of which: Real estate financing
of which: Large corporate clients
of which: SME clients
RReemmeeaassuurreemmeennttss wwiitthhoouutt ssttaaggee ttrraannssffeerrss33
of which: Private clients with mortgages
of which: Real estate financing
of which: Large corporate clients
of which: SME clients
MMooddeell cchhaannggeess44
TToottaall EECCLL aalllloowwaannccee mmoovveemmeennttss wwiitthh pprrooffiitt oorr lloossss iimmppaacctt55
WWrriittee--ooffffss,, FFXX aanndd ootthheerr mmoovveemmeennttss ((wwiitthhoouutt pprrooffiitt oorr lloossss iimmppaacctt))66
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22001199
Total
((11,,005544))
((5533))
(1)
(3)
(6)
(16)
((112255))
(5)
5
(45)
(64)
7733
22
1
(24)
35
2266
((7788))
110055
((11,,002299))
Stage 1
((117766))
((6666))
(4)
(5)
(14)
(14)
1144
1
4
4
2
3311
2
0
(10)
9
1177
((44))
((11))
((118811))
Stage 2
((118833))
1100
3
2
8
(2)
((3355))
(5)
1
(11)
(11)
4411
30
0
0
10
99
2255
((22))
((116600))
Stage 3
((669955))
33
0
0
0
0
((110055))
(1)
0
(38)
(55)
11
(9)
1
(14)
17
00
((110000))
110088
((668888))
11 Represents the increase and decrease in allowances and provisions resulting from financial instruments (including guarantees and facilities) that were newly originated, purchased or renewed and from the final
derecognition of loans or facilities on their maturity date or earlier. 22 Represents the remeasurement between 12-month and lifetime ECL due to stage transfers. 33 Represents the change in allowances and
provisions related to changes in model inputs or assumptions, including changes in forward-looking macroeconomic conditions, changes in the exposure profile, PD and LGD changes, and unwinding of the time
value. 44 Represents the change in the allowances and provisions related to changes in models and methodologies. 55 To align to the table format for the 2020 ECL allowance and provision movement, UBS has
adjusted the 2019 table format. Includes ECL movements from new and derecognized transactions, remeasurement changes, model and methodology changes. 66 Represents the decrease in allowances and
provisions resulting from write-offs of the ECL allowance against the gross carrying amount when all or part of a financial asset is deemed uncollectible or forgiven and movements in foreign exchange rates.
As explained in Note 1a, the assessment of an SICR considers a
probability of default (PD) based on rating analyses and
number of qualitative and quantitative factors to determine
economic outlook. Additionally, UBS considers counterparties
whether a stage transfer between stage 1 and stage 2 is
that have moved to a credit watch list and those with payments
required. The primary assessment considers changes
in
that are at least 30 days past due.
Stage 2 classification by trigger
USD million
On-and off-balance sheet
of which: Private clients with mortgages
of which: Real estate financing
of which: Large corporate clients
of which: SME clients
of which: Financial intermediaries and hedge funds
of which: Loans to financial advisors
of which: Credit cards
of which: Other
EECCLL aalllloowwaanncceess // pprroovviissiioonnss aass ooff 3311 DDeecceemmbbeerr 22002200
of which:
PD layer
of which:
watch list
of which:
≥30 days
past due
SSttaaggee 22
(333)
(93)
(53)
(110)
(38)
(19)
(5)
(14)
(2)
(252)
(83)
(45)
(89)
(16)
(19)
0
0
0
(41)
0
(2)
(20)
(16)
0
(1)
0
(2)
(40)
(11)
(6)
0
(5)
0
(4)
(14)
0
Note 20 Expected credit loss measurement (continued)
Note 20 Expected credit loss measurement (continued)
d) Maximum exposure to credit risk
The tables below and on the following page provide the Group’s
maximum exposure to credit risk for financial instruments
subject to ECL requirements and the respective collateral and
other credit enhancements mitigating credit risk for these classes
of financial instruments.
The maximum exposure to credit risk includes the carrying
amounts of financial instruments recognized on the balance
sheet subject to credit risk and the notional amounts for off-
balance sheet arrangements. Where information is available,
collateral is presented at fair value. For other collateral, such as
real estate, a reasonable alternative value is used. Credit
enhancements,
such as credit derivative contracts and
guarantees, are included at their notional amounts. Both are
capped at the maximum exposure to credit risk for which they
serve as security. The “Risk management and control” section of
this report describes management’s view of credit risk and the
related exposures, which can differ in certain respects from the
requirements of IFRS.
Maximum exposure to credit risk
USD billion
FFiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt
aammoorrttiizzeedd ccoosstt oonn tthhee bbaallaannccee sshheeeett
Cash and balances at central banks
Loans and advances to banks3
Receivables from securities financing transactions
Cash collateral receivables on derivative instruments4,5
Loans and advances to customers6
Other financial assets measured at amortized cost
TToottaall ffiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt aammoorrttiizzeedd ccoosstt
FFiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt ffaaiirr vvaalluuee
tthhrroouugghh ootthheerr ccoommpprreehheennssiivvee iinnccoommee –– ddeebbtt
TToottaall mmaaxxiimmuumm eexxppoossuurree ttoo ccrreeddiitt rriisskk
rreefflleecctteedd oonn tthhee bbaallaannccee sshheeeett iinn ssccooppee ooff EECCLL
Guarantees7
Loan commitments7
Forward starting transactions, reverse repurchase
and securities borrowing agreements
Committed unconditionally revocable credit lines
TToottaall mmaaxxiimmuumm eexxppoossuurree ttoo ccrreeddiitt rriisskk nnoott
rreefflleecctteedd oonn tthhee bbaallaannccee sshheeeett,, iinn ssccooppee ooff EECCLL
CCoollllaatteerraall11
CCrreeddiitt eennhhaanncceemmeennttss11
3311..1122..2200
MMaaxxiimmuumm
eexxppoossuurree ttoo
ccrreeddiitt rriisskk
CCaasshh
ccoollllaatteerraall
rreecceeiivveedd
CCoollllaatteerraalliizzeedd
bbyy sseeccuurriittiieess
SSeeccuurreedd bbyy
rreeaall eessttaattee
OOtthheerr
ccoollllaatteerraall22
NNeettttiinngg
CCrreeddiitt
ddeerriivvaattiivvee
ccoonnttrraaccttss GGuuaarraanntteeeess
115588..22
1155..44
7744..22
3322..77
337799..55
2277..22
668877..33
88..33
669955..66
1177..00
4411..22
33..22
4400..11
110011..66
00..00
2255..88
00..11
2266..00
2266..00
00..77
00..00
00..11
00..88
00..11
6677..11
111188..22
00..22
118855..77
118855..77
55..00
44..22
33..22
1100..33
2222..77
119944..66
119944..66
119944..66
00..22
22..11
66..22
88..55
2211..11
2211..11
00..00
2211..11
00..00
00..44
77..00
2211..77
11..33
3300..11
3300..11
11..77
66..88
22..77
1111..22
00..00
00..44
31.12.19
Collateral1
Credit enhancements1
44..44
44..44
44..44
22..55
22..44
00..00
44..99
EExxppoossuurree ttoo
ccrreeddiitt rriisskk
aafftteerr ccoollllaatteerraall
aanndd ccrreeddiitt
eennhhaanncceemmeennttss
115588..22
1155..33
00..00
1111..66
1144..88
2255..55
222255..55
88..33
223333..77
77..00
2255..33
00..00
2200..77
5533..00
Exposure to
credit risk
after collateral
and credit
enhancements
Maximum
exposure to
credit risk
Cash
collateral
received
Collateralized
by securities
Secured by
real estate
Other
collateral2
Credit
derivative
contracts Guarantees
5.8
Netting
0.0
77.6
18.4
0.1
1188..66
107.1
12.4
84.2
23.3
326.8
23.0
557766..88
USD billion
FFiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt
aammoorrttiizzeedd ccoosstt oonn tthhee bbaallaannccee sshheeeett
Cash and balances at central banks
Loans and advances to banks3
Receivables from securities financing transactions
Cash collateral receivables on derivative instruments4,5
Loans and advances to customers6
Other financial assets measured at amortized cost
TToottaall ffiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt aammoorrttiizzeedd ccoosstt
FFiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt ffaaiirr vvaalluuee
tthhrroouugghh ootthheerr ccoommpprreehheennssiivvee iinnccoommee –– ddeebbtt
TToottaall mmaaxxiimmuumm eexxppoossuurree ttoo ccrreeddiitt rriisskk
rreefflleecctteedd oonn tthhee bbaallaannccee sshheeeett iinn ssccooppee ooff EECCLL
Guarantees7
Loan commitments7
Forward starting transactions, reverse repurchase
and securities borrowing agreements
Committed unconditionally revocable credit lines
TToottaall mmaaxxiimmuumm eexxppoossuurree ttoo ccrreeddiitt rriisskk nnoott
rreefflleecctteedd oonn tthhee bbaallaannccee sshheeeett,, iinn ssccooppee ooff EECCLL
4455..77
11 Of which: USD 1,983 million for 31 December 2020 (31 December 2019: USD 1,720 million) relates to total credit-impaired financial assets measured at amortized cost and USD 154 million for 31 December 2020
(31 December 2019: USD 27 million) to total off-balance sheet financial instruments and other credit lines for credit-impaired positions. 22 Includes but is not limited to life insurance contracts, inventory, mortgage
loans, gold and other commodities. 33 Loans and advances to banks include amounts held with third-party banks on behalf of clients. The credit risk associated with these balances may be borne by those clients.
44 Included within Cash collateral receivables on derivative instruments are margin balances due from exchanges or clearing houses. Some of these margin balances reflect amounts transferred on behalf of clients
who retain the associated credit risk. 55 The amount shown in the “Netting” column represents the netting potential not recognized on the balance sheet. Refer to Note 22 for more information. 66 Collateral
arrangements generally incorporate a range of collateral, including cash, securities, property and other collateral. 77 The amount shown in the “Guarantees” column includes sub-participations.
107.1
12.4
0.8
8.9
14.0
21.1
116644..44
117700..77
9.8
18.0
117744..77
0.1
1.3
558833..22
18.1
27.5
117799..44
3.0
1.9
101.4
0.4
117799..44
174.7
0.0
117744..77
2244..33
1.7
5.8
1188..66
1.0
0.2
17.1
1.3
2244..33
11..11
2.5
0.2
0.0
17.9
1.7
35.1
1.7
8.3
14.4
1144..44
1144..44
1144..99
1111..00
8822..33
66..33
11..11
11..55
66..33
00..00
22..88
66..33
00..00
1.1
0.2
4.9
00..00
0.3
3.6
0.0
00..22
342
343
343
Financial statements
Consolidated financial statements
Note 20 Expected credit loss measurement (continued)
e) Financial assets subject to credit risk by rating category
The table below shows the credit quality and the maximum
exposure to credit risk based on the Group’s internal credit
rating system and year-end stage classification. Under IFRS 9, the
credit risk rating reflects the Group’s assessment of the
probability of default of individual counterparties, prior to
substitutions. The amounts presented are gross of impairment
allowances.
› Refer to the “Risk management and control” section of this
report for more details regarding the Group’s internal grading
system
Financial assets subject to credit risk by rating category
USD million
3311..1122..2200
Rating category1
FFiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt aammoorrttiizzeedd ccoosstt
CCaasshh aanndd bbaallaanncceess aatt cceennttrraall bbaannkkss
of which: stage 1
LLooaannss aanndd aaddvvaanncceess ttoo bbaannkkss
of which: stage 1
of which: stage 2
of which: stage 3
RReecceeiivvaabblleess ffrroomm sseeccuurriittiieess ffiinnaanncciinngg ttrraannssaaccttiioonnss
of which: stage 1
CCaasshh ccoollllaatteerraall rreecceeiivvaabblleess oonn ddeerriivvaattiivvee iinnssttrruummeennttss
of which: stage 1
LLooaannss aanndd aaddvvaanncceess ttoo ccuussttoommeerrss
of which: stage 1
of which: stage 2
of which: stage 3
OOtthheerr ffiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt aammoorrttiizzeedd ccoosstt
of which: stage 1
of which: stage 2
of which: stage 3
TToottaall ffiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt aammoorrttiizzeedd ccoosstt
OOnn--bbaallaannccee sshheeeett ffiinnaanncciiaall iinnssttrruummeennttss
FFiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt FFVVOOCCII –– ddeebbtt iinnssttrruummeennttss
TToottaall oonn--bbaallaannccee sshheeeett ffiinnaanncciiaall iinnssttrruummeennttss
00––11
22––33
44––55
66––88
99––1133
CCrreeddiitt--
iimmppaaiirreedd
((ddeeffaauulltteedd))
TToottaall ggrroossss
ccaarrrryyiinngg
aammoouunntt
EECCLL
aalllloowwaanncceess
1133,,447777
00
0
11,,334444
55
0
1166,,000099
115566,,225500
11,,998811
156,250 1,981
1122,,112299
00
0
554433
11,,118822
543 12,074 1,277 1,145
37
0
1177,,999955
00
0
226600
231
29
67
0
0
0
0
11,,884422
1155,,336677
2222,,999988
22,998 16,009 15,367 17,995 1,842
8888
77,,773333
88,,119966
33,,224433
88
8,196 13,477 7,733 3,243
55,,881133 221144,,330077
2211,,003388
6699,,221177
6677,,227700
5,813 212,970 63,000 59,447 15,860
0 1,338 4,269 9,770 5,178
0
0
0
0
0
448811
228800
1155,,440044
66,,558855
44,,001188
389
269 6,334
15,404 4,015
91
251
11
3
0
0
0
0
2233,,770099
9988,,222233
9911,,999933
220099,,220044 226611,,992222
0
0
00
115588,,223311
0 158,231
11
1155,,446600
0 15,269
189
0
1
1
7744,,221122
00
0 74,212
00
3322,,773377
0 32,737
338800,,558899
0 357,090
0 20,556
2,943
2277,,332277
0 26,410
357
0
560
560
668888,,555566
33,,550055
2,943
556600
22,,994433
00
0
((1166))
(9)
(5)
(1)
((22))
(2)
00
0
((11,,006600))
(142)
(215)
(703)
((113333))
(34)
(9)
(90)
((11,,221111))
33,,221122
55,,001144
221122,,441177 226666,,993366
00
9911,,999933
3322
9988,,225555
00
2233,,770099
00
33,,550055
88,,225588
669966,,881155
00
((11,,221111))
NNeett ccaarrrryyiinngg
aammoouunntt
((mmaaxxiimmuumm
eexxppoossuurree ttoo
ccrreeddiitt rriisskk))
115588,,223311
158,231
1155,,444444
15,260
184
0
7744,,221100
74,210
3322,,773377
32,737
337799,,552288
356,948
20,341
2,240
2277,,119944
26,377
348
469
668877,,334455
88,,225588
669955,,660033
Off-balance sheet positions subject to expected credit loss by rating category
USD million
3311..1122..2200
00––11
22––33
44––55
66––88
99––1133
TToottaall ooffff --
bbaallaannccee sshheeeett
eexxppoossuurree
((mmaaxxiimmuumm
eexxppoossuurree ttoo
ccrreeddiitt rriisskk)) EECCLL pprroovviissiioonnss
CCrreeddiitt--
iimmppaaiirreedd
((ddeeffaauulltteedd))
33,,552222
44,,662233
404
0
1144,,551166
44,,229933
33,,448822
3,482 4,219 2,688 3,558
736
0
99,,330022
999911
739
252
834
0
0
0
0
33,,001188
55,,885500
88,,558833
3,018 13,589 6,873 8,739 4,676
563 1,174
0
00
66,,884400
927 1,711
0
00
1122,,110055
0
0
8822
66,,558833
0
33,,001155
1166,,661100
0
115500
1199,,228899
117700
0
0
170
110044
0
0
104
00
227733
88,,448888
1133,,550055
1111,,550011
55,,995588
557744
574 12,940 4,517 6,609 10,593
908
565 1,441 1,879
0
0
0
335577
663322
993311
355
630
930
1
2
1
0
0
0
1111,,885588
99,,111199
66,,888899
0
0
0
1144
11,,334499
14 1,349
1
0
0
0
1144,,885544
558888
110088
0
0
108
00
0
0
0
110099
1177,,008811
14,687
2,225
170
4411,,337722
36,894
4,374
104
33,,224477
6611,,770000
4400,,113344
35,233
4,792
108
33,,228822
3,277
5
0
4433,,441166
((6633))
(14)
(15)
(34)
((114422))
(74)
(68)
0
00
((220055))
((5500))
(29)
(21)
0
((22))
(2)
0
0
((5522))
Rating category1
OOffff--bbaallaannccee sshheeeett ffiinnaanncciiaall iinnssttrruummeennttss
GGuuaarraanntteeeess
of which: stage 1
of which: stage 2
of which: stage 3
IIrrrreevvooccaabbllee llooaann ccoommmmiittmmeennttss
of which: stage 1
of which: stage 2
of which: stage 3
FFoorrwwaarrdd ssttaarrttiinngg rreevveerrssee rreeppuurrcchhaassee aanndd sseeccuurriittiieess bboorrrroowwiinngg aaggrreeeemmeennttss
TToottaall ooffff--bbaallaannccee sshheeeett ffiinnaanncciiaall iinnssttrruummeennttss
OOtthheerr ccrreeddiitt lliinneess
CCoommmmiitttteedd uunnccoonnddiittiioonnaallllyy rreevvooccaabbllee ccrreeddiitt lliinneess
of which: stage 1
of which: stage 2
of which: stage 3
IIrrrreevvooccaabbllee ccoommmmiitttteedd pprroolloonnggaattiioonn ooff eexxiissttiinngg llooaannss
344
344
of which: stage 1
of which: stage 2
of which: stage 3
TToottaall ootthheerr ccrreeddiitt lliinneess
11 Refer to the “Internal UBS rating scale and mapping of external ratings” table in the “Risk management and control” section of this report for more information on rating categories.
Consolidated financial statements
Note 20 Expected credit loss measurement (continued)
e) Financial assets subject to credit risk by rating category
The table below shows the credit quality and the maximum
substitutions. The amounts presented are gross of impairment
exposure to credit risk based on the Group’s internal credit
allowances.
rating system and year-end stage classification. Under IFRS 9, the
credit risk rating reflects the Group’s assessment of the
› Refer to the “Risk management and control” section of this
report for more details regarding the Group’s internal grading
probability of default of individual counterparties, prior to
system
Financial assets subject to credit risk by rating category
USD million
3311..1122..2200
Rating category1
FFiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt aammoorrttiizzeedd ccoosstt
CCaasshh aanndd bbaallaanncceess aatt cceennttrraall bbaannkkss
of which: stage 1
LLooaannss aanndd aaddvvaanncceess ttoo bbaannkkss
RReecceeiivvaabblleess ffrroomm sseeccuurriittiieess ffiinnaanncciinngg ttrraannssaaccttiioonnss
CCaasshh ccoollllaatteerraall rreecceeiivvaabblleess oonn ddeerriivvaattiivvee iinnssttrruummeennttss
of which: stage 1
LLooaannss aanndd aaddvvaanncceess ttoo ccuussttoommeerrss
OOtthheerr ffiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt aammoorrttiizzeedd ccoosstt
of which: stage 1
of which: stage 2
of which: stage 3
of which: stage 1
of which: stage 1
of which: stage 2
of which: stage 3
of which: stage 1
of which: stage 2
of which: stage 3
00––11
22––33
44––55
66––88
99––1133
((ddeeffaauulltteedd))
aammoouunntt
aalllloowwaanncceess
115566,,225500
11,,998811
156,250 1,981
554433
1122,,112299
11,,334444
11,,118822
543 12,074 1,277 1,145
0
0
55
0
00
0
67
0
00
0
37
0
00
0
226600
231
29
0
2222,,999988
1166,,000099
1155,,336677
1177,,999955
11,,884422
22,998 16,009 15,367 17,995 1,842
88,,119966
1133,,447777
77,,773333
33,,224433
8,196 13,477 7,733 3,243
8888
88
CCrreeddiitt--
TToottaall ggrroossss
iimmppaaiirreedd
ccaarrrryyiinngg
00
11
0
1
00
115588,,223311
0 158,231
1155,,446600
0 15,269
189
1
7744,,221122
0 74,212
00
3322,,773377
0 32,737
55,,881133 221144,,330077
6677,,227700
6699,,221177
2211,,003388
22,,994433
338800,,558899
((11,,006600))
5,813 212,970 63,000 59,447 15,860
0 1,338 4,269 9,770 5,178
1155,,440044
44,,001188
15,404 4,015
0
0
0
0
3
0
0
228800
0
66,,558855
269 6,334
11
0
251
0
0
448811
389
91
0
0 357,090
0 20,556
2,943
556600
2,943
2277,,332277
0 26,410
0
560
357
560
EECCLL
00
0
((1166))
(9)
(5)
(1)
((22))
(2)
00
0
(142)
(215)
(703)
((113333))
(34)
(9)
(90)
NNeett ccaarrrryyiinngg
aammoouunntt
((mmaaxxiimmuumm
eexxppoossuurree ttoo
ccrreeddiitt rriisskk))
115588,,223311
158,231
1155,,444444
15,260
184
0
7744,,221100
74,210
3322,,773377
32,737
337799,,552288
356,948
20,341
2,240
2277,,119944
26,377
348
469
88,,225588
669955,,660033
TToottaall ffiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt aammoorrttiizzeedd ccoosstt
220099,,220044 226611,,992222
9911,,999933
9988,,222233
2233,,770099
33,,550055
668888,,555566
((11,,221111))
668877,,334455
OOnn--bbaallaannccee sshheeeett ffiinnaanncciiaall iinnssttrruummeennttss
FFiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt FFVVOOCCII –– ddeebbtt iinnssttrruummeennttss
33,,221122
55,,001144
00
3322
00
00
88,,225588
00
TToottaall oonn--bbaallaannccee sshheeeett ffiinnaanncciiaall iinnssttrruummeennttss
221122,,441177 226666,,993366
9911,,999933
9988,,225555
2233,,770099
33,,550055
669966,,881155
((11,,221111))
Off-balance sheet positions subject to expected credit loss by rating category
USD million
3311..1122..2200
00––11
22––33
44––55
66––88
99––1133
((ddeeffaauulltteedd))
ccrreeddiitt rriisskk)) EECCLL pprroovviissiioonnss
33,,448822
44,,662233
33,,552222
44,,229933
3,482 4,219 2,688 3,558
404
0
834
0
736
0
999911
739
252
0
33,,001188
1144,,551166
88,,558833
99,,330022
55,,885500
3,018 13,589 6,873 8,739 4,676
927 1,711
563 1,174
0
115500
0
00
0
33,,001155
1166,,661100
0
00
66,,884400
66,,558833
1199,,228899
1122,,110055
557744
1133,,550055
55,,995588
88,,448888
1111,,550011
574 12,940 4,517 6,609 10,593
565 1,441 1,879
14 1,349
0
11,,334499
1
0
0
993311
930
1
0
0
663322
630
2
0
908
0
335577
355
1
0
0
0
0
0
8822
0
0
1144
0
0
TToottaall ooffff --
bbaallaannccee sshheeeett
eexxppoossuurree
((mmaaxxiimmuumm
eexxppoossuurree ttoo
CCrreeddiitt--
iimmppaaiirreedd
117700
0
0
170
110044
0
0
104
00
227733
110088
108
0
0
00
0
0
0
1177,,008811
14,687
2,225
170
4411,,337722
36,894
4,374
104
33,,224477
6611,,770000
4400,,113344
35,233
4,792
108
33,,228822
3,277
5
0
((6633))
(14)
(15)
(34)
((114422))
(74)
(68)
0
00
((220055))
((5500))
(29)
(21)
0
((22))
(2)
0
0
((5522))
Rating category1
OOffff--bbaallaannccee sshheeeett ffiinnaanncciiaall iinnssttrruummeennttss
GGuuaarraanntteeeess
of which: stage 1
of which: stage 2
of which: stage 3
of which: stage 1
of which: stage 2
of which: stage 3
IIrrrreevvooccaabbllee llooaann ccoommmmiittmmeennttss
FFoorrwwaarrdd ssttaarrttiinngg rreevveerrssee rreeppuurrcchhaassee aanndd sseeccuurriittiieess bboorrrroowwiinngg aaggrreeeemmeennttss
TToottaall ooffff--bbaallaannccee sshheeeett ffiinnaanncciiaall iinnssttrruummeennttss
OOtthheerr ccrreeddiitt lliinneess
CCoommmmiitttteedd uunnccoonnddiittiioonnaallllyy rreevvooccaabbllee ccrreeddiitt lliinneess
IIrrrreevvooccaabbllee ccoommmmiitttteedd pprroolloonnggaattiioonn ooff eexxiissttiinngg llooaannss
of which: stage 1
of which: stage 2
of which: stage 3
of which: stage 1
of which: stage 2
of which: stage 3
TToottaall ootthheerr ccrreeddiitt lliinneess
344
11 Refer to the “Internal UBS rating scale and mapping of external ratings” table in the “Risk management and control” section of this report for more information on rating categories.
558888
1144,,885544
66,,888899
99,,111199
1111,,885588
110099
4433,,441166
Note 20 Expected credit loss measurement (continued)
Financial assets subject to credit risk by rating category
USD million
31.12.19
Rating category1
FFiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt aammoorrttiizzeedd ccoosstt
CCaasshh aanndd bbaallaanncceess aatt cceennttrraall bbaannkkss
of which: stage 1
LLooaannss aanndd aaddvvaanncceess ttoo bbaannkkss
of which: stage 1
of which: stage 2
of which: stage 3
RReecceeiivvaabblleess ffrroomm sseeccuurriittiieess ffiinnaanncciinngg ttrraannssaaccttiioonnss
of which: stage 1
CCaasshh ccoollllaatteerraall rreecceeiivvaabblleess oonn ddeerriivvaattiivvee iinnssttrruummeennttss
of which: stage 1
LLooaannss aanndd aaddvvaanncceess ttoo ccuussttoommeerrss
of which: stage 1
of which: stage 2
of which: stage 3
OOtthheerr ffiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt aammoorrttiizzeedd ccoosstt
of which: stage 1
of which: stage 2
of which: stage 3
TToottaall ffiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt aammoorrttiizzeedd ccoosstt
OOnn--bbaallaannccee sshheeeett ffiinnaanncciiaall iinnssttrruummeennttss
FFiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt FFVVOOCCII –– ddeebbtt iinnssttrruummeennttss
TToottaall oonn--bbaallaannccee sshheeeett ffiinnaanncciiaall iinnssttrruummeennttss
0–1
2–3
4–5
6–8
9–13
Credit-
impaired
(defaulted)
Total gross
carrying
amount
ECL
allowances
00
0
11,,332266
1,326
0
0
1144,,336666
11,,887733
1,873
99,,883322
9,832
0
0
1166,,888899
00
110055,,119955
0
105,195
668877
330099
677
309
10
0
0
0
2211,,008899
2288,,881155
21,089 16,889 14,366 28,815
22,,776655
2,765
7700,,552288
00
0
229988
228
71
0
33,,008888
3,088
3399
55,,003333
44,,889999
1100,,555533
39
5,033
4,899 10,553
11,,774444
1188,,774488
5599,,224400
117744,,998822
1,744 174,328 56,957 62,435 14,117
4,631
2,283
0
0
331122
339900
280
381
32
9
0
0
2222,,448855
8800,,335544
0
0
1133,,003311
13,031
0
0
114466,,226677
655
0
11,,556600
1,549
11
0
221155,,669900
8,093
0
77,,115588
6,747
412
0
110099,,995522
110077,,006688
00
0 107,068
11
1122,,445544
0 12,371
81
0
1
1
00
8844,,224466
0 84,246
00
2233,,228899
0 23,289
332277,,555500
0 309,581
0 15,661
2,308
2233,,112233
0 21,988
463
0
672
672
557777,,773300
22,,998811
2,308
667722
22,,330088
55,,885544
115522,,112200
445500
221166,,113399
00
8800,,335544
4411
110099,,999944
00
2222,,448855
00
22,,998811
66,,334455
558844,,007755
00
0
((66))
(4)
(1)
(1)
((22))
(2)
00
0
((776644))
(82)
(123)
(559)
((114433))
(35)
(13)
(95)
((991155))
00
((991155))
Off-balance sheet positions subject to expected credit loss by rating category
USD million
31.12.19
Net carrying
amount
(maximum
exposure to
credit risk)
110077,,006688
107,068
1122,,444477
12,367
80
0
8844,,224455
84,245
2233,,228899
23,289
332266,,778866
309,499
15,538
1,749
2222,,998800
21,953
451
576
557766,,881155
66,,334455
558833,,115599
0–1
2–3
4–5
6–8
9–13
Total off -
balance sheet
exposure
(maximum
exposure to
credit risk) ECL provisions
Credit-
impaired
(defaulted)
Rating category1
OOffff--bbaallaannccee sshheeeett ffiinnaanncciiaall iinnssttrruummeennttss
GGuuaarraanntteeeess
of which: stage 1
of which: stage 2
of which: stage 3
IIrrrreevvooccaabbllee llooaann ccoommmmiittmmeennttss
of which: stage 1
of which: stage 2
of which: stage 3
FFoorrwwaarrdd ssttaarrttiinngg rreevveerrssee rreeppuurrcchhaassee aanndd sseeccuurriittiieess bboorrrroowwiinngg aaggrreeeemmeennttss
TToottaall ooffff--bbaallaannccee sshheeeett ffiinnaanncciiaall iinnssttrruummeennttss
OOtthheerr ccrreeddiitt lliinneess
CCoommmmiitttteedd uunnccoonnddiittiioonnaallllyy rreevvooccaabbllee ccrreeddiitt lliinneess
of which: stage 1
of which: stage 2
of which: stage 3
IIrrrreevvooccaabbllee ccoommmmiitttteedd pprroolloonnggaattiioonn ooff eexxiissttiinngg llooaannss
66,,006600
44,,993322
1
0
1100,,006688
885577
55,,445500
857 4,931 6,048 5,218
233
0
55,,885599
776611
704
57
12
0
0
0
0
44,,116600
44,,886622
22,,554488
2,548 10,068 4,862 5,722 3,878
282
0
00
44,,992222
0
0
5500
1100,,997722
0
0
667722
1155,,667722
137
0
993366
1122,,224455
0
0
00
33,,440055
8822
0
0
82
5500
0
0
50
00
113322
77,,116699
1122,,445599
663322
88,,555544
66,,223311
628 12,422 6,120 6,789 7,889
665
111
0
0
335599
887700
359
870
0
0
0
0
88,,991133
77,,110011
37
4
0
0
11,,339999
2255
25 1,399
0
0
0
0
1133,,885588
665577
380
0
663333
633
0
0
77,,880011
4466
0
0
46
44
0
0
4
5500
of which: stage 1
of which: stage 2
of which: stage 3
TToottaall ootthheerr ccrreeddiitt lliinneess
11 Refer to the “Internal UBS rating scale and mapping of external ratings” table in the “Risk management and control” section of this report for more information on rating categories.
1188,,114422
17,757
304
82
2277,,554477
27,078
419
50
11,,665577
4477,,334477
3355,,009922
33,848
1,197
46
33,,228899
3,285
0
4
3388,,338811
((4422))
(8)
(1)
(33)
((3355))
(30)
(5)
0
00
((7777))
((3344))
(17)
(17)
0
((33))
(3)
0
0
((3377))
345
345
Financial statements Consolidated financial statements
Note 20 Expected credit loss measurement (continued)
f) Sensitivity information
As outlined in Note 1a, ECL estimates involve significant
uncertainties at the time they are made.
ECL model
The models applied to determine point-in-time PDs and LGDs
rely on market and statistical data, which has been found to
correlate well with historically observed defaults in sufficiently
homogeneous segments. The risk sensitivities for each of the
IFRS 9 ECL reporting segments to such factors are summarized in
Note 9.
Forward-looking scenarios
Depending on the scenario selection and related macro-
economic assumptions for the risk factors, the components of
the relevant weighted average ECL change. This is particularly
relevant for interest rates, which can move in both directions
under a given growth assumption (for example, low growth with
high interest rates in a stagflation scenario, versus low growth
and falling interest rates in a recession). Management generally
look for scenario narratives that reflect the key risk drivers of a
given credit portfolio.
As forecasting models are complex, due to the combination
of multiple factors, simple what-if analyses involving a change of
individual parameters do not necessarily provide realistic
information on the exposure of segments to changes in the
macroeconomy. Portfolio-specific analyses based on their key
risk factors would also not be meaningful, as potential
compensatory effects in other segments would be ignored. The
table below indicates some sensitivities to ECLs if a key
macroeconomic variable for the forecasting period is amended
across all scenarios with all other factors remaining unchanged.
Potential effect on stage 1 and stage 2 positions from changing key parameters as at 31 December 2020
BBaasseelliinnee
SSeevveerree ddoowwnnssiiddee WWeeiigghhtteedd aavveerraaggee
(1.36)
2.10
5.69
(7.40)
(3.78)
4.15
8.50
3.72
1.86
(1.46)
(2.97)
8.04
3.45
(2.79)
(5.16)
3.94
1.91
(8.30)
(10.14)
(1.84)
3.19
6.86
(63.01)
(33.54)
36.97
75.93
16.14
9.84
(3.30)
(9.44)
144.34
65.80
(56.60)
(105.61)
9.66
4.29
(4.23)
(8.58)
(1.93)
3.23
7.19
(27.83)
(15.67)
16.99
33.74
9.10
5.09
(2.36)
(5.93)
51.46
23.28
(19.09)
(35.29)
6.78
3.34
(7.27)
(10.22)
USD million
CChhaannggee iinn kkeeyy ppaarraammeetteerrss
FFiixxeedd iinnccoommee:: 1100--yyeeaarr ggoovveerrnnmmeenntt bboonnddss ((aabbssoolluuttee cchhaannggee))
–0.5%
+0.5%
+1.00%
UUnneemmppllooyymmeenntt rraattee ((aabbssoolluuttee cchhaannggee))
–1.00%
–0.5%
+0.5%
+1.00%
RReeaall GGDDPP ggrroowwtthh ((rreellaattiivvee cchhaannggee))
-2.00%
-1.00%
+1.00%
+2.00%
HHoouussee PPrriiccee IInnddeexx ((rreellaattiivvee cchhaannggee))
–5.00%
–2.50%
+2.50%
+5.00%
EEqquuiittyy ((SS&&PP550000,, EEuurrooSSttooxxxx,, SSMMII)) ((rreellaattiivvee cchhaannggee))
–10.00%
–5.00%
+5.00%
+10.00%
346
346
ECL model
Note 9.
As outlined in Note 1a, ECL estimates involve significant
under a given growth assumption (for example, low growth with
uncertainties at the time they are made.
high interest rates in a stagflation scenario, versus low growth
and falling interest rates in a recession). Management generally
look for scenario narratives that reflect the key risk drivers of a
The models applied to determine point-in-time PDs and LGDs
given credit portfolio.
rely on market and statistical data, which has been found to
As forecasting models are complex, due to the combination
correlate well with historically observed defaults in sufficiently
homogeneous segments. The risk sensitivities for each of the
IFRS 9 ECL reporting segments to such factors are summarized in
Forward-looking scenarios
Depending on the scenario selection and related macro-
economic assumptions for the risk factors, the components of
the relevant weighted average ECL change. This is particularly
relevant for interest rates, which can move in both directions
of multiple factors, simple what-if analyses involving a change of
individual parameters do not necessarily provide realistic
information on the exposure of segments to changes in the
macroeconomy. Portfolio-specific analyses based on their key
risk factors would also not be meaningful, as potential
compensatory effects in other segments would be ignored. The
table below indicates some sensitivities to ECLs if a key
macroeconomic variable for the forecasting period is amended
across all scenarios with all other factors remaining unchanged.
Potential effect on stage 1 and stage 2 positions from changing key parameters as at 31 December 2020
Consolidated financial statements
f) Sensitivity information
USD million
CChhaannggee iinn kkeeyy ppaarraammeetteerrss
FFiixxeedd iinnccoommee:: 1100--yyeeaarr ggoovveerrnnmmeenntt bboonnddss ((aabbssoolluuttee cchhaannggee))
UUnneemmppllooyymmeenntt rraattee ((aabbssoolluuttee cchhaannggee))
RReeaall GGDDPP ggrroowwtthh ((rreellaattiivvee cchhaannggee))
HHoouussee PPrriiccee IInnddeexx ((rreellaattiivvee cchhaannggee))
–0.5%
+0.5%
+1.00%
–1.00%
–0.5%
+0.5%
+1.00%
-2.00%
-1.00%
+1.00%
+2.00%
–5.00%
–2.50%
+2.50%
+5.00%
–10.00%
–5.00%
+5.00%
+10.00%
EEqquuiittyy ((SS&&PP550000,, EEuurrooSSttooxxxx,, SSMMII)) ((rreellaattiivvee cchhaannggee))
BBaasseelliinnee
SSeevveerree ddoowwnnssiiddee WWeeiigghhtteedd aavveerraaggee
(1.36)
2.10
5.69
(7.40)
(3.78)
4.15
8.50
3.72
1.86
(1.46)
(2.97)
8.04
3.45
(2.79)
(5.16)
3.94
1.91
(8.30)
(10.14)
(1.84)
3.19
6.86
(63.01)
(33.54)
36.97
75.93
16.14
9.84
(3.30)
(9.44)
144.34
65.80
(56.60)
(105.61)
9.66
4.29
(4.23)
(8.58)
(1.93)
3.23
7.19
(27.83)
(15.67)
16.99
33.74
9.10
5.09
(2.36)
(5.93)
51.46
23.28
(19.09)
(35.29)
6.78
3.34
(7.27)
(10.22)
Note 20 Expected credit loss measurement (continued)
Note 20 Expected credit loss measurement (continued)
coherent
scenarios with
Sensitivities can be more meaningfully assessed in the context
of
developed
macroeconomic factors. The table on the previous page outlines
favorable and unfavorable effects, based on reasonably possible
alternative changes to the economic conditions for stage 1 and
stage 2 positions. The ECL impact is calculated for material
portfolios and disclosed for each scenario.
consistently
The forecasting horizon is limited to three years, with a
model-based mean reversion of PD and LGD assumed
thereafter. Changes to these timelines may have an effect on
ECLs: depending on the cycle, a longer or shorter forecasting
horizon will lead to different annualized lifetime PD and
average LGD estimations. This is currently not deemed to be
material for UBS, as a large proportion of loans, including
mortgages in Switzerland, have maturities that are within the
forecasting horizon.
Scenario weights
ECL is sensitive to changing scenario weights, in particular if
narratives and parameters are selected that are not close to the
baseline scenario, highlighting the non-linearity of credit losses.
As shown in the table on the bottom of this page, the ECL for
stage 1 and stage 2 positions would have been USD 442 million
(31 December 2019: USD 234 million) instead of USD 639
million (31 December 2019: USD 341 million) if ECL had been
determined solely on the baseline scenario. The weighted
average ECL therefore amounts to 145% (31 December 2019:
149%) of the baseline value.
Stage allocation and SICR
The determination of what constitutes a significant increase in
credit risk (SICR) is based on management judgment as
explained in Note 1a. Changing the SICR trigger will have a
direct effect on ECLs, as more or fewer positions would be
subject to lifetime ECLs under any scenario.
is
The relevance of the SICR trigger on overall ECL
demonstrated in the table below with the indication that the
ECL allowances and provisions for stage 1 and stage 2 positions
would have been USD 1,336 million if all non-impaired positions
across the portfolio had been measured for lifetime ECLs
irrespective of their actual SICR status. This amount compares to
actual stage 1 and 2 allowances and provisions of USD 639
million as of 31 December 2020.
for various
Maturity profile
The maturity profile of the assets is an important driver for
changes in ECL due to transfers to stage 2 and from stage 2 to
stage 1. The current maturity profile of most lending books is
relatively short; hence a movement to stage 2 may have a
limited effect on ECLs. A significant portion of our lending to
SMEs is documented under multi-purpose credit agreements,
which allow
forms of utilization but are
unconditionally cancelable by UBS at any time. The relevant
maturity for drawings under such agreements with a fixed
maturity is the respective term, or a maximum of 12 months in
stage 1. For unused credit lines and all drawings that have no
fixed maturity (e.g., current accounts), UBS generally applies a
12-month maturity from the reporting date, given the credit
review policies, which require either continuous monitoring of
key indicators and behavioral patterns for smaller positions or an
annual formal review for any other limit. The ECLs for these
products is sensitive to shortening or extending the maturity
assumption.
Potential effect on stage 1 and stage 2 positions from changing scenario weights or moving to an ECL lifetime calculation
as at 31 December 2020
Scenarios
USD million, except where indicated
SSeeggmmeennttaattiioonn
Private clients with mortgages
Real estate financing
Large corporate clients
SME clients
Other segments
TToottaall
Actual ECL allowances and
provisions (as per Note 9)
WWeeiigghhtteedd aavveerraaggee
Pro forma ECL allowances and provisions, assuming application of
100% weighting
BBaasseelliinnee
Severe downside
ECL
((113311))
((7766))
((220066))
((7744))
((115522))
((663399))
in % of
baseline
244
138
149
115
116
114455
ECL
((5544))
((5555))
((113388))
((6644))
((113311))
((444422))
in % of
baseline
100
100
100
100
100
110000
ECL
(302)
(123)
(298)
(93)
(183)
((999999))
in % of
baseline
562
224
216
144
140
222266
Pro forma ECL allowances and
provisions, assuming all
positions being subject to
lifetime ECL
WWeeiigghhtteedd aavveerraaggee
ECL
((338855))
((113311))
((330077))
((112299))
((338855))
((11,,333366))
in % of
baseline
717
237
222
200
294
330022
346
347
347
Financial statements
Fair values are determined using quoted prices in active
markets for identical assets or liabilities, where available. Where
the market for a financial instrument or non-financial asset or
liability is not active, fair value is established using a valuation
technique, including pricing models. Valuation adjustments may
be made to allow for additional factors, including model,
liquidity, credit and funding risks, which are not explicitly
captured within the valuation technique, but which would
nevertheless be considered by market participants when
establishing a price. The limitations inherent in a particular
valuation technique are considered in the determination of the
classification of an asset or liability within the fair value
hierarchy. Generally, the unit of account for a financial
instrument, and UBS applies
is the
instrument
valuation adjustments at an
level,
consistent with that unit of account. However, if certain
conditions are met, UBS may estimate the fair value of a
portfolio of financial assets and liabilities with substantially
similar and offsetting risk exposures on the basis of the net open
risks.
instrument
individual
individual
› Refer to Note 21d for more information
the business divisions’
Fair value estimates are validated by the risk and finance
control functions, which are independent of the business
divisions. Independent price verification is performed by Finance
through benchmarking
fair value
estimates with observable market prices and other independent
sources. A governance framework and associated controls are in
place in order to monitor the quality of third-party pricing
sources where used. For instruments where valuation models are
used to determine fair value, independent valuation and model
control groups within Finance and Risk Control evaluate UBS’s
models on a regular basis, including valuation and model input
parameters, as well as pricing. As a result of the valuation
controls employed, valuation adjustments may be made to the
business divisions’ estimates of fair value to align with
independent market data and the relevant accounting standard.
› Refer to Note 21d for more information
Consolidated financial statements
Note 21 Fair value measurement
a) Valuation principles
All financial and non-financial assets and liabilities measured or
disclosed at fair value are categorized into one of three fair value
hierarchy levels in accordance with IFRS. The fair value hierarchy
is based on the transparency of inputs to the valuation of an
asset or liability as of the measurement date. In certain cases,
the inputs used to measure fair value may fall within different
levels of the fair value hierarchy. For disclosure purposes, the
level in the hierarchy within which an instrument is classified in
its entirety is based on the lowest level input that is significant to
the position’s fair value measurement:
– Level 1 – quoted prices (unadjusted) in active markets for
identical assets and liabilities;
– Level 2 – valuation techniques for which all significant inputs
are, or are based on, observable market data; or
– Level 3 – valuation techniques for which significant inputs are
not based on observable market data.
b) Valuation governance
UBS’s fair value measurement and model governance framework
includes numerous controls and other procedural safeguards
that are intended to maximize the quality of fair value
measurements reported
in the financial statements. New
products and valuation techniques must be reviewed and
approved by key stakeholders from the risk and finance control
functions. Responsibility for the ongoing measurement of
financial and non-financial instruments at fair value resides with
the business divisions.
348
348
the inputs used to measure fair value may fall within different
be made to allow for additional factors, including model,
Determination of fair values from quoted market prices or valuation techniques1
Note 21 Fair value measurement (continued)
c) Fair value hierarchy
The table below provides the fair value hierarchy classification of
financial and non-financial assets and liabilities measured at fair
value. The narrative that follows describes valuation techniques
used in measuring their fair value of different product types
(including significant valuation inputs and assumptions used),
and the factors considered in determining their classification
within the fair value hierarchy.
USD million
FFiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt ffaaiirr vvaalluuee oonn aa rreeccuurrrriinngg bbaassiiss
3311..1122..2200
31.12.19
LLeevveell 11
LLeevveell 22
LLeevveell 33
TToottaall
Level 1
Level 2
Level 3
Total
Financial assets at fair value held for trading
110077,,550077
1155,,555533
22,,333377
112255,,339977
113,634
12,068
1,812 127,514
of which:
Equity instruments
Government bills / bonds
Investment fund units
Corporate and municipal bonds
Loans
Asset-backed securities
Derivative financial instruments
of which:
Foreign exchange contracts
Interest rate contracts
Equity / index contracts
Credit derivative contracts
Commodity contracts
Brokerage receivables
9900,,330077
99,,002288
77,,337744
778899
00
88
11,,110011
22,,220077
11,,779944
88,,335566
11,,886600
223366
117711 9911,,557799 96,161
1100 1111,,224455
99,,119922
2233
99,,996611
881177
22,,999955
11,,113344
442255
118811
400
9,630 1,770
7,088 1,729
755 6,617
0 1,180
372
0
226 96,787
64 11,464
50 8,867
542 7,914
791 1,971
512
140
779955
115577,,006688
11,,775544
115599,,661177
356 120,222
1,264 121,841
331199 6688,,442244
00 5500,,335533
00 3333,,999900
00
22,,000088
00
22,,221111
55 6688,,774499
553377 5500,,889900
885533 3344,,884422
22,,335588
335500
22,,221177
66
240 52,227
6 42,288
7 22,220
0 1,612
0 1,820
8 52,474
263 42,558
597 22,825
394 2,007
0 1,821
00
2244,,665599
00
2244,,665599
0
18,007
0
18,007
Financial assets at fair value not held for trading
4400,,998866
3355,,443355
33,,994422
8800,,336644
40,608
39,373
3,963
83,944
Consolidated financial statements
Note 21 Fair value measurement
a) Valuation principles
All financial and non-financial assets and liabilities measured or
Fair values are determined using quoted prices in active
disclosed at fair value are categorized into one of three fair value
markets for identical assets or liabilities, where available. Where
hierarchy levels in accordance with IFRS. The fair value hierarchy
the market for a financial instrument or non-financial asset or
is based on the transparency of inputs to the valuation of an
liability is not active, fair value is established using a valuation
asset or liability as of the measurement date. In certain cases,
technique, including pricing models. Valuation adjustments may
levels of the fair value hierarchy. For disclosure purposes, the
liquidity, credit and funding risks, which are not explicitly
level in the hierarchy within which an instrument is classified in
captured within the valuation technique, but which would
its entirety is based on the lowest level input that is significant to
nevertheless be considered by market participants when
the position’s fair value measurement:
establishing a price. The limitations inherent in a particular
– Level 1 – quoted prices (unadjusted) in active markets for
valuation technique are considered in the determination of the
identical assets and liabilities;
classification of an asset or liability within the fair value
– Level 2 – valuation techniques for which all significant inputs
hierarchy. Generally, the unit of account for a financial
are, or are based on, observable market data; or
instrument
is the
individual
instrument, and UBS applies
– Level 3 – valuation techniques for which significant inputs are
valuation adjustments at an
individual
instrument
level,
not based on observable market data.
consistent with that unit of account. However, if certain
conditions are met, UBS may estimate the fair value of a
portfolio of financial assets and liabilities with substantially
similar and offsetting risk exposures on the basis of the net open
risks.
› Refer to Note 21d for more information
b) Valuation governance
UBS’s fair value measurement and model governance framework
Fair value estimates are validated by the risk and finance
includes numerous controls and other procedural safeguards
control functions, which are independent of the business
that are intended to maximize the quality of fair value
divisions. Independent price verification is performed by Finance
measurements reported
in the financial statements. New
through benchmarking
the business divisions’
fair value
products and valuation techniques must be reviewed and
estimates with observable market prices and other independent
approved by key stakeholders from the risk and finance control
sources. A governance framework and associated controls are in
functions. Responsibility for the ongoing measurement of
place in order to monitor the quality of third-party pricing
financial and non-financial instruments at fair value resides with
sources where used. For instruments where valuation models are
the business divisions.
used to determine fair value, independent valuation and model
control groups within Finance and Risk Control evaluate UBS’s
models on a regular basis, including valuation and model input
parameters, as well as pricing. As a result of the valuation
controls employed, valuation adjustments may be made to the
business divisions’ estimates of fair value to align with
independent market data and the relevant accounting standard.
› Refer to Note 21d for more information
FFiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt ffaaiirr vvaalluuee tthhrroouugghh ootthheerr ccoommpprreehheennssiivvee iinnccoommee oonn aa rreeccuurrrriinngg bbaassiiss
Financial assets measured at fair value through other comprehensive income
11,,114444
77,,111144
of which:
Asset-backed securities
Government bills / bonds
Corporate and municipal bonds
NNoonn--ffiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt ffaaiirr vvaalluuee oonn aa rreeccuurrrriinngg bbaassiiss
Precious metals and other physical commodities
NNoonn--ffiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt ffaaiirr vvaalluuee oonn aa nnoonn--rreeccuurrrriinngg bbaassiiss
Other non-financial assets2
00
11,,110033
4400
66,,662244
4477
444444
66,,226644
00
00
11
00
00
00
00
88,,225588
1,906
4,439
0
6,345
66,,662244
11,,115500
448855
0 3,955
16
468
1,859
47
0 3,955
0 1,875
515
0
00
66,,226644
4,597
0
0
4,597
224455
224466
0
0
199
199
TToottaall aasssseettss mmeeaassuurreedd aatt ffaaiirr vvaalluuee
115566,,669966
223399,,883311
88,,227788
440044,,880055
161,101 194,110
7,237 362,448
348
349
349
of which:
Financial assets for unit-linked investment contracts
Corporate and municipal bonds
Government bills / bonds
Loans
Securities financing transactions
Auction rate securities
Investment fund units
Equity instruments
Other
0 27,686
0 19,385
0 15,790
0 10,206 1,231 11,438
0 6,148
147 6,294
0 1,536 1,536
0
740
98
194
559
452
103
515
499
0
110011
229900 1166,,995577
33,,559933
77,,669999
66,,662299
00
444477
00
1100
886622
112222
11,,552277
110055
554444
440088
88,,556611
66,,775511
11,,552277
883311
663311
441188
118
653 18,732
00 2233,,229977 12,089 3,700
1199,,770044
00
00
00
227788
8866
00
22 2200,,773311 27,568
448
4
16
337722 1177,,661199
2200,,662288
Financial statements Consolidated financial statements
Note 21 Fair value measurement (continued)
Determination of fair values from quoted market prices or valuation techniques (continued)1
USD million
FFiinnaanncciiaall lliiaabbiilliittiieess mmeeaassuurreedd aatt ffaaiirr vvaalluuee oonn aa rreeccuurrrriinngg bbaassiiss
3311..1122..2200
31.12.19
LLeevveell 11
LLeevveell 22
LLeevveell 33
TToottaall
Level 1
Level 2
Level 3
Total
Financial liabilities at fair value held for trading
2266,,888888
66,,665522
5555
3333,,559955
25,791
4,726
75
30,591
of which:
Equity instruments
Corporate and municipal bonds
Government bills / bonds
Investment fund units
Derivative financial instruments
of which:
Foreign exchange contracts
Interest rate contracts
Equity / index contracts
Credit derivative contracts
Commodity contracts
FFiinnaanncciiaall lliiaabbiilliittiieess ddeessiiggnnaatteedd aatt ffaaiirr vvaalluuee oonn aa rreeccuurrrriinngg bbaassiiss
Brokerage payables designated at fair value
Debt issued designated at fair value
Other financial liabilities designated at fair value
of which:
Financial liabilities related to unit-linked investment contracts
Securities financing transactions
Over-the-counter debt instruments
2222,,551199
3311
33,,664422
669966
442255
44,,004488
11,,003366
11,,112277
4400 2222,,998855
44,,008899
99
44,,667788
00
11,,882288
55
22,526
149
40 3,606
646
294
2,820
404
59 22,734
16 3,661
0 3,466
698
0
774466
115566,,888844
33,,447711
116611,,110022
385 118,498
1,996 120,880
331166 7700,,114499
00 4433,,338899
00 3388,,887700
00
22,,440033
00
22,,000033
6611 7700,,552277
552277 4433,,991166
22,,330066 4411,,117766
22,,993311
22,,002277
552288
2244
60 54,013
248 53,705
7 36,434
130 36,571
3 24,171 1,293 25,468
512 2,960
0 2,448
0 1,707
0 1,707
00
00
00
3388,,774422
00
3388,,774422
5500,,227733
1100,,997700
6611,,224433
2299,,667711
771166
3300,,338877
0
0
0
37,233
0
37,233
56,943
9,866
66,809
35,119
822
35,940
00 2200,,997755
00
77,,331177
00
11,,336633
00 2200,,997755
77,,331177
00
22,,006600
669977
0 28,145
0 5,742
0 1,231
0 28,145
0 5,742
791 2,022
TToottaall lliiaabbiilliittiieess mmeeaassuurreedd aatt ffaaiirr vvaalluuee
12,759 291,452
11 Bifurcated embedded derivatives are presented on the same balance sheet lines as their host contracts and are not included in this table. The fair value of these derivatives was not material for the periods
presented. 22 Other non-financial assets primarily consist of properties and other non-current assets held for sale, which are measured at the lower of their net carrying amount or fair value less costs to sell.
26,176 252,518
228822,,222222
332255,,006699
1155,,221122
2277,,663355
350
350
USD million
FFiinnaanncciiaall lliiaabbiilliittiieess mmeeaassuurreedd aatt ffaaiirr vvaalluuee oonn aa rreeccuurrrriinngg bbaassiiss
3311..1122..2200
31.12.19
LLeevveell 11
LLeevveell 22
LLeevveell 33
TToottaall
Level 1
Level 2
Level 3
Total
Financial liabilities at fair value held for trading
2266,,888888
66,,665522
5555
3333,,559955
25,791
4,726
75
30,591
of which:
Equity instruments
Corporate and municipal bonds
Government bills / bonds
Investment fund units
Derivative financial instruments
of which:
Foreign exchange contracts
Interest rate contracts
Equity / index contracts
Credit derivative contracts
Commodity contracts
2222,,551199
3311
33,,664422
669966
442255
44,,004488
11,,003366
11,,112277
4400 2222,,998855
22,526
149
99
00
55
44,,008899
44,,667788
11,,882288
40 3,606
2,820
404
646
294
59 22,734
16 3,661
0 3,466
0
698
774466
115566,,888844
33,,447711
116611,,110022
385 118,498
1,996 120,880
331166 7700,,114499
00 4433,,338899
00 3388,,887700
00
00
22,,440033
22,,000033
6611 7700,,552277
552277 4433,,991166
248 53,705
60 54,013
7 36,434
130 36,571
22,,330066 4411,,117766
3 24,171 1,293 25,468
552288
2244
22,,993311
22,,002277
0 2,448
0 1,707
512 2,960
0 1,707
FFiinnaanncciiaall lliiaabbiilliittiieess ddeessiiggnnaatteedd aatt ffaaiirr vvaalluuee oonn aa rreeccuurrrriinngg bbaassiiss
Brokerage payables designated at fair value
3388,,774422
00
3388,,774422
37,233
0
37,233
Debt issued designated at fair value
5500,,227733
1100,,997700
6611,,224433
56,943
9,866
66,809
Other financial liabilities designated at fair value
of which:
Financial liabilities related to unit-linked investment contracts
Securities financing transactions
Over-the-counter debt instruments
2299,,667711
771166
3300,,338877
35,119
822
35,940
00 2200,,997755
00 2200,,997755
00
00
77,,331177
11,,336633
00
669977
77,,331177
22,,006600
0 28,145
0 5,742
0 1,231
0 28,145
0 5,742
791 2,022
00
00
00
0
0
0
TToottaall lliiaabbiilliittiieess mmeeaassuurreedd aatt ffaaiirr vvaalluuee
2277,,663355
228822,,222222
1155,,221122
332255,,006699
26,176 252,518
12,759 291,452
11 Bifurcated embedded derivatives are presented on the same balance sheet lines as their host contracts and are not included in this table. The fair value of these derivatives was not material for the periods
presented. 22 Other non-financial assets primarily consist of properties and other non-current assets held for sale, which are measured at the lower of their net carrying amount or fair value less costs to sell.
Consolidated financial statements
Note 21 Fair value measurement (continued)
Note 21 Fair value measurement (continued)
Determination of fair values from quoted market prices or valuation techniques (continued)1
Valuation techniques
valuation
recognized
for
UBS uses widely
determining the fair value of financial and non-financial
instruments that are not actively traded and quoted. The most
frequently applied valuation techniques include discounted value
of expected cash flows, relative value and option pricing
methodologies.
techniques
Discounted value of expected cash flows is a valuation
technique that measures fair value using estimated expected
future cash flows from assets or liabilities and then discounts
these cash flows using a discount rate or discount margin that
reflects the credit and / or funding spreads required by the
market for instruments with similar risk and liquidity profiles to
produce a present value. When using such valuation techniques,
expected future cash flows are estimated using an observed or
implied market price for the future cash flows or by using
industry standard cash flow projection models. The discount
factors within the calculation are generated using industry-
standard yield curve modeling techniques and models.
Relative value models measure fair value based on the market
prices of equivalent or comparable assets or liabilities, making
adjustments for differences between the characteristics of the
observed instrument and the instrument being valued.
Option pricing models incorporate assumptions regarding the
behavior of future price movements of an underlying referenced
asset or assets to generate a probability-weighted future
expected payoff for the option. The resulting probability-
weighted expected payoff is then discounted using discount
factors generated from industry-standard yield curve modeling
techniques and models. The option pricing model may be
implemented using a closed-form analytical formula or other
mathematical techniques (e.g., binomial tree or Monte Carlo
simulation).
Where available, valuation techniques use market-observable
assumptions and inputs. If such data is not available, inputs may
be derived by reference to similar assets in active markets, from
recent prices for comparable transactions or from other
observable market data. In such cases, the inputs selected are
based on historical experience and practice for similar or
analogous instruments, derivation of input levels based on
similar products with observable price levels, and knowledge of
current market conditions and valuation approaches.
For more complex instruments, fair values may be estimated
using a combination of observed transaction prices, consensus
pricing services and relevant quotes. Consideration is given to the
nature of the quotes (e.g., indicative or firm) and the relationship
of recently evidenced market activity to the prices provided by
consensus pricing services. UBS also uses internally developed
models, which are typically based on valuation methods and
techniques
industry.
Assumptions and inputs used in valuation techniques include
benchmark interest rate curves, credit and funding spreads used in
estimating discount rates, bond and equity prices, equity index
prices, foreign exchange rates, levels of market volatility and
correlation. Refer to Note 21f for more information. The discount
curves used by the Group incorporate the funding and credit
characteristics of the instruments to which they are applied.
standard within
recognized as
the
Financial instruments excluding derivatives: valuation and classification in the fair value hierarchy
Product
Valuation and classification in the fair value hierarchy
Government bills
and bonds
Valuation
– Generally valued using prices obtained directly from the market.
– Instruments not priced directly using active-market data are valued using discounted cash flow valuation
techniques that incorporate market data for similar government instruments.
Corporate and
municipal bonds
Traded loans and
loans measured at
fair value
Fair value hierarchy
– Generally traded in active markets with prices that can be obtained directly from these markets, resulting
in classification as Level 1, while the remaining positions are classified as Level 2 and Level 3.
Valuation
– Generally valued using prices obtained directly from the market for the security, or similar securities,
adjusted for seniority, maturity and liquidity.
– When prices are not available, instruments are valued using discounted cash flow valuation techniques
incorporating the credit spread of the issuer or similar issuers.
– For convertible bonds without directly comparable prices, issuances may be priced using a convertible
bond model.
Fair value hierarchy
– Generally classified as Level 1 or Level 2, depending on the depth of trading activity behind price sources.
– Level 3 instruments have no suitable pricing information available.
Valuation
– Valued directly using market prices that reflect recent transactions or quoted dealer prices, where
available.
– Where no market price data is available, loans are valued by relative value benchmarking using pricing
derived from debt instruments in comparable entities or different products in the same entity, or by using
a credit default swap valuation technique, which requires inputs for credit spreads, credit recovery rates
and interest rates. Recently originated commercial real estate loans are measured using a securitization
approach based on rating agency guidelines.
Fair value hierarchy
– Instruments with suitably deep and liquid pricing information are classified as Level 2.
– Positions requiring the use of valuation techniques, or for which the price sources have insufficient
trading depth, are classified as Level 3.
350
351
351
Financial statements Consolidated financial statements
Note 21 Fair value measurement (continued)
Product
Valuation and classification in the fair value hierarchy
Investment fund
units
Valuation
– Predominantly exchange-traded, with readily available quoted prices in liquid markets.
– Where market prices are not available, fair value may be measured using net asset values (NAVs).
Fair value hierarchy
– Listed units are classified as Level 1, provided there is sufficient trading activity to justify active-market
classification, while other positions are classified as Level 2.
– Positions for which NAVs are not available are classified as Level 3.
Asset-backed
securities (ABS)
Valuation
– For liquid securities, the valuation process will use trade and price data, updated for movements in
market levels between the time of trading and the time of valuation. Less liquid instruments are
measured using discounted expected cash flows incorporating price data for instruments or indices with
similar risk profiles.
Fair value hierarchy
– RMBS, CMBS and other ABS are generally classified as Level 2. However, if significant inputs are
unobservable, or if market or fundamental data is not available, they are classified as Level 3.
Auction rate
securities (ARS)
Valuation
– Effective from the fourth quarter of 2020, ARS are valued utilizing a discounted cash flow methodology.
The model captures interest rate risk emanating from the note coupon, credit risk attributable to the
underlying closed-end fund investments, liquidity risk as a function of the level of trading volume in these
positions, and extension risk as ARS are perpetual instruments that require an assumption regarding their
maturity or issuer redemption date.
– Previously, ARS were valued using market prices that reflected recent transactions after applying an
adjustment for trade size or quoted dealer prices, where available. However, due to significant
deterioration in the volume and size of transactions in relevant ARS markets following the outbreak of
the COVID-19 pandemic, a model-based approach provides a superior indication of orderly exit prices
until such time as markets re-develop.
Fair value hierarchy
– Granular and liquid pricing information is generally not available for ARS. As a result, these securities are
classified as Level 3.
Equity instruments
Valuation
– Listed equity instruments are generally valued using prices obtained directly from the market.
– Unlisted equity holdings, including private equity positions, are initially marked at their transaction price
and are revalued when reliable evidence of price movement becomes available or when the position is
deemed to be impaired.
Financial assets for
unit-linked
investment
contracts
Securities financing
transactions
Brokerage
receivables and
payables
Amounts due under
unit-linked
investment
contracts
Fair value hierarchy
– The majority of equity securities are actively traded on public stock exchanges where quoted prices are
readily and regularly available, resulting in Level 1 classification.
Valuation
– The majority of assets are listed on exchanges and fair values are determined using quoted prices.
Fair value hierarchy
– Most assets are classified as Level 1 if actively traded, or Level 2 if trading is not active.
– Instruments for which prices are not readily available are classified as Level 3.
Valuation
– These instruments are valued using discounted expected cash flow techniques. The discount rate applied
is based on funding curves that are relevant to the collateral eligibility terms.
Fair value hierarchy
– Collateral funding curves for these instruments are generally observable and, as a result, these positions
are classified as Level 2.
– Where the collateral terms are non-standard, the funding curve may be considered unobservable and
these positions are classified as Level 3.
Valuation
– Fair value is determined based on the value of the underlying balances.
Fair value hierarchy
– Due to their on-demand nature, these receivables and payables are deemed as Level 2.
Valuation
– The fair values of investment contract liabilities are determined by reference to the fair value of the
corresponding assets.
Fair value hierarchy
– The liabilities themselves are not actively traded, but are mainly referenced to instruments that are
actively traded and are therefore classified as Level 2.
352
352
Consolidated financial statements
Note 21 Fair value measurement (continued)
Note 21 Fair value measurement (continued)
Valuation and classification in the fair value hierarchy
Product
units
Investment fund
Valuation
– Predominantly exchange-traded, with readily available quoted prices in liquid markets.
– Where market prices are not available, fair value may be measured using net asset values (NAVs).
Fair value hierarchy
– Listed units are classified as Level 1, provided there is sufficient trading activity to justify active-market
classification, while other positions are classified as Level 2.
– Positions for which NAVs are not available are classified as Level 3.
Asset-backed
securities (ABS)
Valuation
– For liquid securities, the valuation process will use trade and price data, updated for movements in
market levels between the time of trading and the time of valuation. Less liquid instruments are
measured using discounted expected cash flows incorporating price data for instruments or indices with
similar risk profiles.
Fair value hierarchy
– RMBS, CMBS and other ABS are generally classified as Level 2. However, if significant inputs are
unobservable, or if market or fundamental data is not available, they are classified as Level 3.
Valuation
– Effective from the fourth quarter of 2020, ARS are valued utilizing a discounted cash flow methodology.
Auction rate
securities (ARS)
The model captures interest rate risk emanating from the note coupon, credit risk attributable to the
underlying closed-end fund investments, liquidity risk as a function of the level of trading volume in these
positions, and extension risk as ARS are perpetual instruments that require an assumption regarding their
maturity or issuer redemption date.
– Previously, ARS were valued using market prices that reflected recent transactions after applying an
adjustment for trade size or quoted dealer prices, where available. However, due to significant
deterioration in the volume and size of transactions in relevant ARS markets following the outbreak of
the COVID-19 pandemic, a model-based approach provides a superior indication of orderly exit prices
until such time as markets re-develop.
Fair value hierarchy
– Granular and liquid pricing information is generally not available for ARS. As a result, these securities are
classified as Level 3.
Equity instruments
Valuation
– Listed equity instruments are generally valued using prices obtained directly from the market.
– Unlisted equity holdings, including private equity positions, are initially marked at their transaction price
and are revalued when reliable evidence of price movement becomes available or when the position is
deemed to be impaired.
Fair value hierarchy
– The majority of equity securities are actively traded on public stock exchanges where quoted prices are
readily and regularly available, resulting in Level 1 classification.
Financial assets for
Valuation
– The majority of assets are listed on exchanges and fair values are determined using quoted prices.
Fair value hierarchy
– Most assets are classified as Level 1 if actively traded, or Level 2 if trading is not active.
– Instruments for which prices are not readily available are classified as Level 3.
Securities financing
Valuation
– These instruments are valued using discounted expected cash flow techniques. The discount rate applied
is based on funding curves that are relevant to the collateral eligibility terms.
Fair value hierarchy
– Collateral funding curves for these instruments are generally observable and, as a result, these positions
– Where the collateral terms are non-standard, the funding curve may be considered unobservable and
are classified as Level 2.
these positions are classified as Level 3.
Valuation
– Fair value is determined based on the value of the underlying balances.
Fair value hierarchy
– Due to their on-demand nature, these receivables and payables are deemed as Level 2.
Amounts due under
Valuation
– The fair values of investment contract liabilities are determined by reference to the fair value of the
corresponding assets.
Fair value hierarchy
– The liabilities themselves are not actively traded, but are mainly referenced to instruments that are
actively traded and are therefore classified as Level 2.
unit-linked
investment
contracts
transactions
Brokerage
receivables and
payables
unit-linked
investment
contracts
Derivative instruments: valuation and classification in the
fair value hierarchy
The curves used for discounting expected cash flows in the
valuation of collateralized derivatives reflect the funding terms
associated with the relevant collateral arrangement for the
instrument being valued. These collateral arrangements differ
across counterparties with respect to the eligible currency and
interest terms of the collateral. The majority of collateralized
derivatives are measured using a discount curve that is based on
funding rates derived from overnight interest in the cheapest
eligible currency for the respective counterparty collateral
agreement.
Uncollateralized and partially collateralized derivatives are
discounted using the LIBOR (or equivalent) curve for the currency
of the instrument. As described in Note 21d, the fair value of
uncollateralized and partially collateralized derivatives is then
adjusted by credit valuation adjustments (CVAs), debit valuation
adjustments (DVAs) and funding valuation adjustment (FVAs), as
applicable, to reflect an estimation of the effect of counterparty
credit risk, UBS’s own credit risk, and funding costs and benefits.
› Refer to Note 10 for more information about derivative
instruments
Derivative product
Valuation and classification in the fair value hierarchy
Interest rate
contracts
Valuation
– Interest rate swap contracts are valued by estimating future interest cash flows and discounting those
cash flows using a rate that reflects the appropriate funding rate for the position being measured. The
yield curves used to estimate future index levels and discount rates are generated using market-standard
yield curve models using interest rates associated with current market activity. The key inputs to the
models are interest rate swap rates, forward rate agreement rates, short-term interest rate futures prices,
basis swap spreads and inflation swap rates.
– Interest rate option contracts are valued using various market-standard option models, using inputs that
include interest rate yield curves, inflation curves, volatilities and correlations.
– When the maturity of an interest rate swap or option contract exceeds the term for which standard
market quotes are observable for a significant input parameter, the contracts are valued by extrapolation
from the last observable point using standard assumptions or by reference to another observable
comparable input parameter to represent a suitable proxy for that portion of the term.
Fair value hierarchy
– The majority of interest rate swaps are classified as Level 2 as the standard market contracts that form
Credit derivative
contracts
Valuation
Fair value hierarchy
the inputs for yield curve models are generally traded in active and observable markets.
– Options are generally treated as Level 2 as the calibration process enables the model output to be
validated to active-market levels. Models calibrated in this way are then used to revalue the portfolio of
both standard options and more exotic products.
– Interest rate swap or option contracts are classified as Level 3 when the terms exceed standard market-
observable quotes.
– Exotic options for which appropriate volatility or correlation input levels cannot be implied from
observable market data are classified as Level 3.
– Credit derivative contracts are valued using industry-standard models based primarily on market credit
spreads, upfront pricing points and implied recovery rates. Where a derivative credit spread is not directly
available, it may be derived from the price of the reference cash bond.
– Asset-backed credit derivatives are valued using a valuation technique similar to that of the underlying
security with an adjustment to reflect the funding differences between cash and synthetic form.
– Single-entity and portfolio credit derivative contracts are classified as Level 2 when credit spreads and
recovery rates are determined from actively traded observable market data. Where the underlying
reference name(s) are not actively traded and the correlation cannot be directly mapped to actively
traded tranche instruments, these contracts are classified as Level 3.
– Asset-backed credit derivatives follow the characteristics of the underlying security and are therefore
distributed across Level 2 and Level 3.
352
353
353
Financial statements Consolidated financial statements
Note 21 Fair value measurement (continued)
Derivative product
Valuation and classification in the fair value hierarchy
Foreign exchange
contracts
Valuation
– Open spot FX contracts are valued using the FX spot rate observed in the market.
– Forward FX contracts are valued using the FX spot rate adjusted for forward pricing points observed from
standard market-based sources.
– OTC FX option contracts are valued using market-standard option valuation models. The models used for
shorter-dated options (i.e., maturities of five years or less) tend to be different than those used for
longer-dated options because the models needed for longer-dated OTC FX contracts require additional
consideration of interest rate and FX rate interdependency.
– The valuation for multi-dimensional FX options uses a multi-local volatility model, which is calibrated to
the observed FX volatilities for all relevant FX pairs.
Fair value hierarchy
– The markets for FX spot and FX forward pricing points are both actively traded and observable and
Equity / index
contracts
Valuation
therefore such FX contracts are generally classified as Level 2.
– A significant proportion of OTC FX option contracts are classified as Level 2 as inputs are derived mostly
from standard market contracts traded in active and observable markets.
– OTC FX option contracts classified as Level 3 include multi-dimensional FX options and long-dated FX
exotic option contracts where there is no active market from which to derive volatility or correlation
inputs.
– Equity forward contracts have a single stock or index underlying and are valued using market-standard
models. The key inputs to the models are stock prices, estimated dividend rates and equity funding rates
(which are implied from prices of forward contracts observed in the market). Estimated cash flows are
then discounted using market-standard discounted cash flow models using a rate that reflects the
appropriate funding rate for that portion of the portfolio. When no market data is available for the
instrument maturity, they are valued by extrapolation of available data, use of historical dividend data, or
use of data for a related equity.
– Equity option contracts are valued using market-standard models that estimate the equity forward level
as described for equity forward contracts and incorporate inputs for stock volatility and for correlation
between stocks within a basket. The probability-weighted expected option payoff generated is then
discounted using market-standard discounted cash flow models applying a rate that reflects the
appropriate funding rate for that portion of the portfolio. When volatility, forward or correlation inputs
are not available, they are valued using extrapolation of available data, historical dividend, correlation or
volatility data, or the equivalent data for a related equity.
Commodity
contracts
Fair value hierarchy
– As inputs are derived mostly from standard market contracts traded in active and observable markets, a
significant proportion of equity forward contracts are classified as Level 2.
– Equity option positions for which inputs are derived from standard market contracts traded in active and
observable markets are also classified as Level 2. Level 3 positions are those for which volatility, forward
or correlation inputs are not observable.
Valuation
– Commodity forward and swap contracts are measured using market-standard models that use market
forward levels on standard instruments.
– Commodity option contracts are measured using market-standard option models that estimate the
commodity forward level as described for commodity forward and swap contracts, incorporating inputs
for the volatility of the underlying index or commodity. For commodity options on baskets of
commodities or bespoke commodity indices, the valuation technique also incorporates inputs for the
correlation between different commodities or commodity indices.
Fair value hierarchy
– Individual commodity contracts are typically classified as Level 2, because active forward and volatility
market data is available.
354
354
Consolidated financial statements
Note 21 Fair value measurement (continued)
Note 21 Fair value measurement (continued)
Derivative product
Valuation and classification in the fair value hierarchy
Foreign exchange
Valuation
– Open spot FX contracts are valued using the FX spot rate observed in the market.
contracts
– Forward FX contracts are valued using the FX spot rate adjusted for forward pricing points observed from
d) Valuation adjustments
standard market-based sources.
– OTC FX option contracts are valued using market-standard option valuation models. The models used for
shorter-dated options (i.e., maturities of five years or less) tend to be different than those used for
longer-dated options because the models needed for longer-dated OTC FX contracts require additional
consideration of interest rate and FX rate interdependency.
– The valuation for multi-dimensional FX options uses a multi-local volatility model, which is calibrated to
the observed FX volatilities for all relevant FX pairs.
Fair value hierarchy
– The markets for FX spot and FX forward pricing points are both actively traded and observable and
therefore such FX contracts are generally classified as Level 2.
– A significant proportion of OTC FX option contracts are classified as Level 2 as inputs are derived mostly
from standard market contracts traded in active and observable markets.
– OTC FX option contracts classified as Level 3 include multi-dimensional FX options and long-dated FX
exotic option contracts where there is no active market from which to derive volatility or correlation
inputs.
The output of a valuation technique is always an estimate of a
fair value that cannot be measured with complete certainty. As a
result, valuations are adjusted, where appropriate and when
such factors would be considered by market participants in
estimating fair value, to reflect close-out costs, credit exposure,
model-driven valuation uncertainty, funding costs and benefits,
trading restrictions and other factors.
Deferred day-1 profit or loss reserves
For new transactions where the valuation technique used to
measure fair value requires significant inputs that are not based
on observable market data, the financial instrument is initially
recognized at the transaction price. The transaction price may
differ from the fair value obtained using a valuation technique,
where any such difference
initially
recognized in the income statement.
is deferred and not
Deferred day-1 profit or loss is generally released into Other
net income from financial instruments measured at fair value
through profit or loss when pricing of equivalent products or the
underlying parameters becomes observable or when the
transaction is closed out.
The table below summarizes the changes in deferred day-1
profit or loss reserves during the respective period.
Equity / index
Valuation
– Equity forward contracts have a single stock or index underlying and are valued using market-standard
contracts
models. The key inputs to the models are stock prices, estimated dividend rates and equity funding rates
(which are implied from prices of forward contracts observed in the market). Estimated cash flows are
then discounted using market-standard discounted cash flow models using a rate that reflects the
appropriate funding rate for that portion of the portfolio. When no market data is available for the
instrument maturity, they are valued by extrapolation of available data, use of historical dividend data, or
use of data for a related equity.
– Equity option contracts are valued using market-standard models that estimate the equity forward level
as described for equity forward contracts and incorporate inputs for stock volatility and for correlation
between stocks within a basket. The probability-weighted expected option payoff generated is then
discounted using market-standard discounted cash flow models applying a rate that reflects the
appropriate funding rate for that portion of the portfolio. When volatility, forward or correlation inputs
are not available, they are valued using extrapolation of available data, historical dividend, correlation or
volatility data, or the equivalent data for a related equity.
Fair value hierarchy
– As inputs are derived mostly from standard market contracts traded in active and observable markets, a
significant proportion of equity forward contracts are classified as Level 2.
– Equity option positions for which inputs are derived from standard market contracts traded in active and
observable markets are also classified as Level 2. Level 3 positions are those for which volatility, forward
Commodity
contracts
Valuation
– Commodity forward and swap contracts are measured using market-standard models that use market
or correlation inputs are not observable.
forward levels on standard instruments.
– Commodity option contracts are measured using market-standard option models that estimate the
commodity forward level as described for commodity forward and swap contracts, incorporating inputs
for the volatility of the underlying index or commodity. For commodity options on baskets of
commodities or bespoke commodity indices, the valuation technique also incorporates inputs for the
correlation between different commodities or commodity indices.
Fair value hierarchy
– Individual commodity contracts are typically classified as Level 2, because active forward and volatility
market data is available.
Deferred day-1 profit or loss reserves
USD million
RReesseerrvvee bbaallaannccee aatt tthhee bbeeggiinnnniinngg ooff tthhee yyeeaarr
Profit / (loss) deferred on new transactions
(Profit) / loss recognized in the income statement
Foreign currency translation
RReesseerrvvee bbaallaannccee aatt tthhee eenndd ooff tthhee yyeeaarr
Own credit
Own credit risk is reflected in the valuation of UBS’s fair value
option liabilities where this component is considered relevant for
valuation purposes by UBS’s counterparties and other market
participants.
Changes in the fair value of financial liabilities designated at
fair value through profit or loss related to own credit are
recognized in Other comprehensive income directly within
Retained earnings, with no reclassification to the income
statement in future periods. This presentation does not create or
increase an accounting mismatch in the income statement, as
the Group does not hedge changes in own credit.
Own credit adjustments on financial liabilities designated at fair value
22002200
114466
336622
((223388))
00
226699
2019
255
171
(278)
(2)
146
2018
338
341
(417)
(6)
255
Own credit is estimated using own credit adjustment (OCA)
curves, which incorporate observable market data, including
market-observed secondary prices for UBS’s debt, UBS’s credit
default swap spreads and debt curves of peers. In the table
below the change in unrealized own credit consists of changes
in fair value that are attributable to the change in UBS’s credit
spreads, as well as the effect of changes in fair values
attributable to factors other than credit spreads, such as
redemptions, effects from time decay and changes in interest
and other market rates. Realized own credit is recognized when
an
instrument with an associated unrealized own credit
adjustment is repurchased prior to the contractual maturity date.
Life-to-date amounts reflect the cumulative unrealized change
since initial recognition.
› Refer to Note 16 for more information about debt issued
designated at fair value
USD million
RReeccooggnniizzeedd dduurriinngg tthhee ppeerriioodd::
Realized gain / (loss)
Unrealized gain / (loss)
TToottaall ggaaiinn // ((lloossss)),, bbeeffoorree ttaaxx
USD million
RReeccooggnniizzeedd oonn tthhee bbaallaannccee sshheeeett aass ooff tthhee eenndd ooff tthhee ppeerriioodd::
Unrealized life-to-date gain / (loss)
Included in Other comprehensive income
For the year ended
3311..1122..2200
31.12.19
31.12.18
22
((229955))
((229933))
8
(408)
(400)
As of
(3)
519
517
3311..1122..2200
31.12.19
31.12.18
((338811))
(88)
320
354
355
355
Financial statements Consolidated financial statements
Note 21 Fair value measurement (continued)
Credit valuation adjustments
In order to measure the fair value of OTC derivative instruments,
including funded derivative instruments that are classified as
Financial assets at fair value not held for trading, CVAs are
necessary to reflect the credit risk of the counterparty inherent in
these instruments. This amount represents the estimated fair
value of protection required to hedge the counterparty credit
risk of such instruments. A CVA is determined for each
counterparty, considering all exposures with that counterparty,
and is dependent on the expected future value of exposures,
default probabilities and recovery rates, applicable collateral or
netting arrangements, break clauses, funding spreads and other
contractual factors.
Funding valuation adjustments
FVAs reflect the costs and benefits of funding associated with
uncollateralized and partially collateralized derivative receivables
and payables and are calculated as the valuation effect from
moving the discounting of the uncollateralized derivative cash
flows from LIBOR to OCA using the CVA framework, including
the probability of counterparty default. An FVA is also applied to
collateralized derivative assets in cases where the collateral
cannot be sold or repledged.
Debit valuation adjustments
A DVA is estimated to incorporate own credit in the valuation of
derivatives where an FVA is not already recognized. The DVA
calculation is effectively consistent with the CVA framework,
being determined for each counterparty, considering all
exposures with that counterparty and taking into account
collateral netting agreements, expected future mark-to-market
movements and UBS’s credit default spreads.
Other valuation adjustments
Instruments that are measured as part of a portfolio of
combined long and short positions are valued at mid-market
levels to ensure consistent valuation of the long- and short-
component risks. A liquidity valuation adjustment is then made
to the overall net long or short exposure to move the fair value
to bid or offer as appropriate, reflecting current levels of market
liquidity. The bid–offer spreads used in the calculation of this
valuation adjustment are obtained from market transactions and
other relevant sources and are updated periodically.
Uncertainties associated with the use of model-based
valuations are incorporated into the measurement of fair value
through the use of model reserves. These reserves reflect the
amounts that the Group estimates should be deducted from
incorporate
valuations produced directly by models
uncertainties in the relevant modeling assumptions, in the model
and market inputs used, or in the calibration of the model
output to adjust for known model deficiencies. In arriving at
these estimates, the Group considers a range of market
practices, including how it believes market participants would
assess these uncertainties. Model reserves are reassessed
periodically in light of data from market transactions, consensus
pricing services and other relevant sources.
to
Valuation adjustments on financial instruments
Life-to-date gain / (loss), USD million
CCrreeddiitt vvaalluuaattiioonn aaddjjuussttmmeennttss11
FFuunnddiinngg vvaalluuaattiioonn aaddjjuussttmmeennttss22
DDeebbiitt vvaalluuaattiioonn aaddjjuussttmmeennttss
OOtthheerr vvaalluuaattiioonn aaddjjuussttmmeennttss
of which: liquidity
of which: model uncertainty
As of
3311..1122..2200
31.12.19
((6666))
((7733))
00
((882200))
((334400))
((447799))
(48)
(93)
1
(566)
(300)
(266)
11 Amounts do not include reserves against defaulted counterparties. 22 Includes FVAs on structured financing transactions of USD 6 million as of 31 December 2020 and USD 43 million as of 31 December 2019.
e) Transfers between Level 1 and Level 2
The amounts disclosed in this section reflect transfers between
Level 1 and Level 2 for instruments that were held for the entire
reporting period.
Assets and liabilities transferred from Level 2 to Level 1 during
2020 were not material. Assets and liabilities transferred from
Level 1 to Level 2 during 2020 were also not material.
356
356
In order to measure the fair value of OTC derivative instruments,
exposures with that counterparty and taking into account
including funded derivative instruments that are classified as
collateral netting agreements, expected future mark-to-market
Financial assets at fair value not held for trading, CVAs are
movements and UBS’s credit default spreads.
necessary to reflect the credit risk of the counterparty inherent in
these instruments. This amount represents the estimated fair
Other valuation adjustments
value of protection required to hedge the counterparty credit
Instruments that are measured as part of a portfolio of
risk of such instruments. A CVA is determined for each
combined long and short positions are valued at mid-market
counterparty, considering all exposures with that counterparty,
levels to ensure consistent valuation of the long- and short-
and is dependent on the expected future value of exposures,
component risks. A liquidity valuation adjustment is then made
default probabilities and recovery rates, applicable collateral or
to the overall net long or short exposure to move the fair value
netting arrangements, break clauses, funding spreads and other
to bid or offer as appropriate, reflecting current levels of market
contractual factors.
Funding valuation adjustments
liquidity. The bid–offer spreads used in the calculation of this
valuation adjustment are obtained from market transactions and
other relevant sources and are updated periodically.
FVAs reflect the costs and benefits of funding associated with
Uncertainties associated with the use of model-based
uncollateralized and partially collateralized derivative receivables
valuations are incorporated into the measurement of fair value
and payables and are calculated as the valuation effect from
through the use of model reserves. These reserves reflect the
moving the discounting of the uncollateralized derivative cash
amounts that the Group estimates should be deducted from
flows from LIBOR to OCA using the CVA framework, including
valuations produced directly by models
to
incorporate
the probability of counterparty default. An FVA is also applied to
uncertainties in the relevant modeling assumptions, in the model
collateralized derivative assets in cases where the collateral
and market inputs used, or in the calibration of the model
cannot be sold or repledged.
Debit valuation adjustments
output to adjust for known model deficiencies. In arriving at
these estimates, the Group considers a range of market
practices, including how it believes market participants would
A DVA is estimated to incorporate own credit in the valuation of
assess these uncertainties. Model reserves are reassessed
derivatives where an FVA is not already recognized. The DVA
periodically in light of data from market transactions, consensus
calculation is effectively consistent with the CVA framework,
pricing services and other relevant sources.
Valuation adjustments on financial instruments
Life-to-date gain / (loss), USD million
CCrreeddiitt vvaalluuaattiioonn aaddjjuussttmmeennttss11
FFuunnddiinngg vvaalluuaattiioonn aaddjjuussttmmeennttss22
DDeebbiitt vvaalluuaattiioonn aaddjjuussttmmeennttss
OOtthheerr vvaalluuaattiioonn aaddjjuussttmmeennttss
of which: liquidity
of which: model uncertainty
e) Transfers between Level 1 and Level 2
As of
3311..1122..2200
31.12.19
((6666))
((7733))
00
((882200))
((334400))
((447799))
(48)
(93)
1
(566)
(300)
(266)
Consolidated financial statements
Note 21 Fair value measurement (continued)
Note 21 Fair value measurement (continued)
Credit valuation adjustments
being determined for each counterparty, considering all
f) Level 3 instruments: valuation techniques and inputs
The table below presents material Level 3 assets and liabilities,
together with the valuation techniques used to measure fair
value, the inputs used in a given valuation technique that are
considered
significant as of 31 December 2020 and
unobservable, and a range of values for those unobservable
inputs.
The range of values represents the highest- and lowest-level
inputs used in the valuation techniques. Therefore, the range
does not reflect the level of uncertainty regarding a particular
input or an assessment of the reasonableness of the Group’s
estimates and assumptions, but rather the different underlying
characteristics of the relevant assets and liabilities held by the
Group. The ranges will therefore vary from period to period and
parameter to parameter based on characteristics of the
instruments held at each balance sheet date. Furthermore, the
ranges of unobservable inputs may differ across other financial
institutions, reflecting the diversity of the products in each firm’s
inventory.
Valuation techniques and inputs used in the fair value measurement of Level 3 assets and liabilities
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tteecchhnniiqquuee((ss))
SSiiggnniiffiiccaanntt
uunnoobbsseerrvvaabbllee
iinnppuutt((ss))11
RRaannggee ooff iinnppuuttss
3311..1122..2200
31.12.19
llooww
hhiigghh
wweeiigghhtteedd
aavveerraaggee22
low high
weighted
average2
unit1
3311..1122..2200 31.12.19
USD billion
FFiinnaanncciiaall aasssseettss aanndd lliiaabbiilliittiieess aatt ffaaiirr vvaalluuee hheelldd ffoorr ttrraaddiinngg aanndd FFiinnaanncciiaall aasssseettss aatt ffaaiirr vvaalluuee nnoott hheelldd ffoorr ttrraaddiinngg
Corporate and municipal
bonds
3311..1122..2200 31.12.19
11..22
00..00
0.5
0.0
Relative value to
market comparable
Discounted expected
cash flows
Discount margin
226688
226688
Bond price equivalent
11
114433
110000
0
143
101
Relative value to
market comparable
Discounted expected
cash flows
Market comparable
and securitization
model
Relative value to
market comparable
Discounted expected
cash flows
Relative value to
market comparable
Relative value to
market comparable
Loan price equivalent
00
110011
9999
0
101
99
Credit spread
119900
880000
225
530
Credit spread
4400 11,,885588
333333
45
1,412
244
Bond price equivalent
79
98
88
Credit spread
110000
118888
114400
Net asset value
Price
Traded loans, loans
measured at fair value,
loan commitments and
guarantees
22..44
2.4
00..00
0.0
Auction rate securities3
11..55
1.5
Investment fund units4
00..11
0.1
00..00
0.0
00..77
0.7
00..00
0.1
Equity instruments4
DDeebbtt iissssuueedd ddeessiiggnnaatteedd aatt
ffaaiirr vvaalluuee55
OOtthheerr ffiinnaanncciiaall lliiaabbiilliittiieess
ddeessiiggnnaatteedd aatt ffaaiirr vvaalluuee
DDeerriivvaattiivvee ffiinnaanncciiaall iinnssttrruummeennttss
1111..00
9.9
00..77
0.8
Discounted expected
cash flows
points
basis
points
points
basis
points
basis
points
points
basis
points
basis
points
basis
points
basis
points
points
%
%
%
11 Amounts do not include reserves against defaulted counterparties. 22 Includes FVAs on structured financing transactions of USD 6 million as of 31 December 2020 and USD 43 million as of 31 December 2019.
Interest rate contracts
00..55
0.3
00..55
0.1 Option model
Credit derivative contracts
00..33
0.4
00..55
0.5
Discounted expected
cash flows
Equity / index contracts
00..99
0.6
22..33
1.3 Option model
The amounts disclosed in this section reflect transfers between
Assets and liabilities transferred from Level 2 to Level 1 during
Level 1 and Level 2 for instruments that were held for the entire
2020 were not material. Assets and liabilities transferred from
reporting period.
Level 1 to Level 2 during 2020 were also not material.
Funding spread
4422
117755
44
175
Volatility of interest
rates
2299
6699
15
63
Credit spreads
Bond price equivalent
Equity dividend yields
Volatility of equity
stocks, equity and
other indices
Equity-to-FX
correlation
Equity-to-equity
correlation
11
00
00
448899
110000
1133
1
0
0
700
100
14
44
110000
4
105
((3344))
6655
(45)
71
%
11 The ranges of significant unobservable inputs are represented in points, percentages and basis points. Points are a percentage of par (e.g., 100 points would be 100% of par). 22 Weighted averages are provided
for non-derivative financial instruments and were calculated by weighting inputs based on the fair values of the respective instruments. Weighted averages are not provided for inputs related to derivative contracts,
as this would not be meaningful. 33 Bond price equivalent prior to the fourth quarter of 2020; discounted cash flow model thereafter. 44 The range of inputs is not disclosed as there is a dispersion of values given
the diverse nature of the investments. 55 Debt issued designated at fair value is composed primarily of UBS structured notes, which include variable maturity notes with various equity and foreign exchange
underlying risks, rates-linked and credit-linked notes, all of which have embedded derivative parameters that are considered to be unobservable. The equivalent derivative instrument parameters are presented in the
respective derivative financial instruments lines in this table.
(17)
((1166))
110000
98
356
357
357
Financial statements
Consolidated financial statements
Note 21 Fair value measurement (continued)
Significant unobservable inputs in Level 3 positions
This section discusses the significant unobservable inputs used in the valuation of Level 3 instruments and assesses the potential
effect that a change in each unobservable input in isolation may have on a fair value measurement. Relationships between
observable and unobservable inputs have not been included in the summary below.
Input
Description
Bond price equivalent
Loan price equivalent
Credit spread
Discount margin
Funding spread
Volatility
– Where market prices are not available for a bond, fair value is measured by comparison with observable pricing data from
similar instruments. Factors considered when selecting comparable instruments include credit quality, maturity and industry
of the issuer. Fair value may be measured either by a direct price comparison or by conversion of an instrument price into a
yield (either as an outright yield or as a spread to LIBOR).
– For corporate and municipal bonds, the range represents the range of prices from reference issuances used in determining
fair value. Bonds priced at 0 are distressed to the point that no recovery is expected, while prices significantly in excess of 100
or par relate to inflation-linked or structured issuances that pay a coupon in excess of the market benchmark as of the
measurement date.
– For credit derivatives, the bond price range represents the range of prices used for reference instruments, which are typically
converted to an equivalent yield or credit spread as part of the valuation process.
– Where market prices are not available for a traded loan, fair value is measured by comparison with observable pricing data
for similar instruments. Factors considered when selecting comparable instruments include industry segment, collateral
quality, maturity and issuer-specific covenants. Fair value may be measured either by a direct price comparison or by
conversion of an instrument price into a yield. The range represents the range of prices derived from reference issuances of a
similar credit quality used to measure fair value for loans classified as Level 3. Loans priced at 0 are distressed to the point
that no recovery is expected, while a current price of 100 represents a loan that is expected to be repaid in full.
– Valuation models for many credit derivatives require an input for the credit spread, which is a reflection of the credit quality
of the associated referenced underlying. The credit spread of a particular security is quoted in relation to the yield on a
benchmark security or reference rate, typically either US Treasury or LIBOR, and is generally expressed in terms of basis
points. An increase / (decrease) in credit spread will increase / (decrease) the value of credit protection offered by credit
default swaps and other credit derivative products. The income statement effect from such changes depends on the nature
and direction of the positions held. Credit spreads may be negative where the asset is more creditworthy than the
benchmark against which the spread is calculated. A wider credit spread represents decreasing creditworthiness. The range
represents a diverse set of underlyings, with the lower end of the range representing credits of the highest quality (e.g.,
approximating the risk of LIBOR) and the upper end of the range representing greater levels of credit risk.
– The discount margin (DM) spread represents the discount rates applied to present value cash flows of an asset to reflect the
market return required for uncertainty in the estimated cash flows. DM spreads are a rate or rates applied on top of a
floating index (e.g., LIBOR) to discount expected cash flows. Generally, a decrease / (increase) in the DM in isolation would
result in a higher / (lower) fair value.
– The high end of the range relates to securities that are priced low within the market relative to the expected cash flow
schedule. This indicates that the market is pricing an increased risk of credit loss into the security that is greater than what is
being captured by the expected cash flow generation process. The low ends of the ranges are typical of funding rates on
better-quality instruments.
– Structured financing transactions are valued using synthetic funding curves that best represent the assets that are pledged as
collateral for the transactions. They are not representative of where UBS can fund itself on an unsecured basis, but provide
an estimate of where UBS can source and deploy secured funding with counterparties for a given type of collateral. The
funding spreads are expressed in terms of basis points over or under LIBOR, and if funding spreads widen, this increases the
effect of discounting.
– A small proportion of structured debt instruments and non-structured fixed-rate bonds within financial liabilities designated
at fair value had an exposure to funding spreads that was longer in duration than the actively traded market.
– Volatility measures the variability of future prices for a particular instrument and is generally expressed as a percentage,
where a higher number reflects a more volatile instrument, for which future price movements are more likely to occur.
Volatility is a key input into option models, where it is used to derive a probability-based distribution of future prices for the
underlying instrument. The effect of volatility on individual positions within the portfolio is driven primarily by whether the
option contract is a long or short position. In most cases, the fair value of an option increases as a result of an increase in
volatility and is reduced by a decrease in volatility. Generally, volatility used in the measurement of fair value is derived from
active-market option prices (referred to as implied volatility). A key feature of implied volatility is the volatility “smile” or
“skew”, which represents the effect of pricing options of different option strikes at different implied volatility levels.
– Volatilities of low interest rates tend to be much higher than volatilities of high interest rates. In addition, different currencies
may have significantly different implied volatilities.
358
358
Consolidated financial statements
Significant unobservable inputs in Level 3 positions
This section discusses the significant unobservable inputs used in the valuation of Level 3 instruments and assesses the potential
effect that a change in each unobservable input in isolation may have on a fair value measurement. Relationships between
observable and unobservable inputs have not been included in the summary below.
Input
Description
Bond price equivalent
– Where market prices are not available for a bond, fair value is measured by comparison with observable pricing data from
similar instruments. Factors considered when selecting comparable instruments include credit quality, maturity and industry
of the issuer. Fair value may be measured either by a direct price comparison or by conversion of an instrument price into a
yield (either as an outright yield or as a spread to LIBOR).
– For corporate and municipal bonds, the range represents the range of prices from reference issuances used in determining
fair value. Bonds priced at 0 are distressed to the point that no recovery is expected, while prices significantly in excess of 100
or par relate to inflation-linked or structured issuances that pay a coupon in excess of the market benchmark as of the
measurement date.
– For credit derivatives, the bond price range represents the range of prices used for reference instruments, which are typically
converted to an equivalent yield or credit spread as part of the valuation process.
for similar instruments. Factors considered when selecting comparable instruments include industry segment, collateral
quality, maturity and issuer-specific covenants. Fair value may be measured either by a direct price comparison or by
conversion of an instrument price into a yield. The range represents the range of prices derived from reference issuances of a
similar credit quality used to measure fair value for loans classified as Level 3. Loans priced at 0 are distressed to the point
that no recovery is expected, while a current price of 100 represents a loan that is expected to be repaid in full.
of the associated referenced underlying. The credit spread of a particular security is quoted in relation to the yield on a
benchmark security or reference rate, typically either US Treasury or LIBOR, and is generally expressed in terms of basis
points. An increase / (decrease) in credit spread will increase / (decrease) the value of credit protection offered by credit
default swaps and other credit derivative products. The income statement effect from such changes depends on the nature
and direction of the positions held. Credit spreads may be negative where the asset is more creditworthy than the
benchmark against which the spread is calculated. A wider credit spread represents decreasing creditworthiness. The range
represents a diverse set of underlyings, with the lower end of the range representing credits of the highest quality (e.g.,
approximating the risk of LIBOR) and the upper end of the range representing greater levels of credit risk.
Credit spread
– Valuation models for many credit derivatives require an input for the credit spread, which is a reflection of the credit quality
Discount margin
– The discount margin (DM) spread represents the discount rates applied to present value cash flows of an asset to reflect the
market return required for uncertainty in the estimated cash flows. DM spreads are a rate or rates applied on top of a
floating index (e.g., LIBOR) to discount expected cash flows. Generally, a decrease / (increase) in the DM in isolation would
result in a higher / (lower) fair value.
– The high end of the range relates to securities that are priced low within the market relative to the expected cash flow
schedule. This indicates that the market is pricing an increased risk of credit loss into the security that is greater than what is
being captured by the expected cash flow generation process. The low ends of the ranges are typical of funding rates on
better-quality instruments.
Funding spread
– Structured financing transactions are valued using synthetic funding curves that best represent the assets that are pledged as
collateral for the transactions. They are not representative of where UBS can fund itself on an unsecured basis, but provide
an estimate of where UBS can source and deploy secured funding with counterparties for a given type of collateral. The
funding spreads are expressed in terms of basis points over or under LIBOR, and if funding spreads widen, this increases the
effect of discounting.
– A small proportion of structured debt instruments and non-structured fixed-rate bonds within financial liabilities designated
at fair value had an exposure to funding spreads that was longer in duration than the actively traded market.
Volatility
– Volatility measures the variability of future prices for a particular instrument and is generally expressed as a percentage,
where a higher number reflects a more volatile instrument, for which future price movements are more likely to occur.
Volatility is a key input into option models, where it is used to derive a probability-based distribution of future prices for the
underlying instrument. The effect of volatility on individual positions within the portfolio is driven primarily by whether the
option contract is a long or short position. In most cases, the fair value of an option increases as a result of an increase in
volatility and is reduced by a decrease in volatility. Generally, volatility used in the measurement of fair value is derived from
active-market option prices (referred to as implied volatility). A key feature of implied volatility is the volatility “smile” or
“skew”, which represents the effect of pricing options of different option strikes at different implied volatility levels.
– Volatilities of low interest rates tend to be much higher than volatilities of high interest rates. In addition, different currencies
may have significantly different implied volatilities.
Note 21 Fair value measurement (continued)
Note 21 Fair value measurement (continued)
Input
Correlation
Equity dividend yields
Description
– Correlation measures the interrelationship between the movements of two variables. It is expressed as a percentage between
–100% and +100%, where +100% represents perfectly correlated variables (meaning a movement of one variable is
associated with a movement of the other variable in the same direction) and –100% implies that the variables are inversely
correlated (meaning a movement of one variable is associated with a movement of the other variable in the opposite
direction). The effect of correlation on the measurement of fair value depends on the specific terms of the instruments being
valued, reflecting the range of different payoff features within such instruments.
– Equity-to-FX correlation is important for equity options based on a currency other than the currency of the underlying stock.
Equity-to-equity correlation is particularly important for complex options that incorporate, in some manner, different equities
in the projected payoff.
– The derivation of a forward price for an individual stock or index is important for measuring fair value for forward or swap
contracts and for measuring fair value using option pricing models. The relationship between the current stock price and the
forward price is based on a combination of expected future dividend levels and payment timings, and, to a lesser extent, the
relevant funding rates applicable to the stock in question. Dividend yields are generally expressed as an annualized
percentage of the share price, with the lowest limit of 0% representing a stock that is not expected to pay any dividend. The
dividend yield and timing represents the most significant parameter in determining fair value for instruments that are
sensitive to an equity forward price.
Loan price equivalent
– Where market prices are not available for a traded loan, fair value is measured by comparison with observable pricing data
g) Level 3 instruments: sensitivity to changes in unobservable input assumptions
The table below summarizes those financial assets and liabilities
classified as Level 3 for which a change in one or more of the
unobservable inputs to reflect reasonably possible favorable and
unfavorable alternative assumptions would change fair value
significantly, and the estimated effect thereof. The table below
does not represent the estimated effect of stress scenarios.
Interdependencies between Level 1, 2 and 3 parameters have
not been incorporated in the table. Furthermore, direct inter-
relationships between the Level 3 parameters discussed below
are not a significant element of the valuation uncertainty.
Sensitivity data is estimated using a number of techniques,
including the estimation of price dispersion among different
market participants, variation in modeling approaches and
reasonably possible changes to assumptions used within the fair
value measurement process. The sensitivity ranges are not
always symmetrical around the fair values, as the inputs used in
valuations are not always precisely in the middle of the favorable
and unfavorable range.
Sensitivity data is determined at a product or parameter level
and then aggregated assuming no diversification benefit.
Diversification would incorporate estimated correlations across
different sensitivity results and, as such, would result in an
overall sensitivity that would be less than the sum of the
individual component sensitivities. However, the Group believes
that the diversification benefit is not significant to this analysis.
Sensitivity of fair value measurements to changes in unobservable input assumptions1
USD million
Traded loans, loans designated at fair value, loan commitments and guarantees
Securities financing transactions
Auction rate securities
Asset-backed securities
Equity instruments
Interest rate derivative contracts, net
Credit derivative contracts, net2
Foreign exchange derivative contracts, net
Equity / index derivative contracts, net
Other
TToottaall
3311..1122..2200
31.12.19
FFaavvoorraabbllee
cchhaannggeess
2299
UUnnffaavvoorraabbllee
cchhaannggeess
((2288))
Favorable
changes
46
Unfavorable
changes
(21)
4400
110055
4411
112299
1111
1100
2200
331188
9911
779944
((5522))
((110055))
((4411))
((9966))
((1166))
((1144))
((1155))
((229944))
((110077))
((776688))
11
87
35
140
8
31
12
183
47
600
(11)
(87)
(40)
(80)
(17)
(35)
(8)
(197)
(51)
(547)
11 Sensitivity of issued and over-the-counter debt instruments is reported with the equivalent derivative or securities financing instrument. 22 Includes refinements applied in estimating valuation uncertainty,
resulting from a move to use issuer-specific proxy credit default swap curves rather than generic curves.
358
359
359
Financial statements
Consolidated financial statements
Note 21 Fair value measurement (continued)
h) Level 3 instruments: movements during the period
The table below presents additional information about material
movements in Level 3 assets and liabilities measured at fair value
on a recurring basis, excluding any related hedging activity.
Assets and liabilities transferred into or out of Level 3 are
presented as if those assets or liabilities had been transferred at
the beginning of the year.
Movements of Level 3 instruments1
Total gains / losses
included in
comprehensive income
of which:
related to
Level 3
instruments
held at the
end of the
reporting
period Purchases
Sales
Issuances Settlements
BBaallaannccee
aass ooff
3311 DDeecceemmbbeerr
22001188
Net gains /
losses
included in
income2
Transfers
into
Level 3
Transfers
out of
Level 3
Foreign
currency
translation
BBaallaannccee
aass ooff
3311 DDeecceemmbbeerr
22001199
22..00
((00..11))
00..00
00..55
((11..33))
11..00
00..00
00..22
((00..44))
00..00
0.4
0.7
0.7
0.2
0.0
0.0
(0.1)
0.0
0.0
0.0
0.0
(0.1)
0.0
0.3
0.0
0.1
(0.2)
(0.2)
(0.8)
0.0
0.0
0.0
1.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.2
(0.2)
(0.2)
0.0
0.0
0.0
0.0
0.0
0.0
11..44
((00..11))
00..00
00..00
00..00
00..44
((00..22))
00..11
((00..33))
00..00
0.4
0.5
0.5
0.0
0.0
0.0
(0.1)
0.0
0.0
0.1
(0.1)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.1
0.2
0.0
0.0
0.0
(0.1)
0.0
0.0
0.1
0.0
0.0
(0.2)
(0.1)
(0.1)
0.0
0.0
0.0
0.0
0.0
44..44
00..00
00..00
11..22
((00..66))
00..00
00..00
00..11
((11..22))
00..00
1.8
1.7
0.5
0.5
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.7
0.0
0.1
0.5
(0.1)
(0.1)
(0.2)
(0.2)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.1
0.0
0.0
0.0
(1.2)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
22..22
00..11
00..11
00..00
00..00
00..22
((00..44))
00..22
((00..33))
00..00
0.2
1.4
0.5
0.1
0.0
0.3
(0.1)
0.0
0.0
0.2
(0.1)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.2
0.0
0.0
(0.3)
0.0
0.0
0.0
0.1
0.0
0.0
(0.1)
(0.2)
(0.1)
0.0
0.0
0.0
0.0
0.0
11..88
0.0
0.5
0.8
0.4
11..33
0.3
0.6
0.4
0.0
44..00
1.2
1.5
0.5
0.7
22..00
0.1
1.3
0.5
0.1
USD billion
FFiinnaanncciiaall aasssseettss aatt ffaaiirr vvaalluuee hheelldd ffoorr
ttrraaddiinngg
of which:
Investment fund units
Corporate and municipal bonds
Loans
Other
DDeerriivvaattiivvee ffiinnaanncciiaall iinnssttrruummeennttss ––
aasssseettss
of which:
Interest rate contracts
Equity / index contracts
Credit derivative contracts
Other
FFiinnaanncciiaall aasssseettss aatt ffaaiirr vvaalluuee nnoott hheelldd
ffoorr ttrraaddiinngg
of which:
Loans
Auction rate securities
Equity instruments
Other
DDeerriivvaattiivvee ffiinnaanncciiaall iinnssttrruummeennttss ––
lliiaabbiilliittiieess
of which:
Interest rate contracts
Equity / index contracts
Credit derivative contracts
Other
DDeebbtt iissssuueedd ddeessiiggnnaatteedd aatt ffaaiirr vvaalluuee
1111..00
00..88
00..77
00..00
00..00
55..88
((55..44))
00..77
((33..11))
00..00
99..99
OOtthheerr ffiinnaanncciiaall lliiaabbiilliittiieess ddeessiiggnnaatteedd
aatt ffaaiirr vvaalluuee
00..88
11 Effective 1 January 2020, UBS has enhanced its disclosure of Level 3 movements by excluding from the table the impacts of instruments purchased during the period and sold prior to the end of the period. Prior-
period comparatives have been restated accordingly. 22 Net gains / losses included in comprehensive income are composed of Net interest income, Other net income from financial instruments measured at fair
value through profit or loss and Other income. 33 Total Level 3 assets as of 31 December 2020 were USD 8.3 billion (31 December 2019: USD 7.2 billion). Total Level 3 liabilities as of 31 December 2020 were USD
15.2 billion (31 December 2019: USD 12.8 billion).
((00..77))
00..11
00..00
00..00
00..33
00..00
00..00
00..00
11..00
00..22
360
360
Note 21 Fair value measurement (continued)
Note 21 Fair value measurement (continued)
Total gains / losses
included in
comprehensive income
of which:
related to
Level 3
instruments
held at the
end of the
reporting
period
BBaallaannccee
aass ooff
3311 DDeecceemmbbeerr
2200119933
Net gains /
losses
included in
income2
Purchases
Sales
Issuances
Settlements
Transfers
into
Level 3
Transfers
out of
Level 3
Foreign
currency
translation
BBaallaannccee
aass ooff
3311 DDeecceemmbbeerr
2200220033
11..88
((00..11))
((00..11))
0.0
0.5
0.8
0.4
0.0
0.0
0.0
0.0
0.0
0.0
(0.1)
0.0
11..33
00..33
00..44
0.3
0.6
0.4
0.0
0.2
0.1
0.0
0.0
0.2
0.1
0.0
0.0
44..00
00..00
00..11
1.2
1.5
0.5
0.7
0.0
0.0
0.0
0.0
22..00
11..33
0.1
1.3
0.5
0.1
0.3
1.0
0.0
0.0
0.0
0.0
0.0
0.0
11..22
0.3
0.8
0.0
0.0
99..99
00..22
00..00
00..88
00..11
00..11
00..88
0.0
0.7
0.0
0.1
00..00
0.0
0.0
0.0
0.0
00..88
0.3
0.0
0.1
0.4
00..00
0.0
0.0
0.0
0.0
00..00
00..00
((11..44))
0.0
(0.5)
(0.7)
(0.3)
00..00
0.0
0.0
0.0
0.0
((00..99))
(0.7)
0.0
(0.1)
(0.2)
00..00
0.0
0.0
0.0
0.0
00..00
00..00
11..00
0.0
0.0
1.0
0.0
00..77
0.0
0.6
0.1
0.0
00..00
0.0
0.0
0.0
0.0
11..22
0.3
0.8
0.1
0.0
77..66
00..33
00..00
0.0
0.0
0.0
0.0
((00..55))
0.0
(0.3)
(0.2)
0.0
00..00
0.0
0.0
0.0
0.0
((00..99))
(0.2)
(0.6)
(0.1)
0.0
00..33
0.0
0.1
0.1
0.2
00..11
0.0
0.0
0.1
0.0
00..11
0.0
0.0
0.0
0.0
00..44
0.2
0.1
0.1
0.0
00..00
0.0
0.0
0.0
0.0
((00..22))
0.0
(0.1)
0.0
0.0
00..00
0.0
0.0
0.0
0.0
((00..66))
(0.2)
(0.2)
(0.2)
0.0
00..00
0.0
0.0
0.0
0.0
00..11
0.0
0.0
0.0
0.0
00..00
0.0
0.0
0.0
0.0
00..11
0.0
0.0
0.0
0.0
22..33
0.0
0.8
1.1
0.4
11..88
0.5
0.9
0.3
0.0
33..99
0.9
1.5
0.5
1.0
33..55
0.5
2.3
0.5
0.1
((55..77))
00..55
((11..77))
00..22
1111..00
((00..55))
00..00
00..00
00..00
00..77
Consolidated financial statements
h) Level 3 instruments: movements during the period
The table below presents additional information about material
Assets and liabilities transferred into or out of Level 3 are
movements in Level 3 assets and liabilities measured at fair value
presented as if those assets or liabilities had been transferred at
on a recurring basis, excluding any related hedging activity.
the beginning of the year.
Movements of Level 3 instruments1
Total gains / losses
included in
comprehensive income
of which:
related to
Level 3
instruments
BBaallaannccee
Net gains /
held at the
aass ooff
losses
end of the
3311 DDeecceemmbbeerr
included in
reporting
USD billion
22001188
income2
period Purchases
Sales
Issuances Settlements
Transfers
Transfers
into
Level 3
out of
Foreign
currency
Level 3
translation
BBaallaannccee
aass ooff
3311 DDeecceemmbbeerr
22001199
FFiinnaanncciiaall aasssseettss aatt ffaaiirr vvaalluuee hheelldd ffoorr
ttrraaddiinngg
of which:
Investment fund units
Corporate and municipal bonds
Loans
Other
DDeerriivvaattiivvee ffiinnaanncciiaall iinnssttrruummeennttss ––
aasssseettss
of which:
Interest rate contracts
Equity / index contracts
Credit derivative contracts
Other
FFiinnaanncciiaall aasssseettss aatt ffaaiirr vvaalluuee nnoott hheelldd
ffoorr ttrraaddiinngg
of which:
Loans
Auction rate securities
Equity instruments
Other
DDeerriivvaattiivvee ffiinnaanncciiaall iinnssttrruummeennttss ––
lliiaabbiilliittiieess
of which:
Interest rate contracts
Equity / index contracts
Credit derivative contracts
Other
22..00
((00..11))
00..00
00..55
((11..33))
11..00
00..00
00..22
((00..44))
00..00
11..44
((00..11))
00..00
00..00
00..00
00..44
((00..22))
00..11
((00..33))
00..00
0.4
0.7
0.7
0.2
0.4
0.5
0.5
0.0
1.8
1.7
0.5
0.5
0.2
1.4
0.5
0.1
0.0
0.0
(0.1)
0.0
0.0
0.0
0.0
(0.1)
0.0
0.0
(0.1)
0.0
0.0
0.1
(0.1)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.3
(0.1)
0.0
0.0
0.2
(0.1)
0.0
0.0
0.3
0.0
0.1
0.0
0.0
0.0
0.0
0.7
0.0
0.1
0.5
0.0
0.0
0.0
0.0
(0.2)
(0.2)
(0.8)
0.0
0.0
0.0
0.0
0.0
(0.1)
(0.1)
(0.2)
(0.2)
0.0
0.0
0.0
0.0
0.0
0.0
1.0
0.0
0.0
0.1
0.2
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.2
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(0.1)
0.0
0.0
0.0
0.0
0.0
0.0
(0.3)
0.0
0.0
0.0
0.0
0.0
0.2
0.0
0.1
0.0
0.0
0.1
0.0
0.0
0.0
0.0
0.1
0.0
0.0
(0.2)
(0.2)
0.0
0.0
(0.2)
(0.1)
(0.1)
0.0
(1.2)
0.0
0.0
0.0
(0.1)
(0.2)
(0.1)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
22..22
00..11
00..11
00..00
00..00
00..22
((00..44))
00..22
((00..33))
00..00
44..44
00..00
00..00
11..22
((00..66))
00..00
00..00
00..11
((11..22))
00..00
DDeebbtt iissssuueedd ddeessiiggnnaatteedd aatt ffaaiirr vvaalluuee
1111..00
00..88
00..77
00..00
00..00
55..88
((55..44))
00..77
((33..11))
00..00
OOtthheerr ffiinnaanncciiaall lliiaabbiilliittiieess ddeessiiggnnaatteedd
aatt ffaaiirr vvaalluuee
11 Effective 1 January 2020, UBS has enhanced its disclosure of Level 3 movements by excluding from the table the impacts of instruments purchased during the period and sold prior to the end of the period. Prior-
period comparatives have been restated accordingly. 22 Net gains / losses included in comprehensive income are composed of Net interest income, Other net income from financial instruments measured at fair
value through profit or loss and Other income. 33 Total Level 3 assets as of 31 December 2020 were USD 8.3 billion (31 December 2019: USD 7.2 billion). Total Level 3 liabilities as of 31 December 2020 were USD
11..00
00..22
00..11
00..00
00..00
00..33
((00..77))
00..00
00..00
00..00
15.2 billion (31 December 2019: USD 12.8 billion).
11..88
0.0
0.5
0.8
0.4
11..33
0.3
0.6
0.4
0.0
44..00
1.2
1.5
0.5
0.7
22..00
0.1
1.3
0.5
0.1
99..99
00..88
360
361
361
Financial statements Consolidated financial statements
Note 21 Fair value measurement (continued)
i) Maximum exposure to credit risk for financial instruments measured at fair value
The tables below provide the Group’s maximum exposure to
credit risk for financial instruments measured at fair value and
the
respective collateral and other credit enhancements
mitigating credit risk for these classes of financial instruments.
The maximum exposure to credit risk includes the carrying
amounts of financial instruments recognized on the balance
sheet subject to credit risk and the notional amounts for off-
balance sheet arrangements. Where information is available,
collateral is presented at fair value. For other collateral, such as
real estate, a reasonable alternative value is used. Credit
enhancements,
such as credit derivative contracts and
guarantees, are included at their notional amounts. Both are
capped at the maximum exposure to credit risk for which they
serve as security. The “Risk management and control” section of
this report describes management’s view of credit risk and the
related exposures, which can differ in certain respects from the
requirements of IFRS.
Maximum exposure to credit risk
USD billion
FFiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt
ffaaiirr vvaalluuee oonn tthhee bbaallaannccee sshheeeett
Financial assets at fair value
held for trading – debt instruments1,2
Derivative financial instruments3,4
Brokerage receivables
Financial assets at fair value not
held for trading – debt instruments5
TToottaall ffiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt ffaaiirr vvaalluuee
Guarantees6
3311..1122..2200
CCoollllaatteerraall
CCrreeddiitt eennhhaanncceemmeennttss
MMaaxxiimmuumm
eexxppoossuurree ttoo
ccrreeddiitt rriisskk
CCaasshh
ccoollllaatteerraall
rreecceeiivveedd
CCoollllaatteerraall--
iizzeedd bbyy
sseeccuurriittiieess
SSeeccuurreedd bbyy
rreeaall eessttaattee
OOtthheerr
ccoollllaatteerraall
NNeettttiinngg
CCrreeddiitt
ddeerriivvaattiivvee
ccoonnttrraaccttss GGuuaarraanntteeeess
2244..66
115599..66
2244..77
5588..22
226677..11
00..55
66..00
2244..44
1133..22
4433..66
00..00
113388..44
113388..44
00..00
00..00
00..33
00..00
00..00
00..11
31.12.19
Collateral
Credit enhancements
Maximum
exposure to
credit risk
Cash
collateral
received
Collateral-
ized by
securities
Secured by
real estate
Other
collateral
Credit
derivative
contracts Guarantees
Netting
USD billion
FFiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt
ffaaiirr vvaalluuee oonn tthhee bbaallaannccee sshheeeett
Financial assets at fair value
held for trading – debt instruments1,2
Derivative financial instruments3,4
Brokerage receivables
Financial assets at fair value not
held for trading – debt instruments5
TToottaall ffiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt ffaaiirr vvaalluuee
Guarantees6
11 These positions are generally managed under the market risk framework. For the purpose of this disclosure, collateral and credit enhancements were not considered. 22 Does not include investment fund units.
33 Includes USD 0 million (31 December 2019: USD 0 million) fair values of loan commitments and forward starting reverse repurchase agreements classified as derivatives. The full contractual committed amount of
forward starting reverse repurchase agreements (generally highly collateralized) of USD 21.9 billion (31 December 2019: USD 20.3 billion) and derivative loan commitments (generally unsecured) of USD 9.4 billion,
of which USD 0.8 billion has been sub-participated (31 December 2019: USD 6.3 billion, of which USD 0.8 billion had been sub-participated) is presented in Note 10 under notional amounts. 44 The amount shown
in the “Netting” column represents the netting potential not recognized on the balance sheet. Refer to Note 22 for more information. 55 Financial assets at fair value not held for trading collateralized by securities
consisted of structured loans and reverse repurchase and securities borrowing agreements. 66 The amount shown in the “Guarantees” column largely relates to sub-participations.
21.9
121.8
18.0
55.0
221166..77
1.0
21.9
11.1
0.2
38.6
7711..77
0.7
3.3
17.8
16.3
3377..44
00..00
0.3
0.1
00..11
0.1
00..11
107.4
110077..44
00..00
00..00
EExxppoossuurree ttoo
ccrreeddiitt rriisskk
aafftteerr ccoollllaatteerraall
aanndd ccrreeddiitt
eennhhaanncceemmeennttss
2244..66
1155..22
00..33
4455..00
8855..11
00..00
Exposure to
credit risk
after collateral
and credit
enhancements
362
362
mitigating credit risk for these classes of financial instruments.
capped at the maximum exposure to credit risk for which they
The maximum exposure to credit risk includes the carrying
serve as security. The “Risk management and control” section of
amounts of financial instruments recognized on the balance
this report describes management’s view of credit risk and the
sheet subject to credit risk and the notional amounts for off-
related exposures, which can differ in certain respects from the
balance sheet arrangements. Where information is available,
requirements of IFRS.
collateral is presented at fair value. For other collateral, such as
TToottaall ffiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt ffaaiirr vvaalluuee
00..00
00..00
113388..44
00..00
Maximum exposure to credit risk
USD billion
FFiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt
ffaaiirr vvaalluuee oonn tthhee bbaallaannccee sshheeeett
Financial assets at fair value
held for trading – debt instruments1,2
Derivative financial instruments3,4
Brokerage receivables
Financial assets at fair value not
held for trading – debt instruments5
Guarantees6
USD billion
FFiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt
ffaaiirr vvaalluuee oonn tthhee bbaallaannccee sshheeeett
Financial assets at fair value
held for trading – debt instruments1,2
Derivative financial instruments3,4
Brokerage receivables
Financial assets at fair value not
held for trading – debt instruments5
TToottaall ffiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt ffaaiirr vvaalluuee
Guarantees6
3311..1122..2200
CCoollllaatteerraall
CCrreeddiitt eennhhaanncceemmeennttss
MMaaxxiimmuumm
eexxppoossuurree ttoo
ccrreeddiitt rriisskk
CCaasshh
ccoollllaatteerraall
rreecceeiivveedd
CCoollllaatteerraall--
iizzeedd bbyy
sseeccuurriittiieess
SSeeccuurreedd bbyy
rreeaall eessttaattee
OOtthheerr
CCrreeddiitt
ddeerriivvaattiivvee
ccoollllaatteerraall
NNeettttiinngg
ccoonnttrraaccttss GGuuaarraanntteeeess
eennhhaanncceemmeennttss
EExxppoossuurree ttoo
ccrreeddiitt rriisskk
aafftteerr ccoollllaatteerraall
aanndd ccrreeddiitt
Collateral
Credit enhancements
Maximum
exposure to
credit risk
Cash
collateral
received
Collateral-
ized by
securities
Secured by
real estate
Other
Credit
derivative
collateral
Netting
contracts Guarantees
enhancements
Exposure to
credit risk
after collateral
and credit
00..00
00..11
31.12.19
113388..44
107.4
66..00
2244..44
1133..22
4433..66
3.3
17.8
16.3
3377..44
0.1
00..11
00..00
110077..44
00..00
0.1
00..11
2244..66
1155..22
00..33
4455..00
8855..11
00..00
21.9
11.1
0.2
38.6
7711..77
0.7
00..00
00..33
00..00
0.3
2244..66
115599..66
2244..77
5588..22
226677..11
00..55
21.9
121.8
18.0
55.0
221166..77
1.0
11 These positions are generally managed under the market risk framework. For the purpose of this disclosure, collateral and credit enhancements were not considered. 22 Does not include investment fund units.
33 Includes USD 0 million (31 December 2019: USD 0 million) fair values of loan commitments and forward starting reverse repurchase agreements classified as derivatives. The full contractual committed amount of
forward starting reverse repurchase agreements (generally highly collateralized) of USD 21.9 billion (31 December 2019: USD 20.3 billion) and derivative loan commitments (generally unsecured) of USD 9.4 billion,
of which USD 0.8 billion has been sub-participated (31 December 2019: USD 6.3 billion, of which USD 0.8 billion had been sub-participated) is presented in Note 10 under notional amounts. 44 The amount shown
in the “Netting” column represents the netting potential not recognized on the balance sheet. Refer to Note 22 for more information. 55 Financial assets at fair value not held for trading collateralized by securities
consisted of structured loans and reverse repurchase and securities borrowing agreements. 66 The amount shown in the “Guarantees” column largely relates to sub-participations.
Consolidated financial statements
Note 21 Fair value measurement (continued)
Note 21 Fair value measurement (continued)
i) Maximum exposure to credit risk for financial instruments measured at fair value
j) Financial instruments not measured at fair value
The tables below provide the Group’s maximum exposure to
real estate, a reasonable alternative value is used. Credit
The table below provides the estimated fair values of financial instruments not measured at fair value.
credit risk for financial instruments measured at fair value and
enhancements,
such as credit derivative contracts and
the
respective collateral and other credit enhancements
guarantees, are included at their notional amounts. Both are
Financial instruments not measured at fair value
CCaarrrryyiinngg
aammoouunntt
3311..1122..2200
FFaaiirr vvaalluuee
Carrying
amount
31.12.19
Fair value
USD billion
AAsssseettss22
Cash and balances at central banks
Loans and advances to banks
Receivables from securities financing
transactions
Cash collateral receivables on derivative
instruments
Loans and advances to customers
Other financial assets measured at amortized
cost
LLiiaabbiilliittiieess
Amounts due to banks
Payables from securities financing
transactions
Cash collateral payables on derivative
instruments
Customer deposits
TToottaall
115588..22
1155..44
7744..22
3322..77
337799..55
2277..22
1111..00
66..33
3377..33
552244..66
CCaarrrryyiinngg
aammoouunntt
aapppprrooxxiimmaatteess
ffaaiirr vvaalluuee11
LLeevveell 11
LLeevveell 22
LLeevveell 33
TToottaall
Total
Carrying
amount
approximates
fair value1
Level 1
Level 2
Level 3
Total
115588..11
1144..77
6644..99
3322..77
117722..00
00..11
00..00
00..00
00..00
00..00
00..00
00..66
00..00
00..11
115588..22
1155..44
107.1
12.4
77..66
11..77
7744..22
84.2
00..00
3344..22
00..00
117744..66
3322..77
338800..88
23.3
326.8
107.0
11.8
74.0
23.3
151.6
0.1
0.0
0.0
0.0
0.0
0.0
0.5
0.0
0.2
107.1
12.4
8.6
1.6
84.2
0.0
25.4
0.0
152.2
23.3
329.1
55..33
99..44
1100..99
22..33
2288..00
23.0
5.7
8.4
6.4
2.8
23.2
88..55
00..00
22..66
00..00
1111..00
66..00
3377..33
551199..44
00..00
00..00
00..00
00..33
00..00
55..33
00..00
00..00
00..00
66..33
3377..33
552244..77
6.6
7.8
31.4
448.3
5.6
0.0
0.9
0.0
6.6
7.5
31.4
439.1
0.0
0.0
0.0
0.3
0.0
9.3
0.0
0.0
0.0
7.8
31.4
448.4
113399..22
Debt issued measured at amortized cost
Other financial liabilities measured at
amortized cost3
5.7
00..00
11 Includes certain financial instruments where the carrying amount is a reasonable approximation of the fair value due to the instruments’ short-term nature (instruments that are receivable or payable on demand, or
with a remaining maturity (excluding the effects of callable features) of three months or less). 22 As of 31 December 2020, USD 0 billion of Loans and advances to banks, USD 1 billion of Receivables from securities
financing transactions, USD 163 billion of Loans and advances to customers and USD 20 billion of Other financial assets measured at amortized cost were expected to be recovered or settled after 12 months. As of
31 December 2019, USD 0 billion of Loans and advances to banks, USD 1 billion of Receivables from securities financing transactions, USD 140 billion of Loans and advances to customers and USD 16 billion of
Other financial assets measured at amortized cost were expected to be recovered or settled after 12 months. 33 Excludes lease liabilities.
112255..55
114411..99
110.5
104.9
113.6
1166..44
55..88
00..00
55..77
00..00
0.0
0.0
00..00
8.7
0.0
55..88
00..11
5.8
5.7
0.0
0.0
The fair values included in the table above have been calculated
for disclosure purposes only. The valuation techniques and
assumptions described below relate only to the fair value of
UBS’s financial instruments not measured at fair value. Other
institutions may use different methods and assumptions for their
fair value estimations, and therefore such fair value disclosures
cannot necessarily be compared from one financial institution to
another. The
following principles were applied when
determining fair value estimates for financial instruments not
measured at fair value:
– For financial instruments with remaining maturities greater
than three months, the fair value was determined from
quoted market prices, if available.
– Where quoted market prices were not available, the fair
values were estimated by discounting contractual cash flows
using current market interest rates or appropriate yield curves
for instruments with similar credit risk and maturity. These
estimates generally include adjustments for counterparty
credit risk or UBS’s own credit.
– For short-term financial instruments with remaining maturities
of three months or less, the carrying amount, which is net of
credit loss allowances, is generally considered a reasonable
estimate of fair value.
362
363
363
Financial statements
Consolidated financial statements
Note 22 Offsetting financial assets and financial liabilities
UBS enters into netting agreements with counterparties to
manage the credit risks associated primarily with repurchase and
reverse repurchase transactions, securities borrowing and
lending, over-the-counter derivatives and exchange-traded
derivatives. These netting agreements and similar arrangements
generally enable the counterparties to set off liabilities against
available assets received in the ordinary course of business and /
or in the event that the counterparties to the transaction are
unable to fulfill their contractual obligations. The right of setoff
is a legal right to settle or otherwise eliminate all or a portion of
an amount due by applying an amount receivable from the same
counterparty against it, thus reducing credit exposure.
The table below provides a summary of financial assets
subject to offsetting, enforceable master netting arrangements
and similar agreements, as well as financial collateral received to
mitigate credit exposures for these financial assets. The gross
financial assets of the Group that are subject to offsetting,
enforceable netting arrangements and similar agreements are
reconciled to the net amounts presented within the associated
balance sheet line, after giving effect to financial liabilities with
the same counterparties that have been offset on the balance
sheet and other financial assets not subject to an enforceable
netting arrangement or similar agreement, as well as other out-
of-scope items. Furthermore, related amounts for financial
liabilities and collateral received that are not offset on the
balance sheet are shown so as to arrive at financial assets after
consideration of netting potential.
The Group engages in a variety of counterparty credit risk
mitigation strategies in addition to netting and collateral
arrangements. Therefore, the net amounts presented in the
tables on this and on the next page do not purport to represent
their actual credit risk exposure.
Financial assets subject to offsetting, enforceable master netting arrangements and similar agreements
AAsssseettss ssuubbjjeecctt ttoo nneettttiinngg aarrrraannggeemmeennttss
Netting recognized on the balance sheet
Netting potential not recognized on
the balance sheet3
Gross assets
before netting
Netting with
gross liabilities2
NNeett aasssseettss
rreeccooggnniizzeedd
oonn tthhee
bbaallaannccee
sshheeeett
AAsssseettss aafftteerr
ccoonnssiiddeerraattiioonn
ooff
nneettttiinngg
ppootteennttiiaall
Financial
liabilities
Collateral
received
AAsssseettss nnoott
ssuubbjjeecctt ttoo nneettttiinngg
aarrrraannggeemmeennttss44
AAsssseettss
rreeccooggnniizzeedd
oonn tthhee
bbaallaannccee
sshheeeett
TToottaall aasssseettss
TToottaall aasssseettss
aafftteerr
ccoonnssiiddeerraattiioonn
ooff nneettttiinngg
ppootteennttiiaall
TToottaall aasssseettss
rreeccooggnniizzeedd
oonn tthhee
bbaallaannccee
sshheeeett
70.3
156.9
31.9
85.6
85.6
334444..88
83.2
120.2
26.4
83.1
83.0
331133..00
(13.4)
(5.0)
5577..00
115511..99
(1.7)
(117.2)
(55.3)
(27.2)
00..00
77..55
0.0
3311..99
(19.6)
(1.5)
1100..88
(79.1)
66..55
(0.8)
(5.8)
00..00
(79.1)
((9977..55))
66..55
224477..33
(0.8)
((113399..33))
(5.8)
((8899..88))
00..00
1188..33
(14.0)
(3.4)
6699..22
111166..88
(1.2)
(89.3)
(68.0)
(21.4)
(4.0)
2222..44
(13.3)
(1.1)
(77.5)
55..66
0.0
(5.6)
00..00
66..11
88..00
00..00
(77.5)
((9988..99))
55..44
221144..00
0.0
((110033..88))
(5.4)
((9966..11))
00..00
1144..11
1177..33
77..77
00..88
7733..99
00..22
9999..77
1155..00
55..00
00..99
7788..33
00..99
9999..33
1177..33
1155..22
1111..66
7733..99
00..22
111177..99
1155..00
1111..11
88..99
7788..33
00..99
111133..44
7744..22
115599..66
3322..77
8800..44
66..77
334466..99
8844..22
112211..88
2233..33
8833..99
66..33
331133..33
As of 31.12.20, USD billion
Receivables from securities
financing transactions
Derivative financial instruments
Cash collateral receivables on
derivative instruments1
Financial assets at fair value
not held for trading
of which: reverse
repurchase agreements
TToottaall aasssseettss
As of 31.12.19, USD billion
Receivables from securities
financing transactions
Derivative financial instruments
Cash collateral receivables on
derivative instruments1
Financial assets at fair value
not held for trading
of which: reverse
repurchase agreements
TToottaall aasssseettss
11 The net amount of Cash collateral receivables on derivative instruments recognized on the balance sheet includes certain OTC derivatives that are net settled on a daily basis either legally or in substance under
IAS 32 principles and exchange-traded derivatives that are economically settled on a daily basis. 22 The logic of the table results in amounts presented in the “Netting with gross liabilities” column corresponding
directly to the amounts presented in the “Netting with gross assets” column in the liabilities table presented on the following page. Netting in this column for reverse repurchase agreements presented within the
lines “Receivables from securities financing transactions” and “Financial assets at fair value not held for trading” taken together corresponds to the amounts presented for repurchase agreements in the “Payables
from securities financing transactions” and “Other financial liabilities designated at fair value” lines in the liabilities table presented on the following page. 33 For the purpose of this disclosure, the amounts of
financial instruments and cash collateral presented have been capped so as not to exceed the net amount of financial assets presented on the balance sheet; i.e., over-collateralization, where it exists, is not
reflected in the table. 44 Includes assets not subject to enforceable netting arrangements and other out-of-scope items.
364
364
Consolidated financial statements
UBS enters into netting agreements with counterparties to
financial assets of the Group that are subject to offsetting,
manage the credit risks associated primarily with repurchase and
enforceable netting arrangements and similar agreements are
reverse repurchase transactions, securities borrowing and
reconciled to the net amounts presented within the associated
lending, over-the-counter derivatives and exchange-traded
balance sheet line, after giving effect to financial liabilities with
derivatives. These netting agreements and similar arrangements
the same counterparties that have been offset on the balance
generally enable the counterparties to set off liabilities against
sheet and other financial assets not subject to an enforceable
available assets received in the ordinary course of business and /
netting arrangement or similar agreement, as well as other out-
or in the event that the counterparties to the transaction are
of-scope items. Furthermore, related amounts for financial
unable to fulfill their contractual obligations. The right of setoff
liabilities and collateral received that are not offset on the
is a legal right to settle or otherwise eliminate all or a portion of
balance sheet are shown so as to arrive at financial assets after
an amount due by applying an amount receivable from the same
consideration of netting potential.
counterparty against it, thus reducing credit exposure.
The Group engages in a variety of counterparty credit risk
The table below provides a summary of financial assets
mitigation strategies in addition to netting and collateral
subject to offsetting, enforceable master netting arrangements
arrangements. Therefore, the net amounts presented in the
and similar agreements, as well as financial collateral received to
tables on this and on the next page do not purport to represent
mitigate credit exposures for these financial assets. The gross
their actual credit risk exposure.
Financial assets subject to offsetting, enforceable master netting arrangements and similar agreements
AAsssseettss ssuubbjjeecctt ttoo nneettttiinngg aarrrraannggeemmeennttss
Netting recognized on the balance sheet
the balance sheet3
Netting potential not recognized on
ssuubbjjeecctt ttoo nneettttiinngg
Gross assets
Netting with
before netting
gross liabilities2
Financial
liabilities
Collateral
received
NNeett aasssseettss
rreeccooggnniizzeedd
oonn tthhee
bbaallaannccee
sshheeeett
AAsssseettss nnoott
aarrrraannggeemmeennttss44
AAsssseettss
rreeccooggnniizzeedd
oonn tthhee
bbaallaannccee
sshheeeett
AAsssseettss aafftteerr
ccoonnssiiddeerraattiioonn
ooff
nneettttiinngg
ppootteennttiiaall
TToottaall aasssseettss
TToottaall aasssseettss
aafftteerr
ccoonnssiiddeerraattiioonn
ooff nneettttiinngg
ppootteennttiiaall
TToottaall aasssseettss
rreeccooggnniizzeedd
oonn tthhee
bbaallaannccee
sshheeeett
70.3
156.9
31.9
85.6
85.6
334444..88
83.2
120.2
26.4
83.1
83.0
331133..00
(13.4)
(5.0)
5577..00
115511..99
(1.7)
(117.2)
(55.3)
(27.2)
00..00
77..55
0.0
3311..99
(19.6)
(1.5)
1100..88
(79.1)
66..55
(0.8)
(5.8)
00..00
(79.1)
((9977..55))
66..55
(0.8)
(5.8)
224477..33
((113399..33))
((8899..88))
00..00
1188..33
(14.0)
(3.4)
6699..22
111166..88
(1.2)
(89.3)
(68.0)
(21.4)
(4.0)
2222..44
(13.3)
(1.1)
(77.5)
55..66
0.0
(5.6)
00..00
66..11
88..00
00..00
(77.5)
((9988..99))
55..44
0.0
(5.4)
221144..00
((110033..88))
((9966..11))
00..00
1144..11
1177..33
77..77
00..88
7733..99
00..22
9999..77
1155..00
55..00
00..99
7788..33
00..99
9999..33
1177..33
1155..22
1111..66
7733..99
00..22
111177..99
1155..00
1111..11
88..99
7788..33
00..99
111133..44
7744..22
115599..66
3322..77
8800..44
66..77
334466..99
8844..22
112211..88
2233..33
8833..99
66..33
331133..33
As of 31.12.20, USD billion
Receivables from securities
financing transactions
Derivative financial instruments
Cash collateral receivables on
derivative instruments1
Financial assets at fair value
not held for trading
of which: reverse
repurchase agreements
TToottaall aasssseettss
As of 31.12.19, USD billion
Receivables from securities
financing transactions
Derivative financial instruments
Cash collateral receivables on
derivative instruments1
Financial assets at fair value
not held for trading
of which: reverse
repurchase agreements
TToottaall aasssseettss
11 The net amount of Cash collateral receivables on derivative instruments recognized on the balance sheet includes certain OTC derivatives that are net settled on a daily basis either legally or in substance under
IAS 32 principles and exchange-traded derivatives that are economically settled on a daily basis. 22 The logic of the table results in amounts presented in the “Netting with gross liabilities” column corresponding
directly to the amounts presented in the “Netting with gross assets” column in the liabilities table presented on the following page. Netting in this column for reverse repurchase agreements presented within the
lines “Receivables from securities financing transactions” and “Financial assets at fair value not held for trading” taken together corresponds to the amounts presented for repurchase agreements in the “Payables
from securities financing transactions” and “Other financial liabilities designated at fair value” lines in the liabilities table presented on the following page. 33 For the purpose of this disclosure, the amounts of
financial instruments and cash collateral presented have been capped so as not to exceed the net amount of financial assets presented on the balance sheet; i.e., over-collateralization, where it exists, is not
reflected in the table. 44 Includes assets not subject to enforceable netting arrangements and other out-of-scope items.
Note 22 Offsetting financial assets and financial liabilities
Note 22 Offsetting financial assets and financial liabilities (continued)
The table below provides a summary of financial liabilities
subject to offsetting, enforceable master netting arrangements
and similar agreements, as well as financial collateral pledged to
mitigate credit exposures for these financial liabilities. The gross
financial liabilities of UBS that are subject to offsetting,
enforceable netting arrangements and similar agreements are
reconciled to the net amounts presented within the associated
balance sheet line, after giving effect to financial assets with the
same counterparties that have been offset on the balance sheet
and other financial liabilities not subject to an enforceable
netting arrangement or similar agreement. Furthermore, related
amounts for financial assets and collateral pledged that are not
offset on the balance sheet are shown so as to arrive at financial
liabilities after consideration of netting potential.
Financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements
LLiiaabbiilliittiieess ssuubbjjeecctt ttoo nneettttiinngg aarrrraannggeemmeennttss
Netting recognized on the balance sheet
Netting potential not recognized
on the balance sheet3
NNeett
lliiaabbiilliittiieess
rreeccooggnniizzeedd
oonn tthhee
bbaallaannccee
sshheeeett
LLiiaabbiilliittiieess
aafftteerr
ccoonnssiiddeerraattiioonn ooff
nneettttiinngg
ppootteennttiiaall
Financial
assets
Collateral
pledged
Netting with
gross assets2
Gross
liabilities
before
netting
18.2
157.1
(13.3)
(5.0)
44..99
115522..11
(1.6)
(117.2)
(3.3)
(23.9)
35.6
0.0
3355..66
(19.6)
(2.1)
87.0
86.2
229977..88
(79.2)
(79.2)
((9977..55))
77..88
77..00
220000..33
(0.8)
(0.8)
((113399..22))
(6.3)
(6.3)
((3355..55))
19.8
118.1
(14.0)
(3.4)
55..88
111144..88
(0.8)
(89.3)
(5.0)
(16.8)
34.2
(4.0)
3300..11
(16.5)
(1.7)
83.5
83.1
225555..66
(77.6)
(77.6)
((9988..99))
55..99
55..55
115566..66
(0.4)
(0.4)
((110077..00))
(5.6)
(5.2)
((2299..00))
00..00
1100..99
1133..99
00..77
00..00
2255..66
00..00
88..66
1122..00
00..00
00..00
2200..66
LLiiaabbiilliittiieess nnoott
ssuubbjjeecctt
ttoo nneettttiinngg
aarrrraannggeemmeennttss44
LLiiaabbiilliittiieess
rreeccooggnniizzeedd
oonn tthhee
bbaallaannccee
sshheeeett
TToottaall lliiaabbiilliittiieess
TToottaall
lliiaabbiilliittiieess
aafftteerr
ccoonnssiiddeerraattiioonn
ooff nneettttiinngg
ppootteennttiiaall
TToottaall
lliiaabbiilliittiieess
rreeccooggnniizzeedd
oonn tthhee
bbaallaannccee
sshheeeett
11..44
99..00
11..77
2222..66
00..33
3344..88
22..00
66..11
11..33
3300..00
00..22
3399..44
11..44
1199..99
1155..77
2233..33
00..33
6600..44
22..00
1144..88
1133..33
3300..00
00..22
6600..00
66..33
116611..11
3377..33
3300..44
77..33
223355..11
77..88
112200..99
3311..44
3355..99
55..77
119966..00
As of 31.12.20, USD billion
Payables from securities
financing transactions
Derivative financial instruments
Cash collateral payables on
derivative instruments1
Other financial liabilities
designated at fair value
of which: repurchase agreements
TToottaall lliiaabbiilliittiieess
As of 31.12.19, USD billion
Payables from securities
financing transactions
Derivative financial instruments
Cash collateral payables on
derivative instruments1
Other financial liabilities
designated at fair value
of which: repurchase agreements
TToottaall lliiaabbiilliittiieess
11 The net amount of Cash collateral payables on derivative instruments recognized on the balance sheet includes certain OTC derivatives that are net settled on a daily basis either legally or in substance under
IAS 32 principles and exchange-traded derivatives that are economically settled on a daily basis. 22 The logic of the table results in amounts presented in the “Netting with gross assets” column corresponding to
the amounts presented in the “Netting with gross liabilities” column in the assets table presented on the previous page. Netting in this column for repurchase agreements presented within the lines “Payables from
securities financing transactions” and “Other financial liabilities designated at fair value” taken together corresponds to the amounts presented for reverse repurchase agreements in the “Receivables from securities
financing transactions” and “Financial assets at fair value not held for trading” lines in the assets table presented on the previous page. 33 For the purpose of this disclosure, the amounts of financial instruments
and cash collateral presented have been capped so as not to exceed the net amount of financial liabilities presented on the balance sheet; i.e., over-collateralization, where it exists, is not reflected in the table.
44 Includes liabilities not subject to enforceable netting arrangements and other out-of-scope items.
364
365
365
Financial statements
Consolidated financial statements
Note 23 Restricted and transferred financial assets
This Note provides information about restricted financial assets (Note 23a), transfers of financial assets (Note 23b and 23c) and
financial assets that are received as collateral with the right to resell or repledge these assets (Note 23d).
a) Restricted financial assets
Restricted financial assets consist of assets pledged as collateral
against an existing liability or contingent liability and other assets
that are otherwise explicitly restricted such that they cannot be
used to secure funding.
Financial assets are mainly pledged as collateral in securities
lending transactions, in repurchase transactions, against loans
from Swiss mortgage institutions and in connection with the
issuance of covered bonds. The Group generally enters into
repurchase and securities lending arrangements under standard
market agreements. For securities lending, the cash received as
collateral may be more or less than the fair value of the
securities loaned, depending on the nature of the transaction.
For repurchase agreements, the fair value of the collateral sold
under an agreement to repurchase is generally in excess of the
cash borrowed. Pledged mortgage loans serve as collateral for
existing liabilities against Swiss central mortgage institutions and
for existing covered bond issuances of USD 12,456 million as of
31 December 2020 (31 December 2019: USD 11,206 million).
Other restricted financial assets include assets protected
under client asset segregation rules, assets held by the Group’s
insurance entities to back related liabilities to the policy holders,
assets held in certain jurisdictions to comply with explicit
minimum local asset maintenance requirements and assets held
in consolidated bankruptcy remote entities, such as certain
investment funds and other structured entities. The carrying
amount of the liabilities associated with these other restricted
financial assets is generally equal to the carrying amount of the
assets, with the exception of assets held to comply with local
asset maintenance requirements, for which the associated
liabilities are greater.
Restricted financial assets
USD million
FFiinnaanncciiaall aasssseettss pplleeddggeedd aass ccoollllaatteerraall
Financial assets at fair value held for trading
of which: assets pledged as collateral that may be sold or repledged by counterparties
Loans and advances to customers
of which: mortgage loans1
Financial assets at fair value not held for trading
of which: assets pledged as collateral that may be sold or repledged by counterparties
Debt securities classified as Other financial assets measured at amortized cost
of which: assets pledged as collateral that may be sold or repledged by counterparties
Financial assets measured at fair value through other comprehensive income
of which: assets pledged as collateral that may be sold or repledged by counterparties
TToottaall ffiinnaanncciiaall aasssseettss pplleeddggeedd aass ccoollllaatteerraall22
3311..1122..2200
31.12.19
6644,,336677
4477,,009988
2200,,336611
1188,,119911
22,,114400
22,,114400
22,,550066
22,,550066
114499
114499
8899,,552233
56,415
41,285
18,399
18,399
188
188
1,212
1,212
0
0
76,215
OOtthheerr rreessttrriicctteedd ffiinnaanncciiaall aasssseettss
3,131
Loans and advances to banks
Financial assets at fair value held for trading
242
Cash collateral receivables on derivative instruments
2,986
Loans and advances to customers
620
Financial assets at fair value not held for trading
29,676
Financial assets measured at fair value through other comprehensive income
176
Other
379
TToottaall ootthheerr rreessttrriicctteedd ffiinnaanncciiaall aasssseettss
37,210
TToottaall ffiinnaanncciiaall aasssseettss pplleeddggeedd aanndd ootthheerr rreessttrriicctteedd ffiinnaanncciiaall aasssseettss
113,425
11 All related to mortgage loans that serve as collateral for existing liabilities toward Swiss central mortgage institutions and for existing covered bond issuances. Of these pledged mortgage loans, approximately
USD 2.7 billion for 31 December 2020 (31 December 2019: approximately USD 6.3 billion) could be withdrawn or used for future liabilities or covered bond issuances without breaching existing collateral
requirements. 22 Does not include assets placed with central banks related to undrawn credit lines and for payment, clearing and settlement purposes (31 December 2020: USD 1.3 billion; 31 December 2019:
USD 0.6 billion).
33,,773300
774411
33,,776655
775566
2233,,224433
00
111100
3322,,334455
112211,,886688
366
366
Consolidated financial statements
Note 23 Restricted and transferred financial assets
Note 23 Restricted and transferred financial assets (continued)
This Note provides information about restricted financial assets (Note 23a), transfers of financial assets (Note 23b and 23c) and
financial assets that are received as collateral with the right to resell or repledge these assets (Note 23d).
a) Restricted financial assets
Restricted financial assets consist of assets pledged as collateral
existing liabilities against Swiss central mortgage institutions and
against an existing liability or contingent liability and other assets
for existing covered bond issuances of USD 12,456 million as of
that are otherwise explicitly restricted such that they cannot be
31 December 2020 (31 December 2019: USD 11,206 million).
used to secure funding.
Other restricted financial assets include assets protected
Financial assets are mainly pledged as collateral in securities
under client asset segregation rules, assets held by the Group’s
lending transactions, in repurchase transactions, against loans
insurance entities to back related liabilities to the policy holders,
from Swiss mortgage institutions and in connection with the
assets held in certain jurisdictions to comply with explicit
issuance of covered bonds. The Group generally enters into
minimum local asset maintenance requirements and assets held
repurchase and securities lending arrangements under standard
in consolidated bankruptcy remote entities, such as certain
market agreements. For securities lending, the cash received as
investment funds and other structured entities. The carrying
collateral may be more or less than the fair value of the
amount of the liabilities associated with these other restricted
securities loaned, depending on the nature of the transaction.
financial assets is generally equal to the carrying amount of the
In addition to restrictions on financial assets, UBS Group AG
and its subsidiaries are, in certain cases, subject to regulatory
requirements that affect the transfer of dividends and capital
within the Group, as well as intercompany lending. Supervisory
authorities also may require entities to measure capital and
leverage ratios on a stressed basis, such as the Federal Reserve
Board’s Comprehensive Capital Analysis and Review (CCAR)
process, which may limit the relevant subsidiaries’ ability to
make distributions of capital based on the results of those tests.
Supervisory authorities generally have discretion to impose
higher requirements or to otherwise limit the activities of
subsidiaries.
Non-regulated subsidiaries are generally not subject to such
requirements and transfer restrictions. However, restrictions can
also be the result of different legal, regulatory, contractual,
entity- or country-specific arrangements and / or requirements.
› Refer to the “Financial and regulatory key figures for our
significant regulated subsidiaries and sub-groups” section of this
report for financial information about significant regulated
subsidiaries of the Group
b) Transferred financial assets that are not derecognized in their entirety
The table below presents information for financial assets that have been transferred but are subject to continued recognition in full,
as well as recognized liabilities associated with those transferred assets.
For repurchase agreements, the fair value of the collateral sold
assets, with the exception of assets held to comply with local
Transferred financial assets subject to continued recognition in full
under an agreement to repurchase is generally in excess of the
asset maintenance requirements, for which the associated
USD million
cash borrowed. Pledged mortgage loans serve as collateral for
liabilities are greater.
Financial assets at fair value held for trading that may be sold or repledged by counterparties
relating to securities lending and repurchase agreements in exchange for cash received
relating to securities lending agreements in exchange for securities received
relating to other financial asset transfers
3311..1122..2200
31.12.19
CCaarrrryyiinngg aammoouunntt
ooff ttrraannssffeerrrreedd
aasssseettss
4477,,009988
1199,,117777
2277,,559955
332266
CCaarrrryyiinngg aammoouunntt ooff
aassssoocciiaatteedd lliiaabbiilliittiieess
rreeccooggnniizzeedd
oonn bbaallaannccee sshheeeett
1188,,887744
1188,,887744
00
00
Carrying amount
of transferred
assets
41,285
16,945
24,082
258
Carrying amount of
associated liabilities
recognized
on balance sheet
16,671
16,671
0
0
Financial assets at fair value not held for trading that may be sold or repledged by
counterparties
Debt securities classified as Other financial assets measured at amortized cost that may be
sold or repledged by counterparties1
Financial assets measured at fair value through other comprehensive income that may be sold
or repledged by counterparties
0
TToottaall ffiinnaanncciiaall aasssseettss ttrraannssffeerrrreedd11
42,685
11 Comparative information has been amended to include Debt securities classified as Other financial assets measured at amortized cost that may be sold or repledged by counterparties.
114499
5511,,889933
114488
2222,,336633
22,,114400
11,,337788
1,212
11,,996633
22,,550066
188
187
690
0
17,548
Transactions in which financial assets are transferred, but
continue to be recognized in their entirety on UBS’s balance
sheet include securities lending and repurchase agreements, as
well as other financial asset transfers. Repurchase and securities
lending arrangements are, for the most part, conducted under
standard market agreements and are undertaken with
counterparties subject to UBS’s normal credit risk control
processes.
› Refer to Note 1a item 2e for more information about repurchase
and securities lending agreements
As of 31 December 2020, approximately 40% of the
transferred financial assets were assets held for trading
transferred in exchange for cash, in which case the associated
recognized liability represents the amount to be repaid to
repurchase
counterparties.
agreements, a haircut between 0% and 15% is generally
applied to the transferred assets, which results in associated
liabilities having a carrying amount below the carrying amount
of the transferred assets. The counterparties to the associated
liabilities presented in the table above have full recourse to UBS.
securities
lending
and
For
In securities lending arrangements entered into in exchange
for the receipt of other securities as collateral, neither the
securities received nor the obligation to return them are
recognized on UBS’s balance sheet, as the risks and rewards of
ownership are not transferred to UBS. In cases where such
financial assets received are subsequently sold or repledged in
another transaction, this is not considered to be a transfer of
financial assets.
Other financial asset transfers primarily include securities
transferred to collateralize derivative transactions, for which the
carrying amount of associated liabilities is not provided in the
table above, because those replacement values are managed on
a portfolio basis across counterparties and product types, and
therefore there is no direct relationship between the specific
collateral pledged and the associated liability.
Transferred
financial assets
to
derecognition in full but remain on the balance sheet to the
extent of the Group’s continuing involvement were not material
as of 31 December 2020 and as of 31 December 2019.
that are not subject
366
367
367
Restricted financial assets
USD million
FFiinnaanncciiaall aasssseettss pplleeddggeedd aass ccoollllaatteerraall
Financial assets at fair value held for trading
Loans and advances to customers
of which: mortgage loans1
Financial assets at fair value not held for trading
of which: assets pledged as collateral that may be sold or repledged by counterparties
of which: assets pledged as collateral that may be sold or repledged by counterparties
Debt securities classified as Other financial assets measured at amortized cost
of which: assets pledged as collateral that may be sold or repledged by counterparties
Financial assets measured at fair value through other comprehensive income
of which: assets pledged as collateral that may be sold or repledged by counterparties
TToottaall ffiinnaanncciiaall aasssseettss pplleeddggeedd aass ccoollllaatteerraall22
OOtthheerr rreessttrriicctteedd ffiinnaanncciiaall aasssseettss
Loans and advances to banks
Financial assets at fair value held for trading
Cash collateral receivables on derivative instruments
Loans and advances to customers
Financial assets at fair value not held for trading
Financial assets measured at fair value through other comprehensive income
Other
TToottaall ootthheerr rreessttrriicctteedd ffiinnaanncciiaall aasssseettss
TToottaall ffiinnaanncciiaall aasssseettss pplleeddggeedd aanndd ootthheerr rreessttrriicctteedd ffiinnaanncciiaall aasssseettss
3311..1122..2200
31.12.19
8899,,552233
76,215
6644,,336677
4477,,009988
2200,,336611
1188,,119911
22,,114400
22,,114400
22,,550066
22,,550066
114499
114499
33,,773300
774411
33,,776655
775566
2233,,224433
00
111100
3322,,334455
112211,,886688
56,415
41,285
18,399
18,399
188
188
1,212
1,212
0
0
3,131
242
2,986
620
29,676
176
379
37,210
113,425
11 All related to mortgage loans that serve as collateral for existing liabilities toward Swiss central mortgage institutions and for existing covered bond issuances. Of these pledged mortgage loans, approximately
USD 2.7 billion for 31 December 2020 (31 December 2019: approximately USD 6.3 billion) could be withdrawn or used for future liabilities or covered bond issuances without breaching existing collateral
requirements. 22 Does not include assets placed with central banks related to undrawn credit lines and for payment, clearing and settlement purposes (31 December 2020: USD 1.3 billion; 31 December 2019:
USD 0.6 billion).
Financial statements Consolidated financial statements
Note 23 Restricted and transferred financial assets (continued)
c) Transferred financial assets that are derecognized in their entirety with continuing involvement
Continuing involvement in a transferred and fully derecognized
financial asset may result from contractual provisions in the
transfer agreement or from a separate agreement with the
counterparty or a third party entered into in connection with the
transfer.
The fair value and carrying amount of UBS’s continuing
involvement from transferred positions as of 31 December 2020
and 31 December 2019 was not material. Life-to-date losses
reported in prior periods primarily relate to legacy positions in
securitization vehicles which have been fully marked down, with
no remaining exposure to loss.
d) Off-balance sheet assets received
The table below presents assets received from third parties that can be sold or repledged and that are not recognized on the balance
sheet, but that are held as collateral, including amounts that have been sold or repledged.
Off-balance sheet assets received
USD million
Fair value of assets received that can be sold or repledged
received as collateral under reverse repurchase, securities borrowing
and lending arrangements, derivative and other transactions1
received in unsecured borrowings
Thereof sold or repledged2
in connection with financing activities
to satisfy commitments under short sale transactions
in connection with derivative and other transactions1
3311..1122..2200
550000,,668899
448877,,990044
1122,,778855
336677,,225588
331155,,660033
3333,,559955
1188,,005599
31.12.19
475,726
466,045
9,681
350,477
305,362
30,591
14,524
11 Includes securities received as initial margin from its clients that UBS is required to remit to central counterparties, brokers and deposit banks through its exchange-traded derivative clearing and execution services.
22 Does not include off-balance sheet securities (31 December 2020: USD 18.9 billion; 31 December 2019: USD 19.6 billion) placed with central banks related to undrawn credit lines and for payment, clearing and
settlement purposes for which there are no associated liabilities or contingent liabilities.
368
368
Consolidated financial statements
c) Transferred financial assets that are derecognized in their entirety with continuing involvement
Continuing involvement in a transferred and fully derecognized
The fair value and carrying amount of UBS’s continuing
financial asset may result from contractual provisions in the
involvement from transferred positions as of 31 December 2020
transfer agreement or from a separate agreement with the
and 31 December 2019 was not material. Life-to-date losses
counterparty or a third party entered into in connection with the
reported in prior periods primarily relate to legacy positions in
securitization vehicles which have been fully marked down, with
no remaining exposure to loss.
transfer.
d) Off-balance sheet assets received
The table below presents assets received from third parties that can be sold or repledged and that are not recognized on the balance
sheet, but that are held as collateral, including amounts that have been sold or repledged.
Off-balance sheet assets received
USD million
Fair value of assets received that can be sold or repledged
received as collateral under reverse repurchase, securities borrowing
and lending arrangements, derivative and other transactions1
received in unsecured borrowings
Thereof sold or repledged2
in connection with financing activities
to satisfy commitments under short sale transactions
in connection with derivative and other transactions1
3311..1122..2200
550000,,668899
448877,,990044
1122,,778855
336677,,225588
331155,,660033
3333,,559955
1188,,005599
31.12.19
475,726
466,045
9,681
350,477
305,362
30,591
14,524
11 Includes securities received as initial margin from its clients that UBS is required to remit to central counterparties, brokers and deposit banks through its exchange-traded derivative clearing and execution services.
22 Does not include off-balance sheet securities (31 December 2020: USD 18.9 billion; 31 December 2019: USD 19.6 billion) placed with central banks related to undrawn credit lines and for payment, clearing and
settlement purposes for which there are no associated liabilities or contingent liabilities.
Note 23 Restricted and transferred financial assets (continued)
Note 24 Maturity analysis of financial liabilities
The contractual maturities for non-derivative and non-trading
financial liabilities as of 31 December 2020 are based on the
earliest date on which UBS could be contractually required to
pay. The total amounts that contractually mature in each time
band are also shown for 31 December 2019. Derivative positions
and trading liabilities, predominantly made up of short sale
transactions, are assigned to the column Due within 1 month, as
this provides a conservative reflection of the nature of these
trading activities. The contractual maturities may extend over
significantly longer periods.
Maturity analysis of financial liabilities
USD billion
FFiinnaanncciiaall lliiaabbiilliittiieess rreeccooggnniizzeedd oonn bbaallaannccee sshheeeett11
Amounts due to banks
Payables from securities financing transactions
Cash collateral payables on derivative instruments
Customer deposits
Debt issued measured at amortized cost2
Other financial liabilities measured at amortized cost
of which: lease liabilities
TToottaall ffiinnaanncciiaall lliiaabbiilliittiieess mmeeaassuurreedd aatt aammoorrttiizzeedd ccoosstt
Financial liabilities at fair value held for trading3,4
Derivative financial instruments3,5
Brokerage payables designated at fair value
Debt issued designated at fair value6
Other financial liabilities designated at fair value
TToottaall ffiinnaanncciiaall lliiaabbiilliittiieess mmeeaassuurreedd aatt ffaaiirr vvaalluuee tthhrroouugghh pprrooffiitt oorr lloossss
TToottaall
GGuuaarraanntteeeess,, ccoommmmiittmmeennttss aanndd ffoorrwwaarrdd ssttaarrttiinngg ttrraannssaaccttiioonnss
Loan commitments7
Guarantees
Forward starting transactions, reverse repurchase
and securities borrowing agreements7
TToottaall
USD billion
FFiinnaanncciiaall lliiaabbiilliittiieess rreeccooggnniizzeedd oonn bbaallaannccee sshheeeett11
Amounts due to banks
Payables from securities financing transactions
Cash collateral payables on derivative instruments
Customer deposits
Debt issued measured at amortized cost2
Other financial liabilities measured at amortized cost
of which: lease liabilities
TToottaall ffiinnaanncciiaall lliiaabbiilliittiieess mmeeaassuurreedd aatt aammoorrttiizzeedd ccoosstt
Financial liabilities at fair value held for trading3,4
Derivative financial instruments3,5
Brokerage payables designated at fair value
Debt issued designated at fair value6
Other financial liabilities designated at fair value
TToottaall ffiinnaanncciiaall lliiaabbiilliittiieess mmeeaassuurreedd aatt ffaaiirr vvaalluuee tthhrroouugghh pprrooffiitt oorr lloossss
TToottaall
DDuuee wwiitthhiinn
11 mmoonntthh
DDuuee bbeettwweeeenn
11 aanndd 33 mmoonntthhss
DDuuee bbeettwweeeenn
33 aanndd 1122 mmoonntthhss
DDuuee bbeettwweeeenn
11 aanndd 55 yyeeaarrss
DDuuee aafftteerr
55 yyeeaarrss
3311..1122..2200
6.1
5.6
37.3
512.8
9.0
4.5
0.1
575.3
33.6
161.1
38.7
21.9
27.9
283.2
885588..55
40.5
17.5
3.2
6611..33
2.4
0.4
6.6
8.3
0.1
0.1
17.9
16.8
0.6
17.4
3355..33
0.5
2.1
0.3
3.5
41.9
0.5
0.5
48.2
7.1
0.6
7.7
5566..00
0.4
0.0
0.0
0.2
35.6
1.8
1.8
37.7
9.5
1.1
10.6
4488..33
0.5
0.0
1.8
53.7
2.0
2.0
58.0
9.2
0.7
9.9
6677..99
0.0
00..55
00..44
00..00
00..00
Due within
1 month
Due between
1 and 3 months
Due between
3 and 12 months
Due between
1 and 5 years
Due after
5 years
31.12.19
5.4
7.4
31.4
423.0
4.5
4.5
0.1
476.1
30.6
120.9
37.2
21.3
34.0
244.0
772200..11
0.3
0.1
16.1
5.3
0.1
0.1
22.0
17.4
0.4
17.8
3399..99
0.4
0.3
7.3
30.5
0.5
0.5
38.9
9.5
0.5
9.9
4488..88
0.5
2.5
46.3
2.0
2.0
51.3
12.7
0.4
13.1
6644..55
0.0
0.0
0.0
36.0
2.0
2.0
38.1
7.6
0.9
8.5
4466..66
TToottaall
11.1
6.3
37.3
524.9
148.5
8.9
4.5
737.1
33.6
161.1
38.7
64.5
30.9
328.8
11,,006655..99
41.4
17.5
3.2
6622..22
Total
6.6
7.8
31.4
448.9
122.7
9.0
4.6
626.4
30.6
120.9
37.2
68.5
36.1
293.3
991199..88
26.8
19.1
GGuuaarraanntteeeess,, ccoommmmiittmmeennttss aanndd ffoorrwwaarrdd ssttaarrttiinngg ttrraannssaaccttiioonnss
Loan commitments7
Guarantees
Forward starting transactions, reverse repurchase
and securities borrowing agreements7
1.6
1.7
4488..33
4477..55
TToottaall
11 Except for financial liabilities at fair value held for trading and derivative financial instruments (see footnote 3), the amounts presented generally represent undiscounted cash flows of future interest and principal
payments. 22 The time-bucket Due after 5 years includes perpetual loss-absorbing additional tier 1 capital instruments. 33 Carrying amount is fair value. Management believes that this best represents the cash
flows that would have to be paid if these positions had to be settled or closed out. 44 Contractual maturities of financial liabilities at fair value held for trading are: USD 32.6 billion due within 1 month (2019:
USD 30 billion), USD 1.0 billion due between 1 month and 1 year (2019: USD 0.6 billion) and USD 0 billion due between 1 and 5 years (2019: USD 0 billion). 55 Includes USD 32 million (2019: 0 million) related to
fair values of derivative loan commitments and forward starting reverse repurchase agreements classified as derivatives, presented within “Due within 1 month”. The full contractual committed amount of USD 31.3
billion (2019: USD 26.6 billion) is presented in Note 10 under notional amounts. 66 Future interest payments on variable-rate liabilities are determined by reference to the applicable interest rate prevailing as of the
reporting date. Future principal payments that are variable are determined by reference to the conditions existing at the reporting date. 77 Excludes derivative loan commitments and forward starting reverse
repurchase agreements measured at fair value. The committed amounts of these instruments were previously presented in the former Note 34 (refer to the “Consolidated financial statements” section of the Annual
Report 2019 for more information). Starting with this report, they are presented in Note 10 under notional amounts and prior-period information in this table has been amended to ensure comparability.
27.5
19.1
0.0
00..33
00..55
0.3
00..00
0.5
0.0
00..00
368
369
369
Financial statements
Consolidated financial statements
Note 25 Hedge accounting
Derivatives designated in hedge accounting relationships
The Group applies hedge accounting to interest rate risk and
foreign exchange risk including structural foreign exchange risk
related to net investments in foreign operations.
› Refer to “Market risk” in the “Risk management and control”
section of this report for more information about how risks arise
and how they are managed by the Group
Hedging instruments and hedged risk
Interest rate swaps are designated in fair value hedges or cash
flow hedges of interest rate risk arising solely from changes in
benchmark interest rates. Fair value changes arising from such
risk are usually the largest component of the overall change in
the fair value of the hedged position in transaction currency.
Cross-currency swaps are designated as fair value hedges of
foreign exchange risk. FX forwards and FX swaps are mainly
designated as hedges of structural foreign exchange risk related
to net investments in foreign operations. In both cases the
hedged risk arises solely from changes in spot foreign exchange
rate.
The notional of the designated hedging instruments matches
the notional of the hedged items, except when the interest rate
swaps are re-designated in cash flow hedges, in which case the
hedge ratio designated is determined based on the swap
sensitivity.
Hedged items and hedge designation
Fair value hedges of interest rate risk related to debt instruments
Fair value hedges of interest rate risk related to debt instruments
involve swapping fixed cash flows associated with the debt
issued or debt securities held to floating cash flows by entering
into interest rate swaps that receive fixed and pay floating cash
flows or that pay fixed and receive floating cash flows,
respectively. The variable future cash flows are based on the
following benchmark rates: USD LIBOR, CHF LIBOR, EURIBOR,
GBP LIBOR, AUD LIBOR, JPY LIBOR and SGD LIBOR.
Fair value hedges of portfolio interest rate risk related to loans
designated under IAS 39
The Group hedges an open portfolio of long-term fixed-rate
mortgage loans in CHF using interest rate swaps that pay a fixed
rate of interest and receive a floating rate of interest. Both the
hedged portfolio and the hedging instruments are adjusted on a
monthly basis to reflect changes in size and the maturity profile
of the hedged portfolio. The existing hedge relationship is
discontinued and a new one is designated. Changes in the
portfolio are driven by new loans originated or existing loans
repaid.
Cash flow hedges of forecast transactions
The Group hedges forecast cash flows on non-trading financial
assets and liabilities that bear interest at variable rates or are
expected to be refinanced or reinvested in the future, due to
movements in future market rates. The amounts and timing of
future cash flows, representing both principal and interest flows,
are projected on the basis of contractual terms and other
including estimates of prepayments and
relevant factors,
defaults. The aggregate principal balances and interest cash
flows across all portfolios over time form the basis for identifying
the non-trading interest rate risk of the Group, which is hedged
with interest rate swaps, the maximum maturity of which is
10 years. Cash flow forecasts and risk exposures are monitored
and adjusted on an ongoing basis, and consequently additional
hedging
instruments are traded and designated, or are
alternatively terminated resulting in a hedge discontinuance.
Fair value hedges of foreign exchange risk related to debt
instruments
Debt instruments denominated in currencies other than the US
dollar are designated in fair value hedges of spot foreign
exchange risk, in addition to and separate from the fair value
hedges of interest rate risk. Cross-currency swaps economically
convert debt denominated in currencies other than the US dollar
to US dollars. This hedge accounting program started on
1 January 2020, with the adoption of the hedge accounting
requirements of IFRS 9, Financial Instruments, by UBS.
› Refer to Note 1b for more information
Hedges of net investments in foreign operations
The Group applies hedge accounting for certain net investments
in foreign operations, which include subsidiaries, branches and
associates. Upon maturity of hedging instruments, typically two
is terminated and new
months, the hedge relationship
designations are made to reflect any changes in the net
investments in foreign operations.
370
370
in
In hedges of net
In hedges of foreign exchange risk related to debt issued,
hedge ineffectiveness can arise due to the discounting of the
hedging instruments and undesignated risk components and
lack of such discounting and risk components in the hedged
items.
foreign operations,
investments
ineffectiveness is unlikely unless the hedged net assets fall below
the designated hedged amount. The exceptions are hedges
where the hedging currency is not the same as the currency of
the foreign operation, where the currency basis may cause
ineffectiveness.
Note 25 Hedge accounting
Note 25 Hedge accounting (continued)
Economic relationship between hedged item and hedging
instrument
For hedges designated under IFRS 9, the economic relationship
between the hedged item and the hedging instrument is
determined based on a qualitative analysis of their critical terms.
In cases where hedge designation takes place after origination
of the hedging instrument, a quantitative analysis of the possible
behavior of hedging derivative and the hedged item during their
respective terms is also performed.
For the fair value hedge of portfolio interest rate risk related
to loans, designated under IAS 39, hedge effectiveness is
assessed by comparing changes in the fair value of the hedged
portfolio of loans attributable to changes in the designated
benchmark interest rate with the changes in the fair value of the
interest rate swaps.
Sources of hedge ineffectiveness
In hedges of interest rate risk, hedge ineffectiveness can arise
from mismatches of critical terms and / or the use of different
curves to discount the hedged item and instrument, or from
entering into a hedge relationship after the trade date of the
hedging derivative.
All hedges: designated hedging instruments and hedge ineffectiveness
Consolidated financial statements
Derivatives designated in hedge accounting relationships
Fair value hedges of portfolio interest rate risk related to loans
The Group applies hedge accounting to interest rate risk and
The Group hedges an open portfolio of long-term fixed-rate
foreign exchange risk including structural foreign exchange risk
mortgage loans in CHF using interest rate swaps that pay a fixed
related to net investments in foreign operations.
› Refer to “Market risk” in the “Risk management and control”
rate of interest and receive a floating rate of interest. Both the
hedged portfolio and the hedging instruments are adjusted on a
section of this report for more information about how risks arise
monthly basis to reflect changes in size and the maturity profile
designated under IAS 39
and how they are managed by the Group
of the hedged portfolio. The existing hedge relationship is
discontinued and a new one is designated. Changes in the
portfolio are driven by new loans originated or existing loans
Hedging instruments and hedged risk
Interest rate swaps are designated in fair value hedges or cash
repaid.
flow hedges of interest rate risk arising solely from changes in
benchmark interest rates. Fair value changes arising from such
Cash flow hedges of forecast transactions
risk are usually the largest component of the overall change in
The Group hedges forecast cash flows on non-trading financial
the fair value of the hedged position in transaction currency.
assets and liabilities that bear interest at variable rates or are
Cross-currency swaps are designated as fair value hedges of
expected to be refinanced or reinvested in the future, due to
foreign exchange risk. FX forwards and FX swaps are mainly
movements in future market rates. The amounts and timing of
designated as hedges of structural foreign exchange risk related
future cash flows, representing both principal and interest flows,
to net investments in foreign operations. In both cases the
are projected on the basis of contractual terms and other
hedged risk arises solely from changes in spot foreign exchange
relevant factors,
including estimates of prepayments and
The notional of the designated hedging instruments matches
flows across all portfolios over time form the basis for identifying
the notional of the hedged items, except when the interest rate
the non-trading interest rate risk of the Group, which is hedged
swaps are re-designated in cash flow hedges, in which case the
with interest rate swaps, the maximum maturity of which is
hedge ratio designated is determined based on the swap
10 years. Cash flow forecasts and risk exposures are monitored
defaults. The aggregate principal balances and interest cash
rate.
sensitivity.
and adjusted on an ongoing basis, and consequently additional
hedging
instruments are traded and designated, or are
alternatively terminated resulting in a hedge discontinuance.
Hedged items and hedge designation
Fair value hedges of interest rate risk related to debt instruments
Fair value hedges of foreign exchange risk related to debt
Fair value hedges of interest rate risk related to debt instruments
instruments
involve swapping fixed cash flows associated with the debt
Debt instruments denominated in currencies other than the US
issued or debt securities held to floating cash flows by entering
dollar are designated in fair value hedges of spot foreign
into interest rate swaps that receive fixed and pay floating cash
exchange risk, in addition to and separate from the fair value
flows or that pay fixed and receive floating cash flows,
hedges of interest rate risk. Cross-currency swaps economically
respectively. The variable future cash flows are based on the
convert debt denominated in currencies other than the US dollar
following benchmark rates: USD LIBOR, CHF LIBOR, EURIBOR,
to US dollars. This hedge accounting program started on
GBP LIBOR, AUD LIBOR, JPY LIBOR and SGD LIBOR.
1 January 2020, with the adoption of the hedge accounting
requirements of IFRS 9, Financial Instruments, by UBS.
› Refer to Note 1b for more information
Hedges of net investments in foreign operations
The Group applies hedge accounting for certain net investments
in foreign operations, which include subsidiaries, branches and
associates. Upon maturity of hedging instruments, typically two
months, the hedge relationship
is terminated and new
designations are made to reflect any changes in the net
investments in foreign operations.
USD million
IInntteerreesstt rraattee rriisskk
Fair value hedges
Cash flow hedges
FFoorreeiiggnn eexxcchhaannggee rriisskk
Fair value hedges2,3
Hedges of net investments in foreign operations
USD million
IInntteerreesstt rraattee rriisskk
Fair value hedges
Cash flow hedges
FFoorreeiiggnn eexxcchhaannggee rriisskk
Hedges of net investments in foreign operations
As of or for the year ended
3311..1122..2200
CCaarrrryyiinngg aammoouunntt
NNoottiioonnaall
aammoouunntt
DDeerriivvaattiivvee
ffiinnaanncciiaall
aasssseettss
DDeerriivvaattiivvee
ffiinnaanncciiaall
lliiaabbiilliittiieess
CChhaannggeess iinn
ffaaiirr vvaalluuee ooff
hheeddggiinngg
iinnssttrruummeennttss11
CChhaannggeess iinn
ffaaiirr vvaalluuee ooff
hheeddggeedd
iitteemmss11
HHeeddggee iinneeffffeeccttiivveenneessss rreeccooggnniizzeedd
iinn OOtthheerr nneett iinnccoommee ffrroomm ffiinnaanncciiaall
iinnssttrruummeennttss mmeeaassuurreedd aatt ffaaiirr vvaalluuee
tthhrroouugghh pprrooffiitt oorr lloossss
8800,,775599
7722,,773322
2211,,555555
1133,,777755
1188
444499
33
1122
77
119944
11,,223311
22,,221133
((11,,224477))
((22,,001122))
((11,,773355))
((993377))
11,,771155
993366
((1166))
220011
((2200))
((22))
As of or for the year ended
31.12.19
Carrying amount
Notional
amount
Derivative
financial
assets
Derivative
financial
liabilities
Changes in
fair value of
hedging
instruments1
Changes in
fair value of
hedged
items1
Hedge ineffectiveness recognized
in Other net income from financial
instruments measured at fair value
through profit or loss
69,750
69,443
11,992
33
16
9
14
1,389
1,639
(1,376)
(1,571)
171
(142)
134
13
68
(8)
11 Amounts used as the basis for recognizing hedge ineffectiveness for the period. 22 Fair value hedges of foreign exchange risk started on 1 January 2020. 33 The foreign currency basis spread of cross-currency
swaps designated as hedging derivatives is excluded from the hedge accounting designation and accounted for as a cost of hedging with amounts deferred in Other comprehensive income within Equity.
370
371
371
Derivatives not designated in hedge accounting relationships
Non-hedge accounted derivatives are mandatorily held for
trading with all fair value movements taken to Other net income
from financial instruments measured at fair value through profit
or loss, even when held as an economic hedge or to facilitate
client clearing. The one exception relates to forward points on
certain short- and long-duration foreign exchange contracts
acting as economic hedges, which are reported in Net interest
income.
Financial statements Consolidated financial statements
Note 25 Hedge accounting (continued)
Fair value hedges: designated hedged items
USD million
DDeebbtt iissssuueedd mmeeaassuurreedd aatt aammoorrttiizzeedd ccoosstt
Carrying amount of designated debt issued
of which: accumulated amount of fair value hedge adjustment
OOtthheerr ffiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt aammoorrttiizzeedd ccoosstt –– ddeebbtt sseeccuurriittiieess
Carrying amount of designated debt securities
of which: accumulated amount of fair value hedge adjustment
LLooaannss aanndd aaddvvaanncceess ttoo ccuussttoommeerrss ddeessiiggnnaatteedd iinn ffaaiirr vvaalluuee hheeddggeess ooff ppoorrttffoolliioo iinntteerreesstt rraattee rriisskk uunnddeerr IIAASS 3399
Carrying amount of designated loans
of which: accumulated amount of fair value hedge adjustment on the portfolio that was subject to hedge accounting 1
of which: accumulated amount of fair value hedge adjustment subject to amortization attributable to the portion of the portfolio
that ceased to be part of hedge accounting 1
3311..1122..2200
IInntteerreesstt rraattee
rriisskk
7700,,442299
22,,440011
33,,224422
((3388))
1100,,337744
110000
111111
FFXX rriisskk22
2211,,555555
31.12.19
Interest rate
risk
67,379
1,099
4,494
117
172
11 Amounts presented within Other financial assets measured at amortized cost and Other financial liabilities measured at amortized cost. 22 Fair value hedges of foreign exchange risk started on 1 January 2020.
Fair value hedges related to debt issued and debt securities: profile of the timing of the nominal amount of the hedging instrument
USD billion
Interest rate swaps
Cross-currency swaps 1
3311..1122..2200
DDuuee wwiitthhiinn
11 mmoonntthh
00
00
DDuuee bbeettwweeeenn
11 aanndd 33 mmoonntthhss
44
DDuuee bbeettwweeeenn
33 aanndd 1122 mmoonntthhss
99
DDuuee bbeettwweeeenn
11 aanndd 55 yyeeaarrss
4466
00
44
1166
DDuuee aafftteerr
55 yyeeaarrss
1122
22
31.12.19
USD billion
Interest rate swaps
11 Fair value hedges of foreign exchange risk using cross-currency swaps started on 1 January 2020.
Due within
1 month
Due between
1 and 3 months
3
Due between
3 and 12 months
9
Due between
1 and 5 years
40
Due after
5 years
14
TToottaall
7700
2222
Total
65
Cash flow hedge reserve on a pre-tax basis
USD million
Amounts related to hedge relationships for which hedge accounting continues to be applied
Amounts related to hedge relationships for which hedge accounting is no longer applied
TToottaall ootthheerr ccoommpprreehheennssiivvee iinnccoommee rreeccooggnniizzeedd ddiirreeccttllyy iinn eeqquuiittyy rreellaatteedd ttoo ccaasshh ffllooww hheeddggeess,, oonn aa pprree--ttaaxx bbaassiiss
Foreign currency translation reserve on a pre-tax basis
USD million
Amounts related to hedge relationships for which hedge accounting continues to be applied
Amounts related to hedge relationships for which hedge accounting is no longer applied
TToottaall ootthheerr ccoommpprreehheennssiivvee iinnccoommee rreeccooggnniizzeedd ddiirreeccttllyy iinn eeqquuiittyy rreellaatteedd ttoo hheeddggiinngg iinnssttrruummeennttss ddeessiiggnnaatteedd aass nneett iinnvveessttmmeenntt hheeddggeess,, oonn aa pprree--ttaaxx
bbaassiiss
3311..1122..2200
22,,556600
229966
22,,885566
31.12.19
1,596
(43)
1,553
3311..1122..2200
31.12.19
((555599))
226688
((229911))
386
257
643
372
372
Consolidated financial statements
Note 25 Hedge accounting (continued)
Fair value hedges: designated hedged items
USD million
DDeebbtt iissssuueedd mmeeaassuurreedd aatt aammoorrttiizzeedd ccoosstt
Carrying amount of designated debt issued
of which: accumulated amount of fair value hedge adjustment
OOtthheerr ffiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt aammoorrttiizzeedd ccoosstt –– ddeebbtt sseeccuurriittiieess
Carrying amount of designated debt securities
of which: accumulated amount of fair value hedge adjustment
3311..1122..2200
IInntteerreesstt rraattee
rriisskk
FFXX rriisskk22
2211,,555555
31.12.19
Interest rate
risk
67,379
1,099
7700,,442299
22,,440011
33,,224422
((3388))
1100,,337744
110000
111111
4,494
117
172
TToottaall
7700
2222
Total
65
LLooaannss aanndd aaddvvaanncceess ttoo ccuussttoommeerrss ddeessiiggnnaatteedd iinn ffaaiirr vvaalluuee hheeddggeess ooff ppoorrttffoolliioo iinntteerreesstt rraattee rriisskk uunnddeerr IIAASS 3399
Carrying amount of designated loans
of which: accumulated amount of fair value hedge adjustment on the portfolio that was subject to hedge accounting 1
of which: accumulated amount of fair value hedge adjustment subject to amortization attributable to the portion of the portfolio
that ceased to be part of hedge accounting 1
11 Amounts presented within Other financial assets measured at amortized cost and Other financial liabilities measured at amortized cost. 22 Fair value hedges of foreign exchange risk started on 1 January 2020.
Fair value hedges related to debt issued and debt securities: profile of the timing of the nominal amount of the hedging instrument
USD billion
Interest rate swaps
Cross-currency swaps 1
USD billion
Interest rate swaps
DDuuee wwiitthhiinn
11 mmoonntthh
DDuuee bbeettwweeeenn
11 aanndd 33 mmoonntthhss
DDuuee bbeettwweeeenn
33 aanndd 1122 mmoonntthhss
DDuuee bbeettwweeeenn
11 aanndd 55 yyeeaarrss
DDuuee aafftteerr
55 yyeeaarrss
00
00
3311..1122..2200
31.12.19
99
44
9
44
00
3
4466
1166
40
1122
22
Due after
5 years
14
Due within
1 month
Due between
1 and 3 months
Due between
3 and 12 months
Due between
1 and 5 years
11 Fair value hedges of foreign exchange risk using cross-currency swaps started on 1 January 2020.
Cash flow hedge reserve on a pre-tax basis
USD million
Amounts related to hedge relationships for which hedge accounting continues to be applied
Amounts related to hedge relationships for which hedge accounting is no longer applied
TToottaall ootthheerr ccoommpprreehheennssiivvee iinnccoommee rreeccooggnniizzeedd ddiirreeccttllyy iinn eeqquuiittyy rreellaatteedd ttoo ccaasshh ffllooww hheeddggeess,, oonn aa pprree--ttaaxx bbaassiiss
Foreign currency translation reserve on a pre-tax basis
USD million
bbaassiiss
Amounts related to hedge relationships for which hedge accounting continues to be applied
Amounts related to hedge relationships for which hedge accounting is no longer applied
TToottaall ootthheerr ccoommpprreehheennssiivvee iinnccoommee rreeccooggnniizzeedd ddiirreeccttllyy iinn eeqquuiittyy rreellaatteedd ttoo hheeddggiinngg iinnssttrruummeennttss ddeessiiggnnaatteedd aass nneett iinnvveessttmmeenntt hheeddggeess,, oonn aa pprree--ttaaxx
3311..1122..2200
22,,556600
229966
22,,885566
31.12.19
1,596
(43)
1,553
3311..1122..2200
31.12.19
((555599))
226688
((229911))
386
257
643
Note 25 Hedge accounting (continued)
Interest rate benchmark reform
The Group continues to apply the relief provided by Interest Rate
Benchmark Reform (amendments to IFRS 9, IAS 39 and IFRS 7),
published by the IASB in September 2019.
The Group established a cross-divisional, cross-regional
governance structure and change program to address the scale
and complexity of this transition.
The
interest rate benchmarks subject to
interest rate
benchmark reforms to which the Group’s hedge relationships
are exposed are USD LIBOR, CHF LIBOR, GBP LIBOR, AUD LIBOR,
JPY LIBOR, HKD LIBOR, SGD LIBOR and EONIA. Existing financial
instruments designated in hedge relationships referencing these
interest rate benchmarks will transition to alternative reference
rates (ARRs) unless they mature before the transition takes place.
The Group’s hedge relationships are also exposed to Euro
Inter-bank Offered Rate (EURIBOR), for which there is no
uncertainty arising from the interest rate benchmark reform.
EURIBOR is expected to continue to exist as a benchmark rate
for the foreseeable future. Thus, the Group does not consider its
hedges involving the EURIBOR benchmark interest rate to be
directly affected by the interest rate benchmark reform.
Hedging instruments referencing LIBOR
USD million
IInntteerreesstt rraattee rriisskk
Fair value hedges
Cash flow hedges
Apart from EURIBOR hedges, UBS applies the relief to all its
fair value hedges of interest rate risk and to those cash flow
hedge relationships where the hedged risk is LIBOR or EONIA.
The following table provides details on the notional amount and
carrying amount of the hedging instruments in those hedge
relationships maturing after 31 December 2021 or 30 June 2023
for USD LIBOR hedges, which are the expected cessation dates
of the applicable interest rate benchmarks. The comparative
information
in the table below has been amended to
consistently reflect this approach.
Hedges of net investments in foreign operations are not
affected by the amendments.
› Refer to Note 1a item 2j for more information about the relief
provided by the amendments to IFRS 9, IAS 39 and IFRS 7 related
to interest rate benchmark reform
3311..1122..2200
31.12.19
CCaarrrryyiinngg aammoouunntt
DDeerriivvaattiivvee
ffiinnaanncciiaall
aasssseettss
DDeerriivvaattiivvee
ffiinnaanncciiaall
lliiaabbiilliittiieess
Carrying amount
Derivative
financial
assets
Derivative
financial
liabilities
Notional
amount
11
00
((1122))
00
26,355
5,895
1
0
(14)
0
NNoottiioonnaall
aammoouunntt
3377,,114466
1111,,117799
372
373
373
Financial statements Consolidated financial statements
Note 26 Post-employment benefit plans
The table below provides a breakdown of expenses related to pension and other post-employment benefit plans recognized in the
income statement within Personnel expenses.
Income statement – expenses related to post-employment benefit plans
USD million
Net periodic expenses for defined benefit plans
of which: related to major plans 1
of which: Swiss pension plan 2
of which: UK pension plan
of which: US and German pension plans
of which: related to remaining plans and other expenses 3
Expenses for defined contribution plans4
of which: UK plans
of which: US plan
of which: remaining plans
3311..1122..2200
31.12.19
31.12.18
550022
447799
445599
33
1188
2233
334433
8888
119900
6655
461
440
417
3
21
21
326
82
173
71
188
186
153
11
22
2
268
80
127
61
TToottaall ppoosstt--eemmppllooyymmeenntt bbeenneeffiitt ppllaann eexxppeennsseess55
11 Refer to Note 26a for more information. 22 Changes to the Swiss pension plan announced in 2018 resulted in a pre-tax gain of USD 241 million related to past service. Refer to Note 26a for more information on
these changes. 33 Other expenses include differences between actual and estimated performance award accruals. 44 Refer to Note 26b for more information. 55 Refer to Note 6.
787
457
884455
The table below provides a breakdown of amounts recognized in Other comprehensive income for defined benefit plans.
Other comprehensive income – gains / (losses) on defined benefit plans
USD million
Major plans1
of which: Swiss pension plan
of which: UK pension plan
of which: US and German pension plans
Remaining plans
Gains / (losses) recognized in other comprehensive income, before tax
Tax (expense) / benefit relating to defined benefit plans recognized in other comprehensive income
GGaaiinnss // ((lloosssseess)) rreeccooggnniizzeedd iinn ootthheerr ccoommpprreehheennssiivvee iinnccoommee,, nneett ooff ttaaxx22
11 Refer to Note 26a for more information. 22 Refer to the “Statement of comprehensive income.”
3311..1122..2200
((332233))
((227766))
((6611))
1144
((44))
((332277))
110099
((221188))
31.12.19
(135)
(22)
(78)
(35)
(10)
(146)
(41)
(186)
31.12.18
(230)
(352)
130
(8)
9
(220)
276
56
The table below provides a breakdown of the assets and liabilities recognized on the balance sheet within Other non-financial assets and
Other non-financial liabilities related to defined benefit plans.
Balance sheet – net defined benefit asset
USD million
Major plans1
of which: Swiss pension plan 2
of which: UK pension plan
of which: US and German pension plans
TToottaall nneett ddeeffiinneedd bbeenneeffiitt aasssseett
3311..1122..2200
31.12.19
4422
00
00
4422
4422
9
0
4
5
9
11 Refer to Note 26a for more information. 22 As of 31 December 2020 and 31 December 2019, the Swiss pension plan was in a surplus situation. No net defined benefit asset was recognized on the balance sheet
due to the IFRS asset ceiling restriction. Refer to Note 26a for more information.
Balance sheet – net defined benefit liability
USD million
Major plans1
of which: UK pension plan
of which: US and German pension plans 2
Remaining plans
3311..1122..2200
31.12.19
559999
1133
558866
112233
527
0
527
107
TToottaall nneett ddeeffiinneedd bbeenneeffiitt lliiaabbiilliittyy33
11 Refer to Note 26a for more information. 22 Of the total liability recognized as of 31 December 2020, USD 88 million related to US plans and USD 498 million related to German plans (31 December 2019:
USD 111 million and USD 416 million, respectively). 33 Refer to Note 19c.
633
772222
374
374
Note 26 Post-employment benefit plans
Note 26 Post-employment benefit plans (continued)
The table below provides a breakdown of expenses related to pension and other post-employment benefit plans recognized in the
a) Defined benefit plans
UBS has established defined benefit plans for its employees in
various jurisdictions in accordance with local regulations and
practices. The major plans are located in Switzerland, the UK,
the US and Germany. The level of benefits depends on the
specific plan rules.
For the funded plans, the plan assets are invested in a
diversified portfolio of financial assets. Volatility arises in each
plan’s net asset / liability position because the fair value of the
plan’s financial assets is not fully correlated to movements in the
value of the plan’s defined benefit obligation (DBO). UBS’s
general principle is to ensure that the plans are adequately
funded on the basis of actuarial valuations. Local pension
regulations are the primary drivers for determining when
contributions are required.
Swiss pension plan
The Swiss pension plan covers employees of UBS AG and
employees of companies having close economic or financial ties
with UBS AG, and exceeds the minimum benefit requirements
under Swiss pension law. The Swiss plan offers retirement,
disability and survivor benefits and is governed by a Pension
Foundation Board. The responsibilities of this board are defined
by Swiss pension law and the plan rules.
Consolidated financial statements
USD million
Net periodic expenses for defined benefit plans
of which: related to major plans 1
of which: Swiss pension plan 2
of which: UK pension plan
of which: US and German pension plans
of which: related to remaining plans and other expenses 3
Expenses for defined contribution plans4
of which: UK plans
of which: US plan
of which: remaining plans
TToottaall ppoosstt--eemmppllooyymmeenntt bbeenneeffiitt ppllaann eexxppeennsseess55
income statement within Personnel expenses.
Income statement – expenses related to post-employment benefit plans
3311..1122..2200
31.12.19
31.12.18
550022
447799
445599
33
1188
2233
334433
8888
119900
6655
884455
((332233))
((227766))
((6611))
1144
((44))
((332277))
110099
((221188))
461
440
417
3
21
21
326
82
173
71
787
31.12.19
(135)
(22)
(78)
(35)
(10)
(146)
(41)
(186)
4422
00
00
4422
4422
559999
1133
558866
112233
772222
188
186
153
11
22
2
268
80
127
61
457
(230)
(352)
130
(8)
9
(220)
276
56
9
0
4
5
9
527
0
527
107
633
3311..1122..2200
31.12.19
3311..1122..2200
31.12.19
11 Refer to Note 26a for more information. 22 Changes to the Swiss pension plan announced in 2018 resulted in a pre-tax gain of USD 241 million related to past service. Refer to Note 26a for more information on
these changes. 33 Other expenses include differences between actual and estimated performance award accruals. 44 Refer to Note 26b for more information. 55 Refer to Note 6.
The table below provides a breakdown of amounts recognized in Other comprehensive income for defined benefit plans.
Other comprehensive income – gains / (losses) on defined benefit plans
3311..1122..2200
31.12.18
USD million
Major plans1
of which: Swiss pension plan
of which: UK pension plan
of which: US and German pension plans
Remaining plans
Gains / (losses) recognized in other comprehensive income, before tax
Tax (expense) / benefit relating to defined benefit plans recognized in other comprehensive income
GGaaiinnss // ((lloosssseess)) rreeccooggnniizzeedd iinn ootthheerr ccoommpprreehheennssiivvee iinnccoommee,, nneett ooff ttaaxx22
11 Refer to Note 26a for more information. 22 Refer to the “Statement of comprehensive income.”
The table below provides a breakdown of the assets and liabilities recognized on the balance sheet within Other non-financial assets and
Other non-financial liabilities related to defined benefit plans.
11 Refer to Note 26a for more information. 22 As of 31 December 2020 and 31 December 2019, the Swiss pension plan was in a surplus situation. No net defined benefit asset was recognized on the balance sheet
Balance sheet – net defined benefit asset
USD million
Major plans1
of which: Swiss pension plan 2
of which: UK pension plan
of which: US and German pension plans
TToottaall nneett ddeeffiinneedd bbeenneeffiitt aasssseett
due to the IFRS asset ceiling restriction. Refer to Note 26a for more information.
Balance sheet – net defined benefit liability
USD million
Major plans1
of which: UK pension plan
of which: US and German pension plans 2
Remaining plans
TToottaall nneett ddeeffiinneedd bbeenneeffiitt lliiaabbiilliittyy33
11 Refer to Note 26a for more information. 22 Of the total liability recognized as of 31 December 2020, USD 88 million related to US plans and USD 498 million related to German plans (31 December 2019:
USD 111 million and USD 416 million, respectively). 33 Refer to Note 19c.
Savings contributions to the Swiss plan are paid by both
employer and employee. Depending on the age of the
employee, UBS pays a savings contribution that ranges between
6.5% and 27.5% of contributory base salary and between 2.8%
and 9% of contributory variable compensation. UBS also pays
risk contributions that are used to fund disability and survivor
benefits. Employees can choose
savings
contributions paid by them, which vary between 2.5% and
13.5% of contributory base salary and between 0% and 9% of
contributory variable compensation, depending on age and
choice of savings contribution category.
level of
the
The plan offers to members at the normal retirement age of
65 a choice between a lifetime pension and a partial or full lump
sum payment. Participants can choose to draw early retirement
benefits starting from the age of 58, but can also continue
employment and remain active members of the plan until the
age of 70. Employees have the opportunity to make additional
purchases of benefits to fund early retirement benefits.
The pension amount payable to a participant is calculated by
applying a conversion rate to the accumulated balance of the
participant’s retirement savings account at the retirement date.
The balance is based on credited vested benefits transferred
from previous employers, purchases of benefits, and the
employee and employer contributions that have been made to
the participant’s retirement savings account, as well as the
interest accrued. The interest rate is defined annually by the
Pension Foundation Board.
Although the Swiss plan is based on a defined contribution
promise under Swiss pension law, it is accounted for as a
defined benefit plan under IFRS, primarily because of the
obligation to accrue interest on the participants’ retirement
savings accounts and the payment of lifetime pension benefits.
An actuarial valuation in accordance with Swiss pension law is
performed regularly. Should an underfunded situation on this
basis occur, the Pension Foundation Board is required to take
the necessary measures to ensure that full funding can be
expected to be restored within a maximum period of 10 years. If
a Swiss plan were to become significantly underfunded on a
Swiss pension law basis, additional employer and employee
contributions could be required. In this situation, the risk is
shared between employer and employees, and the employer is
not legally obliged to cover more than 50% of the additional
contributions required. As of 31 December 2020, the Swiss plan
had a technical funding ratio under Swiss pension law of
132.6% (31 December 2019: 127.1%).
374
375
375
Financial statements Consolidated financial statements
Note 26 Post-employment benefit plans (continued)
The investment strategy of the Swiss plan complies with Swiss
pension law, including the rules and regulations relating to
diversification of plan assets. These rules, among others, specify
restrictions on the composition of plan assets; e.g., there is a
limit of 50% for investments in equities. The investment strategy
of the Swiss plan is aligned with the defined risk budget set out
by the Pension Foundation Board. The risk budget is determined
on the basis of regularly performed asset and
liability
management analyses. In order to implement the risk budget,
the Swiss plan may use direct investments, investment funds and
derivatives. To mitigate foreign currency risk, a specific currency
hedging strategy is in place. The Pension Foundation Board
strives for a medium- and long-term balance between assets and
liabilities.
As of 31 December 2020, the Swiss plan was in a surplus
situation on an IFRS measurement basis, as the fair value of the
plan’s assets exceeded
the DBO by USD 4,862 million
(31 December 2019: a surplus of USD 3,724 million). However, a
surplus is only recognized on the balance sheet to the extent
that it does not exceed the estimated future economic benefit,
which equals the difference between the present value of the
estimated future net service cost and the present value of the
estimated
contributions. As of both
31 December 2020 and 31 December 2019, the estimated
future economic benefit was zero and hence no net defined
benefit asset was recognized on the balance sheet.
future employer
In the first quarter of 2020, UBS adopted an enhanced
methodology for measuring the estimated future economic
benefits available under the Swiss pension plan, whereby future
net service cost is measured individually for each future year,
considering the individually applicable discount rate. In addition,
an enhanced discount curve methodology was adopted, utilizing
the FINMA-published ultimate forward rate, which represents
the average long-term historical real rate plus expected inflation
over
rates are
long-dated periods where discount
unobservable. No changes have been made to the methodology
for measuring the defined benefit obligation.
the
interest
Changes to the Swiss pension plan
As a result of the effects of continuing low and in some cases
negative
return
rates, diminished
expectations and increasing life expectancy, the pension fund of
UBS in Switzerland and UBS agreed to measures that took effect
from the start of 2019 to support the long-term financial
stability of the Swiss pension fund. As a result, the conversion
investment
rate was lowered, the regular retirement age was increased from
64 to 65, employee contributions were increased, and savings
contributions started from age 20 instead of 25. Pensions
already in payment on 1 January 2019 were not affected.
To mitigate the effects of the reduction of the conversion rate
on future pensions, UBS committed to pay an extraordinary
contribution of up to CHF 720 million (USD 813 million based on
the closing exchange rate as of 31 December 2020) in three
installments in 2020, 2021 and 2022. In accordance with IFRS,
these measures led to a reduction in the pension obligation
recognized by UBS, resulting in a pre-tax gain of USD 241
million in 2018. This effect was recognized as a reduction in
Personnel expenses with a corresponding effect in Other
comprehensive income (OCI). The first installment of USD 235
million was paid in 2020 and reduced OCI with no effect on the
income statement. If the Swiss plan remains in an asset ceiling
position, the two payments in 2021 and 2022, adjusted for
expected forfeitures, are expected to reduce OCI by USD 437
million, with no effect on the income statement.
The second installment of USD 254 million was paid in
January 2021 and the regular employer contributions expected
to be made to the Swiss plan in 2021 are estimated to be
USD 518 million.
UK pension plan
The UK plan is a career-average revalued earnings scheme, and
benefits increase automatically based on UK price inflation. The
normal retirement age for participants in the UK plan is 60. The
plan provides guaranteed lifetime pension benefits to plan
participants upon retirement. Since 2000, the UK plan has been
closed to new entrants and, since 2013, plan participants are no
longer accruing benefits for current or future service. Instead,
employees participate in the UK defined contribution plan.
The governance responsibility for the UK plan lies jointly with
the Pension Trustee Board and UBS. The employer contributions
to the pension fund reflect agreed-upon deficit funding
contributions, which are determined on the basis of the most
recent actuarial valuation using assumptions agreed by the
Pension Trustee Board and UBS. In the event of underfunding,
UBS and the Pension Trustee Board must agree on a deficit
recovery plan within statutory deadlines. In 2020, UBS made
deficit funding contributions of USD 46 million to the UK plan.
In 2019, UBS made deficit funding contributions of USD 242
million.
376
376
Note 26 Post-employment benefit plans (continued)
Note 26 Post-employment benefit plans (continued)
The plan assets are invested in a diversified portfolio of
financial assets. In 2020, the UK Pension Trustee Board entered
into a longevity swap with an external insurance company,
which is recognized as a plan asset. The longevity swap enables
the UK pension plan to hedge the risk between expected and
actual longevity, which should mitigate volatility in the net
defined benefit asset / liability. The longevity swap had nil value
on 31 December 2020.
In 2019, UBS and the Pension Trustee Board entered into an
arrangement whereby a collateral pool was established to
provide security for the pension fund. The value of the collateral
pool as of 31 December 2020 was USD 347 million
(31 December 2019: USD 364 million) and includes corporate
bonds, government-related debt instruments and other financial
assets. The arrangement provides the Pension Trustee Board
dedicated access to a pool of assets in the event of UBS’s
insolvency or not paying a required deficit funding contribution.
In 2021, no contributions are expected to be made to the UK
defined benefit plan, subject to regular funding reviews during
the year.
US pension plans
There are two distinct major defined benefit plans in the US,
both with a normal retirement age of 65. Since 1998 and 2001,
respectively, the plans have been closed to new entrants, who
instead can participate in defined contribution plans.
One of the defined benefit plans is a contribution-based plan
in which each participant accrues a percentage of salary in a
retirement savings account. The retirement savings account is
credited annually with interest based on a rate that is linked to
the average yield on one-year US government bonds. For the
other defined benefit plan, retirement benefits accrue based on
the career-average earnings of each individual plan participant.
Former employees with vested benefits have the option to take a
lump sum payment or a lifetime annuity.
As required under applicable pension laws, both plans have
fiduciaries who, together with UBS, are responsible for the
governance of the plans. UBS regularly reviews the contribution
strategy for these plans, considering statutory funding rules and
the cost of any premiums that must be paid to the Pension
Benefit Guaranty Corporation for having an underfunded plan.
The plan assets for both plans are invested in a diversified
portfolio of
fiduciaries are
responsible for the investment decisions with respect to the plan
assets.
financial assets. Each plan’s
The employer contributions expected to be made to the US
defined benefit plans in 2021 are estimated at USD 10 million.
German pension plans
There are two defined benefit plans in Germany, and both are
contribution-based plans. No plan assets are set aside to fund
these plans, and benefits are paid directly by UBS. The normal
retirement age for the participants in the German plans is 65.
Within the larger of the two plans, each participant accrues a
percentage of salary in a retirement savings account. The
accumulated account balance of the plan participant is credited
on an annual basis with guaranteed interest at a rate of 5%. In
the other plan, amounts are accrued annually based on
employee elections related to variable compensation. For this
plan, the accumulated account balance is credited on an annual
basis with a guaranteed interest rate of 6% for amounts accrued
before 2010, of 4% for amounts accrued from 2010 to 2017
and of 0.9% for amounts accrued after 2017. Both plans are
subject to German pension law, whereby the responsibility to
pay pension benefits when they are due resides entirely with
UBS. A portion of the pension payments is directly increased in
line with price inflation.
The benefits expected to be paid by UBS to the participants of
the German plans in 2021 are estimated at USD 11 million.
Financial information by plan
The tables on the following pages provide an analysis of the
movement in the net asset / liability recognized on the balance
sheet for defined benefit plans, as well as an analysis of amounts
recognized in net profit and in Other comprehensive income.
Consolidated financial statements
The investment strategy of the Swiss plan complies with Swiss
rate was lowered, the regular retirement age was increased from
pension law, including the rules and regulations relating to
64 to 65, employee contributions were increased, and savings
diversification of plan assets. These rules, among others, specify
contributions started from age 20 instead of 25. Pensions
restrictions on the composition of plan assets; e.g., there is a
already in payment on 1 January 2019 were not affected.
limit of 50% for investments in equities. The investment strategy
To mitigate the effects of the reduction of the conversion rate
of the Swiss plan is aligned with the defined risk budget set out
on future pensions, UBS committed to pay an extraordinary
by the Pension Foundation Board. The risk budget is determined
contribution of up to CHF 720 million (USD 813 million based on
on the basis of regularly performed asset and
liability
the closing exchange rate as of 31 December 2020) in three
management analyses. In order to implement the risk budget,
installments in 2020, 2021 and 2022. In accordance with IFRS,
the Swiss plan may use direct investments, investment funds and
these measures led to a reduction in the pension obligation
derivatives. To mitigate foreign currency risk, a specific currency
recognized by UBS, resulting in a pre-tax gain of USD 241
hedging strategy is in place. The Pension Foundation Board
million in 2018. This effect was recognized as a reduction in
strives for a medium- and long-term balance between assets and
Personnel expenses with a corresponding effect in Other
liabilities.
comprehensive income (OCI). The first installment of USD 235
As of 31 December 2020, the Swiss plan was in a surplus
million was paid in 2020 and reduced OCI with no effect on the
situation on an IFRS measurement basis, as the fair value of the
income statement. If the Swiss plan remains in an asset ceiling
plan’s assets exceeded
the DBO by USD 4,862 million
position, the two payments in 2021 and 2022, adjusted for
(31 December 2019: a surplus of USD 3,724 million). However, a
expected forfeitures, are expected to reduce OCI by USD 437
surplus is only recognized on the balance sheet to the extent
million, with no effect on the income statement.
that it does not exceed the estimated future economic benefit,
The second installment of USD 254 million was paid in
which equals the difference between the present value of the
January 2021 and the regular employer contributions expected
estimated future net service cost and the present value of the
to be made to the Swiss plan in 2021 are estimated to be
estimated
future employer
contributions. As of both
USD 518 million.
31 December 2020 and 31 December 2019, the estimated
future economic benefit was zero and hence no net defined
UK pension plan
benefit asset was recognized on the balance sheet.
The UK plan is a career-average revalued earnings scheme, and
In the first quarter of 2020, UBS adopted an enhanced
benefits increase automatically based on UK price inflation. The
methodology for measuring the estimated future economic
normal retirement age for participants in the UK plan is 60. The
benefits available under the Swiss pension plan, whereby future
plan provides guaranteed lifetime pension benefits to plan
net service cost is measured individually for each future year,
participants upon retirement. Since 2000, the UK plan has been
considering the individually applicable discount rate. In addition,
closed to new entrants and, since 2013, plan participants are no
an enhanced discount curve methodology was adopted, utilizing
longer accruing benefits for current or future service. Instead,
the FINMA-published ultimate forward rate, which represents
employees participate in the UK defined contribution plan.
the average long-term historical real rate plus expected inflation
The governance responsibility for the UK plan lies jointly with
over
the
long-dated periods where discount
rates are
the Pension Trustee Board and UBS. The employer contributions
unobservable. No changes have been made to the methodology
to the pension fund reflect agreed-upon deficit funding
for measuring the defined benefit obligation.
Changes to the Swiss pension plan
contributions, which are determined on the basis of the most
recent actuarial valuation using assumptions agreed by the
Pension Trustee Board and UBS. In the event of underfunding,
As a result of the effects of continuing low and in some cases
UBS and the Pension Trustee Board must agree on a deficit
negative
interest
rates, diminished
investment
return
recovery plan within statutory deadlines. In 2020, UBS made
expectations and increasing life expectancy, the pension fund of
deficit funding contributions of USD 46 million to the UK plan.
UBS in Switzerland and UBS agreed to measures that took effect
In 2019, UBS made deficit funding contributions of USD 242
from the start of 2019 to support the long-term financial
million.
stability of the Swiss pension fund. As a result, the conversion
376
377
377
Financial statements Consolidated financial statements
Note 26 Post-employment benefit plans (continued)
Defined benefit plans
USD million
Defined benefit obligation at the beginning of the year
Current service cost
Interest expense
Plan participant contributions
Remeasurements
of which: actuarial (gains) / losses due to changes in demographic assumptions
of which: actuarial (gains) / losses due to changes in financial assumptions
of which: experience (gains) / losses 1
Past service cost related to plan amendments
Benefit payments
Other movements
Foreign currency translation
DDeeffiinneedd bbeenneeffiitt oobblliiggaattiioonn aatt tthhee eenndd ooff tthhee yyeeaarr
of which: amounts owed to active members
of which: amounts owed to deferred members
of which: amounts owed to retirees
Fair value of plan assets at the beginning of the year
Return on plan assets excluding interest income
Interest income
Employer contributions
Plan participant contributions
Benefit payments
Administration expenses, taxes and premiums paid
Foreign currency translation
FFaaiirr vvaalluuee ooff ppllaann aasssseettss aatt tthhee eenndd ooff tthhee yyeeaarr
Asset ceiling effect at the beginning of the year
Interest expense on asset ceiling effect
Asset ceiling effect excluding interest expense and foreign currency translation on
asset ceiling effect
Foreign currency translation
AAsssseett cceeiilliinngg eeffffeecctt aatt tthhee eenndd ooff tthhee yyeeaarr
NNeett ddeeffiinneedd bbeenneeffiitt aasssseett // ((lliiaabbiilliittyy))
MMoovveemmeenntt iinn tthhee nneett aasssseett // ((lliiaabbiilliittyy)) rreeccooggnniizzeedd oonn tthhee bbaallaannccee sshheeeett
NNeett aasssseett // ((lliiaabbiilliittyy)) rreeccooggnniizzeedd oonn tthhee bbaallaannccee sshheeeett aatt tthhee bbeeggiinnnniinngg ooff tthhee yyeeaarr
Net periodic expenses recognized in net profit
Gains / (losses) recognized in other comprehensive income
Employer contributions
Other movements
Foreign currency translation
NNeett aasssseett // ((lliiaabbiilliittyy)) rreeccooggnniizzeedd oonn tthhee bbaallaannccee sshheeeett aatt tthhee eenndd ooff tthhee yyeeaarr
FFuunnddeedd aanndd uunnffuunnddeedd ppllaannss
Defined benefit obligation from funded plans
Defined benefit obligation from unfunded plans
Plan assets
SSuurrpplluuss // ((ddeeffiicciitt))
AAsssseett cceeiilliinngg eeffffeecctt
NNeett ddeeffiinneedd bbeenneeffiitt aasssseett // ((lliiaabbiilliittyy))
378
378
Swiss pension plan
2019
22,566
409
200
240
1,728
22002200
2244,,449966
444477
7722
225599
11,,227799
00
((116644))
(196)
998833 1,641
284
446600
0
00
(1,046)
((11,,115533))
0
((44))
399
22,,333333
24,496
2277,,772288
1133,,776655 11,577
0
1133,,996633 12,918
25,839
2288,,221199
2,059
11,,881188
233
8844
452
772299
240
225599
(1,046)
((11,,115533))
((1133))
(11)
453
22,,664477
28,219
3322,,559900
3,274
33,,772244
30
1122
881144
331133
44,,886622
00
353
67
3,724
0
00
((445599))
((227766))
772299
44
11
00
0
(417)
(22)
452
0
(13)
0
UK pension plan
22002200
33,,665544
00
7733
00
444499
2019
3,192
0
92
0
361
((1144))
550055
((4422))
33
((114488))
00
113322
44,,116622
115599
(26)
421
(34)
0
(135)
0
144
3,654
164
11,,887799 1,559
22,,112244 1,931
3,032
33,,665588
284
338888
89
7733
242
4466
00
0
(135)
((114488))
00
0
146
113322
3,658
44,,114499
0
00
0
00
00
00
00
((1133))
44
((33))
((6611))
4466
00
00
((1133))
0
0
0
4
(160)
(3)
(78)
242
0
2
4
US and German
pension plans
22002200
11,,882200
66
4455
00
110055
2019
1,679
6
59
0
185
((3344))
113344
55
00
((110088))
00
3377
11,,990055
224455
774433
991177
11,,229999
111188
3388
1177
00
((110088))
((44))
00
11,,336600
00
00
00
00
00
((554455))
((552211))
((1188))
1144
1177
00
((3377))
((554455))
3
179
4
0
(102)
0
(8)
1,820
235
675
911
1,168
150
47
38
0
(102)
(2)
0
1,299
0
0
0
0
0
(521)
(511)
(21)
(35)
38
0
8
(521)
Total
22002200
2299,,997700
445533
119900
225599
11,,883322
2019
27,437
415
351
240
2,275
((221122))
(220)
11,,662211 2,241
254
442233
0
33
(1,283)
((11,,440099))
0
((44))
535
22,,550011
29,970
3333,,779955
1144,,116699 11,976
22,,662222 2,233
1177,,000044 15,760
30,039
3333,,117766
2,492
22,,332244
369
119966
732
779922
240
225599
(1,283)
((11,,440099))
(13)
((1177))
599
22,,777799
33,176
3388,,110000
3,274
33,,772244
30
1122
881144
331133
44,,886622
((555588))
353
67
3,724
(518)
((551188))
((447799))
((332233))
779922
44
((3355))
((555588))
(671)
(440)
(135)
732
0
(3)
(518)
2277,,772288
24,496
44,,116622
3,654
11,,331199
1,319
3333,,220099
29,469
00
0
3322,,559900
44,,886622
28,219
3,724
44,,886622
3,724
00
0
00
44,,114499
((1133))
00
((1133))
0
3,658
4
0
4
558866
11,,336600
((554455))
00
501
1,299
(521)
558866
501
3388,,110000
44,,330044
33,176
3,206
0
44,,886622
3,724
((554455))
(521)
((555588))
(518)
of which: actuarial (gains) / losses due to changes in demographic assumptions
of which: actuarial (gains) / losses due to changes in financial assumptions
Consolidated financial statements
Defined benefit obligation at the beginning of the year
Defined benefit plans
USD million
Current service cost
Interest expense
Plan participant contributions
Remeasurements
of which: experience (gains) / losses 1
Past service cost related to plan amendments
Benefit payments
Other movements
Foreign currency translation
DDeeffiinneedd bbeenneeffiitt oobblliiggaattiioonn aatt tthhee eenndd ooff tthhee yyeeaarr
of which: amounts owed to active members
of which: amounts owed to deferred members
of which: amounts owed to retirees
Fair value of plan assets at the beginning of the year
Return on plan assets excluding interest income
Interest income
Employer contributions
Plan participant contributions
Benefit payments
Administration expenses, taxes and premiums paid
Foreign currency translation
FFaaiirr vvaalluuee ooff ppllaann aasssseettss aatt tthhee eenndd ooff tthhee yyeeaarr
Asset ceiling effect at the beginning of the year
Interest expense on asset ceiling effect
asset ceiling effect
Foreign currency translation
AAsssseett cceeiilliinngg eeffffeecctt aatt tthhee eenndd ooff tthhee yyeeaarr
NNeett ddeeffiinneedd bbeenneeffiitt aasssseett // ((lliiaabbiilliittyy))
Asset ceiling effect excluding interest expense and foreign currency translation on
MMoovveemmeenntt iinn tthhee nneett aasssseett // ((lliiaabbiilliittyy)) rreeccooggnniizzeedd oonn tthhee bbaallaannccee sshheeeett
NNeett aasssseett // ((lliiaabbiilliittyy)) rreeccooggnniizzeedd oonn tthhee bbaallaannccee sshheeeett aatt tthhee bbeeggiinnnniinngg ooff tthhee yyeeaarr
Net periodic expenses recognized in net profit
Gains / (losses) recognized in other comprehensive income
Employer contributions
Other movements
Foreign currency translation
NNeett aasssseett // ((lliiaabbiilliittyy)) rreeccooggnniizzeedd oonn tthhee bbaallaannccee sshheeeett aatt tthhee eenndd ooff tthhee yyeeaarr
FFuunnddeedd aanndd uunnffuunnddeedd ppllaannss
Defined benefit obligation from funded plans
Defined benefit obligation from unfunded plans
Plan assets
SSuurrpplluuss // ((ddeeffiicciitt))
AAsssseett cceeiilliinngg eeffffeecctt
NNeett ddeeffiinneedd bbeenneeffiitt aasssseett // ((lliiaabbiilliittyy))
((11,,115533))
(1,046)
((114488))
(135)
((110088))
(102)
((11,,440099))
(1,283)
Swiss pension plan
UK pension plan
22002200
2019
2244,,449966
22,566
22002200
33,,665544
2019
3,192
US and German
pension plans
22002200
11,,882200
2019
1,679
11,,990055
1,820
3333,,779955
29,970
224455
774433
991177
11,,229999
111188
235
675
911
1,168
150
1144,,116699 11,976
22,,662222 2,233
1177,,000044 15,760
3333,,117766
30,039
22,,332244
2,492
66
4455
00
110055
((3344))
113344
55
00
00
3377
3388
1177
00
((44))
00
00
00
00
00
00
6
59
0
185
3
179
4
0
0
(8)
47
38
0
(2)
0
0
0
0
0
0
Total
22002200
2019
2299,,997700
27,437
445533
119900
225599
415
351
240
11,,883322
2,275
((221122))
(220)
11,,662211 2,241
442233
33
((44))
254
0
0
22,,550011
535
119966
779922
225599
((1177))
22,,777799
1122
881144
331133
((551188))
((447799))
((332233))
779922
44
((3355))
((555588))
369
732
240
(13)
599
30
353
67
(671)
(440)
(135)
732
0
(3)
(518)
44,,886622
3,724
((554455))
(521)
((555588))
(518)
(160)
(3)
(78)
242
((552211))
((1188))
1144
1177
00
((3377))
((554455))
(511)
(21)
(35)
38
0
8
(521)
444477
7722
225599
409
200
240
11,,227799
1,728
((116644))
(196)
998833 1,641
446600
284
00
((44))
0
0
00
7733
00
444499
((1144))
550055
((4422))
33
00
0
92
0
361
(26)
421
(34)
0
0
22,,333333
399
2277,,772288
24,496
113322
44,,116622
144
3,654
1133,,776655 11,577
115599
164
00
0
11,,887799 1,559
1133,,996633 12,918
22,,112244 1,931
2288,,221199
25,839
33,,665588
3,032
11,,881188
2,059
8844
772299
225599
233
452
240
284
89
242
338888
7733
4466
00
((1133))
22,,664477
(11)
453
3322,,559900
28,219
33,,772244
3,274
1122
30
881144
331133
353
67
44,,886622
3,724
0
0
(417)
(22)
452
(13)
0
0
((445599))
((227766))
772299
00
00
44
11
00
00
0
0
0
0
0
0
0
4
0
2
4
0
4
0
4
00
00
00
00
00
00
((1133))
44
((33))
((6611))
4466
00
00
((1133))
((1133))
00
((1133))
2277,,772288
24,496
44,,116622
3,654
11,,331199
1,319
3333,,220099
29,469
0
00
558866
501
558866
501
3322,,559900
28,219
44,,114499
3,658
11,,336600
1,299
3388,,110000
33,176
44,,886622
44,,886622
00
3,724
3,724
0
((554455))
(521)
00
0
44,,330044
44,,886622
3,206
3,724
((554455))
(521)
((555588))
(518)
((11,,115533))
(1,046)
((114488))
(135)
((110088))
(102)
((11,,440099))
(1,283)
113322
44,,114499
146
3,658
11,,336600
1,299
3388,,110000
33,176
33,,772244
3,274
Note 26 Post-employment benefit plans (continued)
Note 26 Post-employment benefit plans (continued)
AAnnaallyyssiiss ooff aammoouunnttss rreeccooggnniizzeedd iinn nneett pprrooffiitt
USD million
For the year ended
Current service cost
Interest expense related to defined benefit obligation
Interest income related to plan assets
Interest expense on asset ceiling effect
Administration expenses, taxes and premiums paid
Past service cost related to plan amendments
NNeett ppeerriiooddiicc eexxppeennsseess rreeccooggnniizzeedd iinn nneett pprrooffiitt
AAnnaallyyssiiss ooff aammoouunnttss rreeccooggnniizzeedd iinn ootthheerr ccoommpprreehheennssiivvee iinnccoommee ((OOCCII))
USD million
For the year ended
Remeasurement of defined benefit obligation
of which: change in discount rate assumption
of which: change in rate of salary increase assumption
of which: change in rate of pension increase assumption
of which: change in rate of interest credit on retirement savings assumption
of which: change in life expectancy
of which: change in other actuarial assumptions
of which: experience gains / (losses) 1
Return on plan assets excluding interest income
Asset ceiling effect excluding interest expense and foreign currency translation
Swiss pension plan
3311..1122..2200 31.12.19
409
444477
UK pension plan
3311..1122..2200 31.12.19
0
00
7722
((8844))
1122
1133
00
445599
200
(233)
30
11
0
417
7733
((7733))
92
(89)
00
00
33
33
0
0
0
3
US and German
pension plans
3311..1122..2200 31.12.19
6
66
Total
3311..1122..2200 31.12.19
415
445533
4455
((3388))
00
44
00
1188
59
(47)
0
2
0
21
119900
((119966))
1122
1177
33
447799
351
(369)
30
13
0
440
Swiss pension plan
3311..1122..2200 31.12.19
(1,728)
((11,,227799))
UK pension plan
3311..1122..2200 31.12.19
(361)
((444499))
US and German
pension plans
3311..1122..2200 31.12.19
(185)
((110055))
Total
3311..1122..2200 31.12.19
(2,275)
((11,,883322))
((777777)) (1,887)
((550044))
(552)
((114411))
(166)
((11,,442211)) (2,605)
((223300))
00
2266
226611
3
0
243
0
((9999))
196
((446600))
(284)
11,,881188
2,059
((881144))
(353)
00
((11))
00
2222
((88))
4422
338888
00
0
132
0
21
5
34
284
0
00
11
2244
5500
((3344))
((55))
111188
00
0
(4)
18
4
(33)
(4)
150
0
((223300))
00
5500
333333
((114422))
((442233))
3
128
261
25
168
(254)
22,,332244
2,492
((881144))
(353)
(135)
TToottaall ggaaiinnss // ((lloosssseess)) rreeccooggnniizzeedd iinn ootthheerr ccoommpprreehheennssiivvee iinnccoommee,, bbeeffoorree ttaaxx
11 Experience (gains) / losses are a component of actuarial remeasurements of the defined benefit obligation that reflect the effects of differences between the previous actuarial assumptions and what has actually
occurred.
((332233))
((227766))
((6611))
(22)
(78)
(35)
1144
The table below provides information about the duration of the DBO and the timing for expected benefit payments.
DDuurraattiioonn ooff tthhee ddeeffiinneedd bbeenneeffiitt oobblliiggaattiioonn ((iinn yyeeaarrss))
MMaattuurriittyy aannaallyyssiiss ooff bbeenneeffiittss eexxppeecctteedd ttoo bbee ppaaiidd
USD million
Benefits expected to be paid within 12 months
Benefits expected to be paid between 1 and 3 years
Benefits expected to be paid between 3 and 6 years
Benefits expected to be paid between 6 and 11 years
Benefits expected to be paid between 11 and 16 years
Benefits expected to be paid in more than 16 years
11 The duration of the defined benefit obligation represents a weighted average across US and German plans.
Swiss pension plan
3311..1122..2200
31.12.19
UK pension plan
US and German pension
plans1
3311..1122..2200
31.12.19
3311..1122..2200
31.12.19
1155..77
14.9
1199..00
20.2
1100..22
10.1
11,,229933
22,,663300
33,,883399
66,,116666
55,,664466
1,232
2,483
3,670
5,761
5,070
111144
223322
440066
774444
775588
93
209
384
748
807
1188,,888844
15,517
33,,220066
3,913
112222
223355
334466
553322
441133
554411
121
228
346
548
455
721
378
379
379
Financial statements Consolidated financial statements
Note 26 Post-employment benefit plans (continued)
Actuarial assumptions
The measurement of each plan’s DBO considers different
actuarial assumptions. Changes in these assumptions lead to
volatility in the DBO. The actuarial assumptions used for the
defined benefit plans are based on the economic conditions
prevailing in the jurisdiction in which they are offered. Changes
in the defined benefit obligation are most sensitive to changes in
the discount rate. The discount rate is based on the yield of
high-quality corporate bonds quoted in an active market in the
currency of the respective plan. A decrease in the discount curve
increases the DBO and an increase in the discount curve
decreases the DBO. UBS regularly reviews the actuarial
assumptions used in calculating the DBO to determine their
continuing relevance.
› Refer to Note 1a item 6 for a description of the accounting policy
for defined benefit plans
The tables below show the significant actuarial assumptions used in calculating the DBO at the end of the year.
Significant actuarial assumptions
In %
Discount rate
Rate of salary increase
Rate of pension increase
Rate of interest credit on retirement savings
11 Represents weighted average assumptions across US and German plans.
Mortality tables and life expectancies for major plans
CCoouunnttrryy
Switzerland
UK
USA
Germany
CCoouunnttrryy
Switzerland
UK
USA
Germany
MMoorrttaalliittyy ttaabbllee
BVG 2020 G with CMI 2019 projections1
S3PA with CMI 2019 projections2
Pri-2012 with MP-2020 projection scale3
Dr. K. Heubeck 2018 G
MMoorrttaalliittyy ttaabbllee
BVG 2020 G with CMI 2019 projections1
S3PA with CMI 2019 projections2
Pri-2012 with MP-2020 projection scale3
Dr. K. Heubeck 2018 G
Swiss pension plan
3311..1122..2200
31.12.19
UK pension plan
US and German pension
plans1
3311..1122..2200
31.12.19
3311..1122..2200
31.12.19
00..1100
22..0000
00..0000
00..6600
0.29
1.50
0.00
0.49
11..4422
00..0000
22..8899
00..0000
2.07
0.00
2.92
0.00
11..6622
22..2255
11..7700
11..1122
2.58
2.37
1.80
2.57
Life expectancy at age 65 for a male member currently
aged 65
aged 45
3311..1122..2200
31.12.19
3311..1122..2200
31.12.19
2211..77
2233..44
2211..88
2200..88
21.6
23.3
22.8
20.7
2233..22
2244..66
2233..22
2233..66
23.1
24.5
24.3
23.5
Life expectancy at age 65 for a female member currently
aged 65
aged 45
3311..1122..2200
31.12.19
3311..1122..2200
31.12.19
2233..44
2244..99
2233..22
2244..33
23.6
25.1
24.4
24.2
2244..99
2266..33
2244..55
2266..55
25.1
26.4
25.9
26.4
1 In 2019, BVG 2015 G with CMI 2016 projections was used. 22 In 2019, S2PA with CMI 2018 projections was used. 33 In 2019, RP-2014 WCHA with MP-2019 projection scale was used.
380
380
Note 26 Post-employment benefit plans (continued)
Note 26 Post-employment benefit plans (continued)
Sensitivity analysis of significant actuarial assumptions
The table below presents a sensitivity analysis for each significant
actuarial assumption, showing how the DBO would have been
affected by changes in the relevant actuarial assumption that
were reasonably possible at the balance sheet date. Unforeseen
circumstances may arise, which could result in variations that are
outside the range of alternatives deemed reasonably possible.
Caution should be used in extrapolating the sensitivities below
on the DBO as the sensitivities may not be linear.
Sensitivity analysis of significant actuarial assumptions1
Increase / (decrease) in defined benefit obligation
USD million
DDiissccoouunntt rraattee
Increase by 50 basis points
Decrease by 50 basis points
RRaattee ooff ssaallaarryy iinnccrreeaassee
Increase by 50 basis points
Decrease by 50 basis points
RRaattee ooff ppeennssiioonn iinnccrreeaassee
Increase by 50 basis points
Decrease by 50 basis points
RRaattee ooff iinntteerreesstt ccrreeddiitt oonn rreettiirreemmeenntt ssaavviinnggss
Increase by 50 basis points
Decrease by 50 basis points
LLiiffee eexxppeeccttaannccyy
Increase in longevity by one additional year
Swiss pension plan
3311..1122..2200
31.12.19
UK pension plan
US and German pension plans
3311..1122..2200
31.12.19
3311..1122..2200
31.12.19
((11,,779933))
22,,004488
111177
((111111))
11,,441133
––33
223366
((118888))55
11,,006611
(1,505)
1,710
76
(73)
1,221
–3
175
(102)
886
((337700))
442233
––22
––22
335588
((331166))
––44
––44
(346)
395
–2
–2
331
(299)
–4
–4
((9911))
9999
11
((11))
88
((77))
99
((88))
(86)
93
1
(1)
7
(7)
9
(9)
118822
154
6600
51
11 The sensitivity analyses are based on a change in one assumption while holding all other assumptions constant, so that interdependencies between the assumptions are excluded. 22 As the plan is closed for
future service, a change in assumption is not applicable. 33 As the assumed rate of pension increase was 0% as of 31 December 2020 and as of 31 December 2019, a downward change in assumption is
not applicable. 44 As the UK plan does not provide interest credits on retirement savings, a change in assumption is not applicable. 55 As of 31 December 2020, 20% of retirement savings were subject to a legal
minimum rate of 1.00%.
Consolidated financial statements
Actuarial assumptions
high-quality corporate bonds quoted in an active market in the
The measurement of each plan’s DBO considers different
currency of the respective plan. A decrease in the discount curve
actuarial assumptions. Changes in these assumptions lead to
increases the DBO and an increase in the discount curve
volatility in the DBO. The actuarial assumptions used for the
decreases the DBO. UBS regularly reviews the actuarial
defined benefit plans are based on the economic conditions
assumptions used in calculating the DBO to determine their
prevailing in the jurisdiction in which they are offered. Changes
continuing relevance.
in the defined benefit obligation are most sensitive to changes in
› Refer to Note 1a item 6 for a description of the accounting policy
the discount rate. The discount rate is based on the yield of
for defined benefit plans
The tables below show the significant actuarial assumptions used in calculating the DBO at the end of the year.
Significant actuarial assumptions
In %
Discount rate
Rate of salary increase
Rate of pension increase
Rate of interest credit on retirement savings
11 Represents weighted average assumptions across US and German plans.
Mortality tables and life expectancies for major plans
CCoouunnttrryy
Switzerland
UK
USA
Germany
CCoouunnttrryy
Switzerland
UK
USA
Germany
MMoorrttaalliittyy ttaabbllee
BVG 2020 G with CMI 2019 projections1
S3PA with CMI 2019 projections2
Pri-2012 with MP-2020 projection scale3
Dr. K. Heubeck 2018 G
MMoorrttaalliittyy ttaabbllee
BVG 2020 G with CMI 2019 projections1
S3PA with CMI 2019 projections2
Pri-2012 with MP-2020 projection scale3
Dr. K. Heubeck 2018 G
Swiss pension plan
UK pension plan
plans1
3311..1122..2200
31.12.19
3311..1122..2200
31.12.19
3311..1122..2200
31.12.19
US and German pension
00..1100
22..0000
00..0000
00..6600
0.29
1.50
0.00
0.49
11..4422
00..0000
22..8899
00..0000
2.07
0.00
2.92
0.00
11..6622
22..2255
11..7700
11..1122
2.58
2.37
1.80
2.57
Life expectancy at age 65 for a male member currently
aged 65
aged 45
3311..1122..2200
31.12.19
3311..1122..2200
31.12.19
2211..77
2233..44
2211..88
2200..88
2233..44
2244..99
2233..22
2244..33
21.6
23.3
22.8
20.7
23.6
25.1
24.4
24.2
2233..22
2244..66
2233..22
2233..66
2244..99
2266..33
2244..55
2266..55
23.1
24.5
24.3
23.5
25.1
26.4
25.9
26.4
Life expectancy at age 65 for a female member currently
aged 65
aged 45
3311..1122..2200
31.12.19
3311..1122..2200
31.12.19
1 In 2019, BVG 2015 G with CMI 2016 projections was used. 22 In 2019, S2PA with CMI 2018 projections was used. 33 In 2019, RP-2014 WCHA with MP-2019 projection scale was used.
380
381
381
Financial statements Consolidated financial statements
Note 26 Post-employment benefit plans (continued)
Fair value of plan assets
The tables below provide information about the composition and fair value of plan assets of the Swiss, the UK and the US pension plans.
Composition and fair value of plan assets
Swiss pension plan
USD million
CCaasshh aanndd ccaasshh eeqquuiivvaalleennttss
RReeaall eessttaattee // pprrooppeerrttyy
Domestic
Foreign
IInnvveessttmmeenntt ffuunnddss
Equity
Domestic
Foreign
Bonds1
Domestic, AAA to BBB–
Foreign, AAA to BBB–
Foreign, below BBB–
Other
OOtthheerr iinnvveessttmmeennttss
TToottaall ffaaiirr vvaalluuee ooff ppllaann aasssseettss
TToottaall ffaaiirr vvaalluuee ooff ppllaann aasssseettss
of which:2
Bank accounts at UBS
UBS debt instruments
UBS shares
Securities lent to UBS3
Property occupied by UBS
Derivative financial instruments, counterparty UBS3
3311..1122..2200
31.12.19
FFaaiirr vvaalluuee
PPllaann aasssseett
aallllooccaattiioonn %%
Fair value
Plan asset
allocation %
QQuuootteedd
iinn aann aaccttiivvee
mmaarrkkeett
221199
OOtthheerr
00
TToottaall
221199
00
00
33,,558822
333311
33,,558822
333311
882266
66,,228844
00
11,,995588
882266
88,,224422
33,,772211
66,,114466
11,,330033
33,,336633
666633
2222,,552255
00
00
00
33,,772222
447733
1100,,006655
33,,772211
66,,114466
11,,330033
77,,008855
11,,113366
3322,,559900
3311..1122..2200
3322,,559900
223311
3344
2244
11,,441166
9966
114499
11
1111
11
33
2255
1111
1199
44
2222
33
110000
Quoted
in an active
market
159
Other
0
Total
159
0
0
3,050
160
3,050
160
701
6,091
3,238
5,880
999
1,604
535
19,206
0
1,653
0
0
0
3,956
194
9,014
701
7,743
3,238
5,880
999
5,560
729
28,219
31.12.19
28,219
159
7
21
1,328
88
10
1
11
1
2
27
11
21
4
20
3
100
11 The bond credit ratings are primarily based on Standard & Poor’s credit ratings. Ratings AAA to BBB– and below BBB– represent investment grade and non-investment grade ratings, respectively. In cases where
credit ratings from other rating agencies were used, these were converted to the equivalent rating in Standard & Poor’s rating classification. 22 Bank accounts at UBS encompass accounts in the name of the Swiss
pension fund. The other positions disclosed in the table encompass both direct investments in UBS instruments and indirect investments, i.e., those made through funds that the pension fund invests in. 33 Securities
lent to UBS and derivative financial instruments are presented gross of any collateral. Securities lent to UBS were fully covered by collateral as of 31 December 2020 and 31 December 2019. Net of
collateral, derivative financial instruments amounted to negative USD 17 million as of 31 December 2020 (31 December 2019: positive USD 6 million).
382
382
Consolidated financial statements
Fair value of plan assets
Composition and fair value of plan assets
Swiss pension plan
USD million
CCaasshh aanndd ccaasshh eeqquuiivvaalleennttss
RReeaall eessttaattee // pprrooppeerrttyy
Domestic
Foreign
IInnvveessttmmeenntt ffuunnddss
Equity
Domestic
Foreign
Bonds1
Domestic, AAA to BBB–
Foreign, AAA to BBB–
Foreign, below BBB–
Other
OOtthheerr iinnvveessttmmeennttss
TToottaall ffaaiirr vvaalluuee ooff ppllaann aasssseettss
of which:2
Bank accounts at UBS
UBS debt instruments
UBS shares
Securities lent to UBS3
Property occupied by UBS
3311..1122..2200
31.12.19
PPllaann aasssseett
aallllooccaattiioonn %%
Fair value
Plan asset
allocation %
FFaaiirr vvaalluuee
QQuuootteedd
iinn aann aaccttiivvee
mmaarrkkeett
221199
OOtthheerr
00
TToottaall
221199
00
00
33,,558822
333311
33,,558822
333311
882266
66,,228844
33,,772211
66,,114466
11,,330033
33,,336633
666633
11,,995588
00
00
00
00
33,,772222
447733
882266
88,,224422
33,,772211
66,,114466
11,,330033
77,,008855
11,,113366
3311..1122..2200
3322,,559900
223311
3344
2244
11,,441166
9966
114499
1
11
1
2
27
11
21
4
20
3
100
Quoted
in an active
market
159
Other
0
Total
159
0
0
3,050
160
3,050
160
701
6,091
3,238
5,880
999
1,604
535
1,653
0
0
0
0
3,956
194
9,014
11
1111
11
33
2255
1111
1199
44
2222
33
701
7,743
3,238
5,880
999
5,560
729
28,219
31.12.19
28,219
159
7
21
1,328
88
10
Derivative financial instruments, counterparty UBS3
11 The bond credit ratings are primarily based on Standard & Poor’s credit ratings. Ratings AAA to BBB– and below BBB– represent investment grade and non-investment grade ratings, respectively. In cases where
credit ratings from other rating agencies were used, these were converted to the equivalent rating in Standard & Poor’s rating classification. 22 Bank accounts at UBS encompass accounts in the name of the Swiss
pension fund. The other positions disclosed in the table encompass both direct investments in UBS instruments and indirect investments, i.e., those made through funds that the pension fund invests in. 33 Securities
lent to UBS and derivative financial instruments are presented gross of any collateral. Securities lent to UBS were fully covered by collateral as of 31 December 2020 and 31 December 2019. Net of
collateral, derivative financial instruments amounted to negative USD 17 million as of 31 December 2020 (31 December 2019: positive USD 6 million).
TToottaall ffaaiirr vvaalluuee ooff ppllaann aasssseettss
2222,,552255
1100,,006655
3322,,559900
110000
19,206
Note 26 Post-employment benefit plans (continued)
Note 26 Post-employment benefit plans (continued)
The tables below provide information about the composition and fair value of plan assets of the Swiss, the UK and the US pension plans.
Composition and fair value of plan assets (continued)
UK pension plan
USD million
CCaasshh aanndd ccaasshh eeqquuiivvaalleennttss
BBoonnddss11
Domestic, AAA to BBB–
Foreign, AAA to BBB–
IInnvveessttmmeenntt ffuunnddss
Equity
Domestic
Foreign
Bonds1
Domestic, AAA to BBB–
Domestic, below BBB–
Foreign, AAA to BBB–
Foreign, below BBB–
3311..1122..2200
31.12.19
FFaaiirr vvaalluuee
PPllaann aasssseett
aallllooccaattiioonn %%
Fair value
Plan asset
allocation %
QQuuootteedd
iinn aann aaccttiivvee
mmaarrkkeett
119955
OOtthheerr
00
TToottaall
119955
22,,115500
5533
3344
11,,007777
991199
4477
114499
111100
00
00
33
00
113311
00
00
00
22,,115500
5533
3377
11,,007777
11,,005500
4477
114499
111100
Quoted
in an active
market
141
1,810
0
33
916
610
22
310
108
Other
0
Total
141
0
0
0
0
117
0
0
0
1,810
0
33
916
727
22
310
108
55
5522
11
11
2266
2255
11
44
33
4
49
0
1
25
20
1
8
3
Real estate
Domestic
Foreign
Other
111144
3377
((8866))
IInnssuurraannccee ccoonnttrraaccttss
88
DDeerriivvaattiivveess
((33))
AAsssseett--bbaacckkeedd sseeccuurriittiieess
66
OOtthheerr iinnvveessttmmeennttss22
((779944))
TToottaall ffaaiirr vvaalluuee ooff ppllaann aasssseettss
44,,114499
11 The bond credit ratings are primarily based on Standard & Poor’s credit ratings. Ratings AAA to BBB– and below BBB– represent investment grade and non-investment grade ratings, respectively. In cases where
credit ratings from other rating agencies were used, these were converted to the equivalent rating in Standard & Poor’s rating classification. 22 Mainly relates to repurchase arrangements on UK treasury bonds.
103
0
0
0
3
0
(572)
3,483
122
19
0
7
3
6
(565)
3,658
9988
00
((8866))
00
((33))
00
((880033))
33,,994400
3
1
0
0
0
0
(15)
100
33
11
((22))
00
00
00
((1199))
110000
18
19
0
7
0
6
7
175
1166
3377
00
88
00
66
99
220099
US pension plans
USD million
CCaasshh aanndd ccaasshh eeqquuiivvaalleennttss
BBoonnddss11
Domestic, AAA to BBB–
Domestic, below BBB–
Foreign, AAA to BBB–
Foreign, below BBB–
IInnvveessttmmeenntt ffuunnddss
Equity
Domestic
Foreign
Bonds1
Domestic, AAA to BBB–
Domestic, below BBB–
Foreign, AAA to BBB–
Foreign, below BBB–
3311..1122..2200
31.12.19
FFaaiirr vvaalluuee
PPllaann aasssseett
aallllooccaattiioonn %%
Fair value
Plan asset
allocation %
QQuuootteedd
iinn aann aaccttiivvee
mmaarrkkeett
3388
OOtthheerr
00
TToottaall
3388
449900
77
9999
11
221100
116699
119955
3344
1199
33
00
00
00
00
00
00
00
00
00
00
449900
77
9999
11
221100
116699
119955
3344
1199
33
Quoted
in an active
market
27
Other
0
Total
27
475
2
99
3
208
161
176
28
17
3
0
0
0
0
0
0
0
0
0
0
475
2
99
3
208
161
176
28
17
3
33
3366
00
77
00
1155
1122
1144
22
11
00
2
37
0
8
0
16
12
14
2
1
0
Real estate
Domestic
Other
1144
7799
IInnssuurraannccee ccoonnttrraaccttss
11
TToottaall ffaaiirr vvaalluuee ooff ppllaann aasssseettss
11,,336600
11 The bond credit ratings are primarily based on Standard & Poor’s credit ratings. Ratings AAA to BBB– and below BBB– represent investment grade and non-investment grade ratings, respectively. In cases where
credit ratings from other rating agencies were used, these were converted to the equivalent rating in Standard & Poor’s rating classification.
0
69
0
1,268
13
69
18
1,299
00
7799
00
11,,334455
1
5
1
100
11
66
00
110000
13
0
18
31
1144
00
11
1155
382
383
383
Financial statements Consolidated financial statements
Note 26 Post-employment benefit plans (continued)
b) Defined contribution plans
UBS sponsors a number of defined contribution plans, with the
most significant plans in the US and the UK. UBS’s obligation is
limited to its contributions made in accordance with the plan,
which may include direct contributions as well as matching
contributions. Employer contributions to defined contribution
plans are recognized as an expense, which, for 2020, 2019 and
2018, amounted to USD 343 million, USD 326 million and
USD 268 million, respectively.
c) Related-party disclosure
UBS is the principal provider of banking services for the pension
fund of UBS in Switzerland. In this capacity, UBS is engaged to
execute most of the pension fund’s banking activities. These
activities can include, but are not limited to, trading, securities
lending and borrowing and derivative transactions. The non-
Swiss UBS pension funds do not have a similar banking
relationship with UBS.
Also, UBS leases certain properties that are owned by the
Swiss pension fund. As of 31 December 2020, the minimum
commitment toward the Swiss pension fund under the related
leases was approximately USD 11 million (31 December 2019:
USD 14 million).
› Refer to the “Composition and fair value of plan assets” table in
Note 26a for more information about fair value of investments
in UBS instruments held by the Swiss pension fund
The following amounts have been received or paid by UBS
from and to the post-employment benefit plans located in
Switzerland, the UK and the US in respect of these banking
activities and arrangements.
Related-party disclosure
USD million
RReecceeiivveedd bbyy UUBBSS
Fees
PPaaiidd bbyy UUBBSS
Rent
Dividends, capital repayments and interest
For the year ended
3311..1122..2200
31.12.19
31.12.18
3344
55
1100
34
4
11
35
4
10
The transaction volumes in UBS shares and UBS debt instruments and the balances of UBS shares held as of 31 December were:
Transaction volumes – UBS shares and UBS debt instruments
For the year ended
3311..1122..2200
31.12.19
11,,775588
2288
22,,660055
66
967
2
1,977
8
3311..1122..2200
1144,,885544
221100
31.12.19
15,701
198
FFiinnaanncciiaall iinnssttrruummeennttss bboouugghhtt bbyy ppeennssiioonn ffuunnddss
UBS shares (in thousands of shares)
UBS debt instruments (par values, USD million)
FFiinnaanncciiaall iinnssttrruummeennttss ssoolldd bbyy ppeennssiioonn ffuunnddss oorr mmaattuurreedd
UBS shares (in thousands of shares)
UBS debt instruments (par values, USD million)
UBS shares held by post-employment benefit plans
Number of shares (in thousands of shares)
Fair value (USD million)
384
384
Consolidated financial statements
b) Defined contribution plans
c) Related-party disclosure
UBS sponsors a number of defined contribution plans, with the
contributions. Employer contributions to defined contribution
most significant plans in the US and the UK. UBS’s obligation is
plans are recognized as an expense, which, for 2020, 2019 and
limited to its contributions made in accordance with the plan,
2018, amounted to USD 343 million, USD 326 million and
which may include direct contributions as well as matching
USD 268 million, respectively.
UBS is the principal provider of banking services for the pension
leases was approximately USD 11 million (31 December 2019:
fund of UBS in Switzerland. In this capacity, UBS is engaged to
USD 14 million).
execute most of the pension fund’s banking activities. These
activities can include, but are not limited to, trading, securities
lending and borrowing and derivative transactions. The non-
Swiss UBS pension funds do not have a similar banking
› Refer to the “Composition and fair value of plan assets” table in
Note 26a for more information about fair value of investments
in UBS instruments held by the Swiss pension fund
relationship with UBS.
The following amounts have been received or paid by UBS
Also, UBS leases certain properties that are owned by the
from and to the post-employment benefit plans located in
Swiss pension fund. As of 31 December 2020, the minimum
Switzerland, the UK and the US in respect of these banking
commitment toward the Swiss pension fund under the related
activities and arrangements.
The transaction volumes in UBS shares and UBS debt instruments and the balances of UBS shares held as of 31 December were:
Transaction volumes – UBS shares and UBS debt instruments
Related-party disclosure
USD million
RReecceeiivveedd bbyy UUBBSS
PPaaiidd bbyy UUBBSS
Fees
Rent
Dividends, capital repayments and interest
FFiinnaanncciiaall iinnssttrruummeennttss bboouugghhtt bbyy ppeennssiioonn ffuunnddss
UBS shares (in thousands of shares)
UBS debt instruments (par values, USD million)
FFiinnaanncciiaall iinnssttrruummeennttss ssoolldd bbyy ppeennssiioonn ffuunnddss oorr mmaattuurreedd
UBS shares (in thousands of shares)
UBS debt instruments (par values, USD million)
UBS shares held by post-employment benefit plans
Number of shares (in thousands of shares)
Fair value (USD million)
For the year ended
3311..1122..2200
31.12.19
31.12.18
3344
55
1100
34
4
11
35
4
10
For the year ended
3311..1122..2200
31.12.19
11,,775588
2288
22,,660055
66
967
2
1,977
8
3311..1122..2200
1144,,885544
221100
31.12.19
15,701
198
Note 26 Post-employment benefit plans (continued)
Note 27 Employee benefits: variable compensation
a) Plans offered
The Group has several share-based and other deferred
compensation plans that align the interests of Group Executive
Board (GEB) members and other employees with the interests of
investors.
Share based payment awards are granted in the form of
notional shares and, where permitted, carry a dividend equivalent
that may be paid in notional shares or cash and that vest on the
same terms and conditions as the award. Awards are settled by
delivering UBS shares at vesting, except in jurisdictions where this is
not permitted for legal or tax reasons.
Deferred compensation awards are generally forfeitable upon,
among other circumstances, voluntary termination of employment
with UBS. These compensation plans are also designed to meet
regulatory requirements and include special provisions for
regulated employees.
The most significant deferred compensation plans are described
below.
› Refer to Note 1a item 5 for a description of the accounting policy
related to share-based and other deferred compensation plans
Mandatory deferred compensation plans
Equity Ownership Plan (EOP)
The EOP is a mandatory deferred share-based compensation plan
for all employees whose total annual compensation exceeds a
specified threshold, other than GEB members, Group Managing
Directors (GMDs) and Group or Divisional Vice Chair role holders
who are granted share-based awards under the new Long-Term
Incentive Plan (LTIP) first granted in 2020. Awards generally vest in
equal installments after two and three years following grant,
provided that vesting conditions are satisfied. Awards granted to
GEB members in 2019 and prior years generally vest three, four and
five years after grant.
EOP awards granted to GEB members and GMDs in 2019 and
prior years, as well as EOP awards granted to certain other
employees will only vest if certain performance measures both
for the Group and the applicable business division are met.
In order to align deferred compensation of certain Asset
Management employees with
the
investment funds they manage, awards are granted to such
employees in the form of cash-settled notional investment
funds. The amount delivered depends on the value of the
underlying investment funds at the time of vesting.
the performance of
Certain awards, such as replacement awards issued outside
the normal performance year cycle, may take the form of
deferred cash under the EOP plan rules.
Long-Term Incentive Plan
The LTIP is a mandatory deferred share-based compensation
plan for GEB members, GMDs and Group or Divisional Vice
Chair role holders.
The final number of notional shares delivered at vesting
depends on
two equally-weighted performance metrics:
reported return on common equity tier 1 capital (RoCET1) and
relative total shareholder return (rTSR), which measures the
performance of the UBS share against an index consisting of
Global Systemically Important Banks as determined by the
Financial Stability Board.
The final number of shares as determined at the end of the
three-year performance period will vest
three equal
the
installments
performance period for GEB members, and cliff vest in the first
year following the performance period for GMDs and Vice Chair
role holders.
in each of
three years
following
the
in
Deferred Contingent Capital Plan (DCCP)
The DCCP is a mandatory deferred compensation plan for all
employees whose total annual compensation exceeds a specified
threshold.
DCCP awards take the form of notional additional tier 1 (AT1)
capital instruments, which, at the discretion of UBS, can be
settled in either a cash payment or a perpetual, marketable AT1
capital instrument. DCCP awards vest in full after five years, and
up to seven years for certain regulated employees, unless there
is a trigger event.
Awards are forfeited if a viability event occurs, i.e., if FINMA
notifies the firm in writing that the DCCP awards must be
written down to prevent an insolvency, bankruptcy or failure of
UBS, or if UBS receives a commitment of extraordinary support
from the public sector that is necessary to prevent such an
event. DCCP awards are also written down for GEB members if
the Group’s CET1 capital ratio falls below 10% and for all other
employees if it falls below 7%. As an additional performance
condition, GEB members forfeit 20% of their award for each
loss-making year during the vesting period.
Interest payments on DCCP awards are paid at the discretion
of UBS. Where interest payments are not permitted, such as for
certain regulated employees, the DCCP award reflects the fair
value of the granted non-interest-bearing award.
384
385
385
Financial statements Consolidated financial statements
Note 27 Employee benefits: variable compensation (continued)
Financial advisor variable compensation
Discontinued deferred compensation plans
as
voluntary participant
PartnerPlus
Through performance year 2016, financial advisor strategic
objective awards were partly granted under the PartnerPlus
deferred cash plan, which included amounts awarded by UBS, as
contributions. Company
well
contributions and voluntary contributions were credited with
interest in accordance with the terms of the plan, or upon
election credited with notional earnings based on
the
performance of various mutual funds. Company contributions
and interest on both company and voluntary contributions
ratably vest in 20% installments 6 to 10 years following grant
date. Company contributions and interest on notional earnings
on both company and voluntary contributions are forfeitable
under certain circumstances.
GrowthPlus
GrowthPlus is a compensation plan for selected financial
advisors whose revenue production and length of service
exceeded defined thresholds from 2010 through 2017. Awards
were granted in 2010, 2011, 2015 and 2018. The awards are
cash-based and are distributed over seven years, with the
exception of 2018 awards, which are distributed over five years.
Share delivery obligations
Share delivery obligations related to employee share-based
shares as of
compensation awards were 172 million
31 December 2020 (31 December 2019: 156 million shares).
Share delivery obligations are calculated on the basis of
undistributed notional
taking applicable
performance conditions into account.
share awards,
As of 31 December 2020, UBS held 157 million treasury
shares (31 December 2019: 125 million) that were available to
satisfy share delivery obligations.
In line with market practice for US wealth management
businesses, the compensation for US financial advisors in Global
Wealth Management is composed of production payout and
deferred compensation awards. Production payout is primarily
based on compensable revenue.
Financial advisors may also qualify for deferred compensation
awards, which generally vest over a six-year period. The awards
are based on strategic performance measures,
including
production, length of service with the firm and net new
business. Production payout rates and deferred compensation
awards may be reduced for, among other things, errors,
negligence or carelessness, or a failure to comply with the firm’s
rules, standards, practices and / or policies and / or applicable
laws and regulations.
Other compensation plans
Equity Plus Plan
The Equity Plus Plan is a voluntary employee share purchase
program that allows eligible employees to purchase UBS shares
at market price and receive one additional notional share for
every three shares purchased, up to a maximum annual limit.
Additional shares vest after a maximum of three years, provided
the employee remains employed with UBS and has retained the
purchased shares throughout the holding period.
Role-based allowances
Some employees may receive a role-based allowance in addition
to their base salary. This allowance reflects the market value of a
specific role and is fixed, non-forfeitable compensation. Unlike
salary, a role-based allowance is paid only as long as the
employee is in a specific role. Role-based allowances consist of a
cash portion and, where applicable, a blocked UBS share award.
The compensation expense is recognized in the year of grant.
386
386
Consolidated financial statements
Note 27 Employee benefits: variable compensation (continued)
Note 27 Employee benefits: variable compensation (continued)
Financial advisor variable compensation
Discontinued deferred compensation plans
b) Effect on the income statement
In line with market practice for US wealth management
PartnerPlus
businesses, the compensation for US financial advisors in Global
Through performance year 2016, financial advisor strategic
Wealth Management is composed of production payout and
objective awards were partly granted under the PartnerPlus
deferred compensation awards. Production payout is primarily
deferred cash plan, which included amounts awarded by UBS, as
based on compensable revenue.
well
as
voluntary participant
contributions. Company
Financial advisors may also qualify for deferred compensation
contributions and voluntary contributions were credited with
awards, which generally vest over a six-year period. The awards
interest in accordance with the terms of the plan, or upon
are based on strategic performance measures,
including
election credited with notional earnings based on
the
production, length of service with the firm and net new
performance of various mutual funds. Company contributions
business. Production payout rates and deferred compensation
and interest on both company and voluntary contributions
awards may be reduced for, among other things, errors,
ratably vest in 20% installments 6 to 10 years following grant
negligence or carelessness, or a failure to comply with the firm’s
date. Company contributions and interest on notional earnings
rules, standards, practices and / or policies and / or applicable
on both company and voluntary contributions are forfeitable
laws and regulations.
under certain circumstances.
Other compensation plans
GrowthPlus
Equity Plus Plan
GrowthPlus is a compensation plan for selected financial
advisors whose revenue production and length of service
The Equity Plus Plan is a voluntary employee share purchase
exceeded defined thresholds from 2010 through 2017. Awards
program that allows eligible employees to purchase UBS shares
were granted in 2010, 2011, 2015 and 2018. The awards are
at market price and receive one additional notional share for
cash-based and are distributed over seven years, with the
every three shares purchased, up to a maximum annual limit.
exception of 2018 awards, which are distributed over five years.
Additional shares vest after a maximum of three years, provided
the employee remains employed with UBS and has retained the
Share delivery obligations
purchased shares throughout the holding period.
Role-based allowances
Share delivery obligations related to employee share-based
compensation awards were 172 million
shares as of
Some employees may receive a role-based allowance in addition
31 December 2020 (31 December 2019: 156 million shares).
to their base salary. This allowance reflects the market value of a
Share delivery obligations are calculated on the basis of
specific role and is fixed, non-forfeitable compensation. Unlike
undistributed notional
share awards,
taking applicable
salary, a role-based allowance is paid only as long as the
performance conditions into account.
employee is in a specific role. Role-based allowances consist of a
As of 31 December 2020, UBS held 157 million treasury
cash portion and, where applicable, a blocked UBS share award.
shares (31 December 2019: 125 million) that were available to
The compensation expense is recognized in the year of grant.
satisfy share delivery obligations.
Effect on the income statement for the financial year and future
periods
The table below provides information about compensation expenses
related to total variable compensation, including financial advisor
variable compensation, that were recognized in the financial year
ended 31 December 2020, as well as expenses that were deferred
and will be recognized in the income statement for 2021 and later.
The majority of expenses deferred to 2021 and later that are related
to the 2020 performance year pertain to awards granted in
February 2021. The total unamortized compensation expense for
unvested share-based awards granted up to 31 December 2020 will
be recognized in future periods over a weighted average period of
2.9 years.
During the third quarter of 2020, UBS modified the
conditions for continued vesting of certain outstanding deferred
compensation awards for qualifying employees, resulting in the
recognition of USD 314 million in expenses for variable
compensation – performance awards. The full year effect was an
expense of approximately USD 240 million. Refer to Note 1b for
more information.
Variable compensation including financial advisor variable compensation
USD million
Non-deferred cash
Deferred compensation awards
of which: Equity Ownership Plan
of which: Deferred Contingent Capital Plan
of which: Long-Term Incentive Plan
of which: Asset Management EOP
VVaarriiaabbllee ccoommppeennssaattiioonn –– ppeerrffoorrmmaannccee aawwaarrddss
VVaarriiaabbllee ccoommppeennssaattiioonn –– ootthheerr22
TToottaall vvaarriiaabbllee ccoommppeennssaattiioonn eexxcclluuddiinngg ffiinnaanncciiaall aaddvviissoorr vvaarriiaabbllee ccoommppeennssaattiioonn
Financial advisor variable compensation
of which: non-deferred cash
of which: deferred share-based awards
of which: deferred cash-based awards
Compensation commitments with recruited financial advisors3
TToottaall FFAA vvaarriiaabbllee ccoommppeennssaattiioonn
TToottaall vvaarriiaabbllee ccoommppeennssaattiioonn iinncclluuddiinngg FFAA vvaarriiaabbllee ccoommppeennssaattiioonn
EExxppeennsseess rreeccooggnniizzeedd iinn 22002200
EExxppeennsseess ddeeffeerrrreedd ttoo 22002211 aanndd llaatteerr11
RReellaatteedd ttoo tthhee
22002200
ppeerrffoorrmmaannccee
yyeeaarr
2,167
RReellaatteedd ttoo pprriioorr
ppeerrffoorrmmaannccee
yyeeaarrss
(26)
341
137
112
42
49
22,,550088
112266
22,,663344
3,356
3,154
69
133
22
33,,337788
66,,001122
727
327
351
11
39
770011
9944
779955
233
0
50
183
480
771133
11,,550088
RReellaatteedd ttoo tthhee
22002200
ppeerrffoorrmmaannccee
yyeeaarr
0
RReellaatteedd ttoo pprriioorr
ppeerrffoorrmmaannccee
yyeeaarrss
0
756
306
280
50
120
775566
118811
993388
350
0
79
271
473
882222
11,,776600
288
69
196
10
12
228888
119922
448800
602
0
135
467
1,682
22,,228844
22,,776644
TToottaall
2,141
1,068
463
463
54
88
33,,220099
222200
33,,442299
3,589
3,154
119
316
502
44,,009911
77,,55220044
TToottaall
0
1,044
376
476
61
132
11,,004444
337744
11,,441188
952
0
214
738
2,155
33,,110066
44,,552244
11 Estimate as of 31 December 2020. Actual amounts to be expensed in future periods may vary, e.g., due to forfeiture of awards. 22 Comprised of replacement payments, forfeiture credits, severance payments,
retention plan payments and interest expense related to the Deferred Contingent Capital Plan. 33 Reflects expenses related to compensation commitments with financial advisors entered into at the time of
recruitment that are subject to vesting requirements. Amounts reflected as deferred expenses represent the maximum deferred exposure as of the balance sheet date. 44 Includes USD 686 million in expenses
related to share-based compensation (performance awards: USD 517 million; other variable compensation: USD 50 million; financial advisor compensation: USD 119 million). A further USD 100 million in expenses
related to share-based compensation was recognized within other expense categories included in Note 6 (salaries: USD 4 million related to role-based allowances; social security: USD 54 million; other personnel
expenses: USD 42 million related to the Equity Plus Plan). Total personnel expense related to share-based equity-settled compensation excluding social security was USD 691 million.
386
387
387
Financial statements Consolidated financial statements
Note 27 Employee benefits: variable compensation (continued)
Variable compensation including financial advisor variable compensation (continued)
USD million
Non-deferred cash
Deferred compensation awards
of which: Equity Ownership Plan
of which: Deferred Contingent Capital Plan
of which: Long-Term Incentive Plan
of which: Asset Management EOP
VVaarriiaabbllee ccoommppeennssaattiioonn –– ppeerrffoorrmmaannccee aawwaarrddss
VVaarriiaabbllee ccoommppeennssaattiioonn –– ootthheerr22
TToottaall vvaarriiaabbllee ccoommppeennssaattiioonn eexxcclluuddiinngg ffiinnaanncciiaall aaddvviissoorr vvaarriiaabbllee ccoommppeennssaattiioonn
Financial advisor variable compensation
of which: non-deferred cash
of which: deferred share-based awards
of which: deferred cash-based awards
Compensation commitments with recruited financial advisors3
TToottaall FFAA vvaarriiaabbllee ccoommppeennssaattiioonn
TToottaall vvaarriiaabbllee ccoommppeennssaattiioonn iinncclluuddiinngg FFAA vvaarriiaabbllee ccoommppeennssaattiioonn
Expenses recognized in 2019
Expenses deferred to 2020 and later1
Related to the
2019
performance
year
1,894
Related to prior
performance
years
(26)
299
122
113
39
25
22,,119933
115599
22,,335522
3,233
3,064
57
112
32
33,,226655
55,,661177
588
300
262
0
26
556622
8888
665500
268
0
48
219
510
777788
11,,442288
Related to the
2019
performance
year
0
Related to prior
performance
years
0
429
205
173
25
26
442299
111177
554455
197
0
54
144
350
554488
11,,009933
608
219
365
0
23
660088
223322
884400
710
0
130
580
1,617
22,,332277
33,,116666
Total
1,868
887
422
375
39
51
22,,775555
224466
33,,000011
3,501
3,064
106
331
542
44,,004433
77,,00445544
Total
0
1,036
424
538
25
49
11,,003366
334499
11,,338855
907
0
183
724
1,967
22,,887744
44,,225599
11 Estimate as of 31 December 2019. Actual amounts expensed may vary, e.g., due to forfeiture of awards. 22 Comprised of replacement payments, forfeiture credits, severance payments, retention plan payments
and interest expense related to the Deferred Contingent Capital Plan. 33 Reflects expenses related to compensation commitments with financial advisors entered into at the time of recruitment that are subject to
vesting requirements. Amounts reflected as deferred expenses represent the maximum deferred exposure as of the balance sheet date. 44 Includes USD 610 million in expenses related to share-based compensation
(performance awards: USD 461 million; other variable compensation: USD 43 million; financial advisor compensation: USD 106 million). A further USD 61 million in expenses related to share-based compensation
was recognized within other expense categories included in Note 6 (salaries: USD 10 million related to role-based allowances; social security: USD 25 million; other personnel expenses: USD 27 million related to the
Equity Plus Plan). Total personnel expense related to share-based equity-settled compensation excluding social security was USD 619 million.
Variable compensation including financial advisor variable compensation (continued)
Expenses recognized in 2018
Expenses deferred to 2019 and later1
USD million
Non-deferred cash
Deferred compensation awards
of which: Equity Ownership Plan
of which: Deferred Contingent Capital Plan
of which: Asset Management EOP
of which: other performance awards
VVaarriiaabbllee ccoommppeennssaattiioonn –– ppeerrffoorrmmaannccee aawwaarrddss
VVaarriiaabbllee ccoommppeennssaattiioonn –– ootthheerr22
TToottaall vvaarriiaabbllee ccoommppeennssaattiioonn eexxcclluuddiinngg ffiinnaanncciiaall aaddvviissoorr vvaarriiaabbllee ccoommppeennssaattiioonn
Financial advisor variable compensation
of which: non-deferred cash
of which: deferred share-based awards
of which: deferred cash-based awards
Compensation commitments with recruited financial advisors3
TToottaall FFAA vvaarriiaabbllee ccoommppeennssaattiioonn
TToottaall vvaarriiaabbllee ccoommppeennssaattiioonn iinncclluuddiinngg FFAA vvaarriiaabbllee ccoommppeennssaattiioonn
Related to the
2018
performance
year
2,089
Related to prior
performance
years
(32)
373
217
131
25
0
22,,446611
116622
22,,662244
3,233
3,089
51
93
33
33,,226666
55,,888899
565
309
226
28
2
553344
8800
661144
237
0
44
193
551
778899
11,,440033
Related to the
2018
performance
year
0
Related to prior
performance
years
0
585
325
238
22
0
558855
118800
776666
128
0
52
76
357
448844
11,,225500
653
244
382
26
1
665533
226699
992222
639
0
131
507
1,883
22,,552222
33,,444444
Total
2,057
938
526
357
53
2
22,,999955
224433
33,,223388
3,470
3,089
95
286
584
44,,005544
77,,22992244
Total
0
1,238
570
620
48
1
11,,223388
445500
11,,668888
767
0
183
584
2,240
33,,000066
44,,669944
11 Estimate as of 31 December 2018. Actual amounts expensed may vary, e.g., due to forfeiture of awards. 22 Comprised of replacement payments, forfeiture credits, severance payments, retention plan payments
and interest expense related to the Deferred Contingent Capital Plan. 33 Reflects expenses related to compensation commitments with financial advisors entered into at the time of recruitment that are subject to
vesting requirements. Amounts reflected as deferred expenses represent the maximum deferred exposure as of the balance sheet date. 44 Includes USD 634 million in expenses related to share-based compensation
(performance awards: USD 526 million; other variable compensation: USD 12 million; financial advisor compensation: USD 95 million). A further USD 49 million in expenses related to share-based compensation was
recognized within other expense categories included in Note 6 (salaries: USD 15 million related to role-based allowances; social security: USD 8 million; other personnel expenses: USD 26 million related to the
Equity Plus Plan). Total personnel expense related to share-based equity-settled compensation excluding social security was USD 676 million.
388
388
Note 27 Employee benefits: variable compensation (continued)
Note 27 Employee benefits: variable compensation (continued)
Variable compensation including financial advisor variable compensation (continued)
c) Outstanding share-based compensation awards
Share and performance share awards
Movements in outstanding share-based awards during 2020 and 2019 are provided in the table below.
Movements in outstanding share-based compensation awards
Outstanding, at the beginning of the year
Awarded during the year
Distributed during the year
Forfeited during the year
Outstanding, at the end of the year
of which: shares vested for accounting purposes
NNuummbbeerr ooff sshhaarreess
22002200
115566,,006644,,776633
7722,,225500,,115577
((4466,,889999,,336622))
((66,,551155,,116644))
117744,,990000,,339955
111188,,226600,,552277
WWeeiigghhtteedd aavveerraaggee
ggrraanntt ddaattee ffaaiirr vvaalluuee
((UUSSDD))
1144
Number of shares
2019
146,845,027
Weighted average
grant date fair value
(USD)
16
1111
1155
1133
1122
77,641,909
(61,152,200)
(7,269,974)
156,064,763
79,486,447
11
13
14
14
The total carrying amount of the liability related to cash-settled share-based awards as of 31 December 2020 and 31 December
2019 was USD 36 million and USD 34 million, respectively.
TToottaall vvaarriiaabbllee ccoommppeennssaattiioonn iinncclluuddiinngg FFAA vvaarriiaabbllee ccoommppeennssaattiioonn
11,,442288
11,,009933
d) Valuation
11 Estimate as of 31 December 2019. Actual amounts expensed may vary, e.g., due to forfeiture of awards. 22 Comprised of replacement payments, forfeiture credits, severance payments, retention plan payments
and interest expense related to the Deferred Contingent Capital Plan. 33 Reflects expenses related to compensation commitments with financial advisors entered into at the time of recruitment that are subject to
vesting requirements. Amounts reflected as deferred expenses represent the maximum deferred exposure as of the balance sheet date. 44 Includes USD 610 million in expenses related to share-based compensation
(performance awards: USD 461 million; other variable compensation: USD 43 million; financial advisor compensation: USD 106 million). A further USD 61 million in expenses related to share-based compensation
was recognized within other expense categories included in Note 6 (salaries: USD 10 million related to role-based allowances; social security: USD 25 million; other personnel expenses: USD 27 million related to the
Equity Plus Plan). Total personnel expense related to share-based equity-settled compensation excluding social security was USD 619 million.
Variable compensation including financial advisor variable compensation (continued)
Expenses recognized in 2018
Expenses deferred to 2019 and later1
Related to the
2018
Related to prior
performance
performance
Related to the
2018
Related to prior
performance
performance
UBS share awards
UBS measures compensation expense based on the average
market price of the UBS share on the grant date as quoted on
the SIX Swiss Exchange, taking into consideration post-vesting
sale and hedge restrictions, non-vesting conditions and market
conditions, where applicable. The fair value of the share awards
subject to post-vesting sale and hedge restrictions is discounted
on the basis of the duration of the post-vesting restriction and is
referenced to the cost of purchasing an at-the-money European
put option for the term of the transfer restriction. The weighted
average discount for share and performance share awards
granted during 2020 was approximately 23.8% (2019: 22.6%)
of the market price of the UBS share. The grant date fair value
of notional shares without dividend entitlements also includes a
deduction for the present value of future expected dividends to
be paid between the grant date and distribution.
Consolidated financial statements
USD million
Non-deferred cash
Deferred compensation awards
of which: Equity Ownership Plan
of which: Deferred Contingent Capital Plan
of which: Long-Term Incentive Plan
of which: Asset Management EOP
VVaarriiaabbllee ccoommppeennssaattiioonn –– ppeerrffoorrmmaannccee aawwaarrddss
VVaarriiaabbllee ccoommppeennssaattiioonn –– ootthheerr22
Financial advisor variable compensation
of which: non-deferred cash
of which: deferred share-based awards
of which: deferred cash-based awards
Compensation commitments with recruited financial advisors3
TToottaall FFAA vvaarriiaabbllee ccoommppeennssaattiioonn
TToottaall vvaarriiaabbllee ccoommppeennssaattiioonn eexxcclluuddiinngg ffiinnaanncciiaall aaddvviissoorr vvaarriiaabbllee ccoommppeennssaattiioonn
USD million
Non-deferred cash
Deferred compensation awards
of which: Equity Ownership Plan
of which: Deferred Contingent Capital Plan
of which: Asset Management EOP
of which: other performance awards
VVaarriiaabbllee ccoommppeennssaattiioonn –– ppeerrffoorrmmaannccee aawwaarrddss
VVaarriiaabbllee ccoommppeennssaattiioonn –– ootthheerr22
Financial advisor variable compensation
of which: non-deferred cash
of which: deferred share-based awards
of which: deferred cash-based awards
Compensation commitments with recruited financial advisors3
TToottaall FFAA vvaarriiaabbllee ccoommppeennssaattiioonn
TToottaall vvaarriiaabbllee ccoommppeennssaattiioonn eexxcclluuddiinngg ffiinnaanncciiaall aaddvviissoorr vvaarriiaabbllee ccoommppeennssaattiioonn
Expenses recognized in 2019
Expenses deferred to 2020 and later1
Related to the
2019
Related to prior
performance
performance
Related to the
2019
Related to prior
performance
performance
year
1,894
299
122
113
39
25
22,,119933
115599
22,,335522
3,233
3,064
57
112
32
33,,226655
55,,661177
year
2,089
373
217
131
25
0
22,,446611
116622
22,,662244
3,233
3,089
51
93
33
33,,226666
55,,888899
years
(26)
588
300
262
0
26
556622
8888
665500
268
0
48
219
510
777788
years
(32)
565
309
226
28
2
553344
8800
661144
237
0
44
193
551
778899
Total
1,868
887
422
375
39
51
22,,775555
224466
33,,000011
3,501
3,064
106
331
542
44,,004433
77,,00445544
Total
2,057
938
526
357
53
2
22,,999955
224433
33,,223388
3,470
3,089
95
286
584
44,,005544
77,,22992244
year
0
429
205
173
25
26
442299
111177
554455
197
0
54
144
350
554488
year
0
585
325
238
22
0
558855
118800
776666
128
0
52
76
357
448844
years
0
608
219
365
0
23
660088
223322
884400
710
0
130
580
1,617
22,,332277
33,,116666
years
0
653
244
382
26
1
665533
226699
992222
639
0
131
507
1,883
22,,552222
33,,444444
Total
0
1,036
424
538
25
49
11,,003366
334499
11,,338855
907
0
183
724
1,967
22,,887744
44,,225599
Total
0
1,238
570
620
48
1
11,,223388
445500
11,,668888
767
0
183
584
2,240
33,,000066
44,,669944
TToottaall vvaarriiaabbllee ccoommppeennssaattiioonn iinncclluuddiinngg FFAA vvaarriiaabbllee ccoommppeennssaattiioonn
11,,440033
11,,225500
11 Estimate as of 31 December 2018. Actual amounts expensed may vary, e.g., due to forfeiture of awards. 22 Comprised of replacement payments, forfeiture credits, severance payments, retention plan payments
and interest expense related to the Deferred Contingent Capital Plan. 33 Reflects expenses related to compensation commitments with financial advisors entered into at the time of recruitment that are subject to
vesting requirements. Amounts reflected as deferred expenses represent the maximum deferred exposure as of the balance sheet date. 44 Includes USD 634 million in expenses related to share-based compensation
(performance awards: USD 526 million; other variable compensation: USD 12 million; financial advisor compensation: USD 95 million). A further USD 49 million in expenses related to share-based compensation was
recognized within other expense categories included in Note 6 (salaries: USD 15 million related to role-based allowances; social security: USD 8 million; other personnel expenses: USD 26 million related to the
Equity Plus Plan). Total personnel expense related to share-based equity-settled compensation excluding social security was USD 676 million.
388
389
389
Financial statements
Consolidated financial statements
Note 28 Interests in subsidiaries and other entities
a) Interests in subsidiaries
UBS defines its significant subsidiaries as those entities that,
either individually or in aggregate, contribute significantly to the
Group’s financial position or results of operations, based on a
number of criteria, including the subsidiaries’ equity and their
contribution to the Group’s total assets and profit or loss before
tax, in accordance with the requirements set by IFRS 12, Swiss
regulations and the rules of the US Securities and Exchange
Commission (SEC).
Individually significant subsidiaries
The two tables below list the Group’s individually significant
subsidiaries as of 31 December 2020. Unless otherwise stated,
the subsidiaries listed below have share capital consisting solely
of ordinary shares that are held entirely by the Group, and the
proportion of ownership interest held is equal to the voting
rights held by the Group.
The country where the respective registered office is located
is also the principal place of business. UBS AG operates through
a global network of branches and a significant proportion of its
business activity is conducted outside Switzerland, including in
the UK, the US, Singapore, Hong Kong and other countries. UBS
Europe SE has branches and offices in a number of EU Member
States, including Germany, Italy, Luxembourg, Spain and Austria.
Share capital is provided in the currency of the legally registered
office.
Individually significant subsidiaries of UBS Group AG as of 31 December 2020
Company
UBS AG
Registered office
Zurich and Basel, Switzerland
UBS Business Solutions AG1
11 UBS Business Solutions AG holds subsidiaries in Poland, China and India.
Zurich, Switzerland
Share capital in million
Equity interest accumulated in %
CHF
CHF
385.8
1.0
100.0
100.0
Individually significant subsidiaries of UBS AG as of 31 December 20201
Company
Registered office
UBS Americas Holding LLC
Wilmington, Delaware, USA
UBS Americas Inc.
Wilmington, Delaware, USA
Primary business
Group Functions
Group Functions
UBS Asset Management AG
Zurich, Switzerland
Asset Management
UBS Bank USA
UBS Europe SE
Salt Lake City, Utah, USA
Global Wealth Management
Frankfurt, Germany
Global Wealth Management
UBS Financial Services Inc.
Wilmington, Delaware, USA
Global Wealth Management
UBS Securities LLC
UBS Switzerland AG
Wilmington, Delaware, USA
Investment Bank
Zurich, Switzerland
Personal & Corporate Banking
Share capital in million
3,150.02
USD
USD
CHF
USD
EUR
USD
USD
CHF
0.0
43.2
0.0
446.0
0.0
1,283.13
10.0
Equity interest accumulated in %
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
11 Includes direct and indirect subsidiaries of UBS AG. 22 Consists of common share capital of USD 1,000 and non-voting preferred share capital of USD 3,150,000,000. 33 Consists of common share capital of
USD 100,000 and non-voting preferred share capital of USD 1,283,000,000.
390
390
Consolidated financial statements
a) Interests in subsidiaries
UBS defines its significant subsidiaries as those entities that,
Individually significant subsidiaries
either individually or in aggregate, contribute significantly to the
The two tables below list the Group’s individually significant
Group’s financial position or results of operations, based on a
subsidiaries as of 31 December 2020. Unless otherwise stated,
number of criteria, including the subsidiaries’ equity and their
the subsidiaries listed below have share capital consisting solely
contribution to the Group’s total assets and profit or loss before
of ordinary shares that are held entirely by the Group, and the
tax, in accordance with the requirements set by IFRS 12, Swiss
proportion of ownership interest held is equal to the voting
regulations and the rules of the US Securities and Exchange
rights held by the Group.
Commission (SEC).
The country where the respective registered office is located
is also the principal place of business. UBS AG operates through
a global network of branches and a significant proportion of its
business activity is conducted outside Switzerland, including in
the UK, the US, Singapore, Hong Kong and other countries. UBS
Europe SE has branches and offices in a number of EU Member
States, including Germany, Italy, Luxembourg, Spain and Austria.
Share capital is provided in the currency of the legally registered
office.
Individually significant subsidiaries of UBS Group AG as of 31 December 2020
Company
UBS AG
Registered office
Zurich and Basel, Switzerland
UBS Business Solutions AG1
Zurich, Switzerland
11 UBS Business Solutions AG holds subsidiaries in Poland, China and India.
Individually significant subsidiaries of UBS AG as of 31 December 20201
Company
Registered office
UBS Americas Holding LLC
Wilmington, Delaware, USA
UBS Americas Inc.
Wilmington, Delaware, USA
Primary business
Group Functions
Group Functions
UBS Asset Management AG
Zurich, Switzerland
Asset Management
UBS Bank USA
UBS Europe SE
Salt Lake City, Utah, USA
Global Wealth Management
Frankfurt, Germany
Global Wealth Management
UBS Financial Services Inc.
Wilmington, Delaware, USA
Global Wealth Management
UBS Securities LLC
UBS Switzerland AG
Wilmington, Delaware, USA
Investment Bank
Zurich, Switzerland
Personal & Corporate Banking
USD
USD
CHF
USD
EUR
USD
USD
CHF
3,150.02
0.0
43.2
0.0
446.0
0.0
1,283.13
10.0
Share capital in million
Equity interest accumulated in %
CHF
CHF
385.8
1.0
Share capital in million
Equity interest accumulated in %
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
11 Includes direct and indirect subsidiaries of UBS AG. 22 Consists of common share capital of USD 1,000 and non-voting preferred share capital of USD 3,150,000,000. 33 Consists of common share capital of
USD 100,000 and non-voting preferred share capital of USD 1,283,000,000.
Note 28 Interests in subsidiaries and other entities
Note 28 Interests in subsidiaries and other entities (continued)
Other subsidiaries
The table below lists other direct and indirect subsidiaries of UBS AG that are not individually significant but that contribute to the
Group’s total assets and aggregated profit before tax thresholds and are thereby disclosed in accordance with the requirements set
by the SEC.
Other subsidiaries of UBS AG as of 31 December 2020
Company
UBS Asset Management (Americas) Inc.
Registered office
Wilmington, Delaware, USA
UBS Asset Management (Hong Kong) Limited
Hong Kong, Hong Kong
UBS Asset Management Life Ltd
London, United Kingdom
UBS Asset Management Switzerland AG
Zurich, Switzerland
Primary business
Asset Management
Asset Management
Asset Management
Asset Management
Asset Management
UBS Asset Management (UK) Ltd
UBS Business Solutions US LLC
UBS Credit Corp.
UBS (France) S.A.
London, United Kingdom
Wilmington, Delaware, USA
Group Functions
Wilmington, Delaware, USA
Global Wealth Management
Paris, France
Global Wealth Management
UBS Fund Management (Luxembourg) S.A.
Luxembourg, Luxembourg
UBS Fund Management (Switzerland) AG
Basel, Switzerland
Asset Management
Asset Management
UBS (Monaco) S.A.
UBS Realty Investors LLC
UBS Securities Australia Ltd
UBS Securities Hong Kong Limited
UBS Securities Japan Co., Ltd.
UBS Securities Pte. Ltd.
Monte Carlo, Monaco
Global Wealth Management
Boston, Massachusetts, USA
Asset Management
Sydney, Australia
Hong Kong, Hong Kong
Tokyo, Japan
Singapore, Singapore
Investment Bank
Investment Bank
Investment Bank
Investment Bank
11 Includes a nominal amount relating to redeemable preference shares.
Share capital in million
0.0
USD
Equity interest
accumulated in %
100.0
HKD
GBP
CHF
GBP
USD
USD
EUR
EUR
CHF
EUR
USD
AUD
HKD
JPY
SGD
254.0
15.0
0.5
125.0
0.0
0.0
133.0
13.0
1.0
49.2
9.0
0.31
3,154.2
32,100.0
420.4
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
Consolidated structured entities
UBS consolidates a structured entity (an SE) if it has power over
the relevant activities of the entity, exposure to variable returns
its returns.
and the ability to use
Consolidated SEs include certain investment funds, securitization
vehicles and client investment vehicles. UBS has no individually
significant subsidiaries that are SEs.
its power to affect
In 2020 and 2019, the Group did not enter into any
contractual obligation that could require the Group to provide
financial support to consolidated SEs. In addition, the Group did
not provide support, financial or otherwise, to a consolidated SE
when the Group was not contractually obligated to do so, nor
does the Group have any intention to do so in the future.
Furthermore, the Group did not provide support, financial or
otherwise, to a previously unconsolidated SE that resulted in the
Group controlling the SE during the reporting period.
390
391
391
Financial statements Consolidated financial statements
Note 28 Interests in subsidiaries and other entities (continued)
b) Interests in associates and joint ventures
As of 31 December 2020 and 2019, no associate or joint
venture was individually material to the Group. In addition, there
were no significant restrictions on the ability of associates or
joint ventures to transfer funds to UBS Group AG or its
subsidiaries in the form of cash dividends or to repay loans or
advances made. There were no quoted market prices for any
associates or joint ventures of the Group.
In the third quarter of 2020, UBS completed the sale of a
to Clearstream and
in Fondcenter AG
51.2%
stake
IFRS 10,
deconsolidated
the entity
Consolidated Financial Statements. The
retained minority
shareholding of 48.8% is accounted for as an investment in an
associate with a carrying amount of USD 399 million as of
31 December 2020.
in accordance with
› Refer to Note 29 for more information
Investments in associates and joint ventures
USD million
Carrying amount at the beginning of the year
Additions1
Disposals
Share of comprehensive income
of which: share of net profit 2
of which: share of other comprehensive income 3
Share of changes in retained earnings
Dividends received
Impairment
Foreign currency translation
CCaarrrryyiinngg aammoouunntt aatt tthhee eenndd ooff tthhee yyeeaarr
of which: associates
of which: SIX Group AG, Zurich 4
of which: Clearstream Fund Centre AG, Zurich 1
of which: other associates
of which: joint ventures
22002200
11,,005511
338888
00
8833
8844
((11))
((4400))
((3333))
00
110088
11,,555577
11,,551133
996655
339999
115500
4444
2019
1,099
0
0
25
46
(21)
0
(83)
(1)
11
1,051
1,010
887
123
41
11 On 30 September 2020, UBS completed the sale of a 51.2% stake in Fondcenter AG to Clearstream and deconsolidated the entity in accordance with IFRS 10, Consolidated Financial Statements. The retained
minority shareholding of 48.8% is accounted for as an associate and increased the investments in associates by USD 385 million upon completion of the transaction. Refer to Note 29 for more information. 22 For
2020, consists of USD 64 million from associates and USD 19 million from joint ventures. For 2019, consists of USD 28 million from associates and USD 18 million from joint ventures. 33 For 2020, consists of
negative USD 1 million from associates. For 2019, consists of negative USD 22 million from associates and USD 1 million from joint ventures. 44 In 2020, UBS AG’s equity interest amounts to 17.31%. UBS AG is
represented on the Board of Directors.
392
392
Consolidated financial statements
Investments in associates and joint ventures
Carrying amount at the beginning of the year
USD million
Additions1
Disposals
Share of comprehensive income
of which: share of net profit 2
of which: share of other comprehensive income 3
Share of changes in retained earnings
Dividends received
Impairment
Foreign currency translation
CCaarrrryyiinngg aammoouunntt aatt tthhee eenndd ooff tthhee yyeeaarr
of which: associates
of which: SIX Group AG, Zurich 4
of which: Clearstream Fund Centre AG, Zurich 1
of which: other associates
of which: joint ventures
Note 28 Interests in subsidiaries and other entities (continued)
Note 28 Interests in subsidiaries and other entities (continued)
b) Interests in associates and joint ventures
c) Interests in unconsolidated structured entities
As of 31 December 2020 and 2019, no associate or joint
In the third quarter of 2020, UBS completed the sale of a
venture was individually material to the Group. In addition, there
51.2%
stake
in Fondcenter AG
to Clearstream and
were no significant restrictions on the ability of associates or
deconsolidated
the entity
in accordance with
IFRS 10,
joint ventures to transfer funds to UBS Group AG or its
Consolidated Financial Statements. The
retained minority
subsidiaries in the form of cash dividends or to repay loans or
shareholding of 48.8% is accounted for as an investment in an
advances made. There were no quoted market prices for any
associate with a carrying amount of USD 399 million as of
associates or joint ventures of the Group.
31 December 2020.
› Refer to Note 29 for more information
UBS is considered to sponsor another entity if, in addition to
ongoing involvement with the entity, it had a key role in
establishing that entity or
in bringing together relevant
counterparties for the transaction facilitated by the entity.
During 2020, the Group sponsored the creation of various SEs
and interacted with a number of non-sponsored SEs, including
securitization vehicles, client vehicles and certain investment
funds, that UBS did not consolidate as of 31 December 2020
because it did not control these entities.
The table below presents the Group’s interests in and
maximum exposure to loss from unconsolidated SEs as well as
the total assets held by the SEs in which UBS had an interest as
of year-end, except for investment funds sponsored by third
parties, for which the carrying amount of UBS’s interest as of
year-end has been disclosed.
22002200
11,,005511
338888
00
8833
8844
((11))
((4400))
((3333))
00
110088
11,,555577
11,,551133
996655
339999
115500
4444
2019
1,099
0
0
25
46
(21)
0
(83)
(1)
11
1,051
1,010
887
123
41
Interests in unconsolidated structured entities
USD million, except where indicated
Financial assets at fair value held for trading
Derivative financial instruments
Loans and advances to customers
Financial assets at fair value not held for trading
Financial assets measured at fair value through other comprehensive income
Other financial assets measured at amortized cost
TToottaall aasssseettss
Derivative financial instruments
TToottaall lliiaabbiilliittiieess
AAsssseettss hheelldd bbyy tthhee uunnccoonnssoolliiddaatteedd ssttrruuccttuurreedd eennttiittiieess iinn wwhhiicchh UUBBSS hhaadd aann iinntteerreesstt
((UUSSDD bbiilllliioonn))
USD million, except where indicated
Financial assets at fair value held for trading
Derivative financial instruments
Loans and advances to customers
Financial assets at fair value not held for trading
Financial assets measured at fair value through other comprehensive income
Other financial assets measured at amortized cost
TToottaall aasssseettss
Derivative financial instruments
SSeeccuurriittiizzaattiioonn
vveehhiicclleess
337755
66
3355
44116633
3344
33
339955
Securitization
vehicles
462
9
81
335
8883
24
CClliieenntt
vveehhiicclleess
113311
4499
1122
66,,662244
0022
66,,880055
1111
1111
3311..1122..2200
IInnvveessttmmeenntt
ffuunnddss
77,,559955
115588
117799
117722
88,,110044
337766
337766
11336666
44884477
Client
vehicles
130
9
82
3,955
162
4,118
225
31.12.19
Investment
funds
5,874
36
174
157
6,242
324
TToottaall
88,,110011
221133
117799
220088
66,,662244
00
1155,,332266
339900
339900
Total
6,466
55
174
245
3,955
351
11,247
552
MMaaxxiimmuumm
eexxppoossuurree ttoo lloossss11
88,,110011
221111
117799
220088
66,,662244
225500
00
Maximum
exposure to loss1
6,466
53
174
997
3,955
1,372
1
11 On 30 September 2020, UBS completed the sale of a 51.2% stake in Fondcenter AG to Clearstream and deconsolidated the entity in accordance with IFRS 10, Consolidated Financial Statements. The retained
minority shareholding of 48.8% is accounted for as an associate and increased the investments in associates by USD 385 million upon completion of the transaction. Refer to Note 29 for more information. 22 For
2020, consists of USD 64 million from associates and USD 19 million from joint ventures. For 2019, consists of USD 28 million from associates and USD 18 million from joint ventures. 33 For 2020, consists of
negative USD 1 million from associates. For 2019, consists of negative USD 22 million from associates and USD 1 million from joint ventures. 44 In 2020, UBS AG’s equity interest amounts to 17.31%. UBS AG is
represented on the Board of Directors.
TToottaall lliiaabbiilliittiieess
AAsssseettss hheelldd bbyy tthhee uunnccoonnssoolliiddaatteedd ssttrruuccttuurreedd eennttiittiieess iinn wwhhiicchh UUBBSS hhaadd aann iinntteerreesstt
((UUSSDD bbiilllliioonn))
11 For the purpose of this disclosure, maximum exposure to loss amounts do not consider the risk-reducing effects of collateral or other credit enhancements. 22 Represents the carrying amount of loan
commitments. The maximum exposure to loss for these instruments is equal to the notional amount. 33 As of 31 December 2020, USD 0.2 billion of the USD 0.4 billion (31 December 2019: USD 0.6 billion of the
USD 0.9 billion) was held in Group Functions – Non-core and Legacy Portfolio. 44 Comprised of credit default swap liabilities and other swap liabilities. The maximum exposure to loss for credit default swap
liabilities is equal to the sum of the negative carrying amount and the notional amount. For other swap liabilities, no maximum exposure to loss is reported. 55 Represents the principal amount outstanding.
66 Represents the market value of total assets. 77 Represents the net asset value of the investment funds sponsored by UBS and the carrying amount of UBS’s interests in the investment funds not sponsored by UBS.
4137
736
555
225
324
552
2
392
393
393
Financial statements Consolidated financial statements
Note 28 Interests in subsidiaries and other entities (continued)
synthetic securitizations transacted with entities that are not
SEs and transactions in which the Group did not have an
interest because it did not absorb any risk; (ii) a different
measurement basis in certain cases (e.g., IFRS carrying amount
within the previous table compared with net exposure amount
at default
(iii) different
classification of vehicles viewed as sponsored by the Group
versus sponsored by third parties.
for Pillar 3 disclosures); and
› Refer to the 31 December 2020 Pillar 3 report under “Pillar 3
disclosures” at ubs.com/investors for more information
Interests in client vehicles
Client vehicles are established predominantly for clients to invest
in specific assets or risk exposures. As of 31 December 2020 and
31 December 2019, the Group retained interests in client
vehicles sponsored by UBS and third parties that relate to
financing and derivative activities, and to hedge structured
product offerings.
investments are
securities guaranteed by US government agencies.
Included within these
Interests in investment funds
Investment funds have a collective investment objective, and are
managed by an investment manager. The Group holds interests
in a number of investment funds, primarily resulting from seed
investments or in order to hedge structured product offerings. In
addition to the interests disclosed in the table on the previous
page, the Group manages the assets of various pooled
investment funds and receives fees that are based, in whole or
part, on the net asset value of the fund and / or the
performance of the fund. The specific fee structure
is
determined on the basis of various market factors and considers
the nature of the fund and the jurisdiction of incorporation, as
well as fee schedules negotiated with clients. These fee contracts
represent an interest in the fund as they align the Group’s
exposure with investors, providing a variable return that is based
on the performance of the entity. Depending on the structure of
the fund, these fees may be collected directly from the fund
assets and / or from the investors. Any amounts due are
collected on a regular basis and are generally backed by the
assets of the fund. The Group did not have any material
exposure to loss from these interests as of 31 December 2020 or
as of 31 December 2019. The total net asset value of the funds
sponsored by UBS are included in the table on the previous
page.
The Group retains or purchases interests in unconsolidated
SEs in the form of direct investments, financing, guarantees,
letters of credit, derivatives and through management contracts.
The Group’s maximum exposure to loss is generally equal to
the carrying amount of the Group’s interest in the SE, with the
exception of guarantees, letters of credit and credit derivatives,
for which the contract’s notional amount, adjusted for losses
already incurred, represents the maximum loss that the Group is
exposed to. In addition, the current fair value of derivative swap
instruments with a positive replacement value only, such as total
return swaps, is presented as the maximum exposure to loss.
Risk exposure for these swap instruments could change over
time with market movements.
The maximum exposure to loss disclosed in the table on the
previous page does not reflect the Group’s risk management
activities, including effects from financial instruments that may
be used to economically hedge the risks inherent in the
unconsolidated SE or the risk-reducing effects of collateral or
other credit enhancements.
In 2020 and 2019, the Group did not provide support,
financial or otherwise, to an unconsolidated SE when not
contractually obligated to do so, nor does the Group have any
intention to do so in the future.
In 2020 and 2019, income and expenses from interests in
unconsolidated SEs primarily resulted from mark-to-market
movements recognized in Other net income from financial
instruments measured at fair value through profit of loss,
which have generally been hedged with other financial
instruments, as well as fee and commission income received
from UBS-sponsored funds.
interests, both
retained and acquired,
Interests in securitization vehicles
As of 31 December 2020 and 31 December 2019, the Group
held
in various
securitization vehicles, half of which are held within Group
Functions – Non-core and Legacy Portfolio. The Investment Bank
also retained interests in securitization vehicles related to
financing, underwriting, secondary market and derivative trading
activities.
The numbers outlined in the table on the previous page may
differ from the securitization positions presented in the
31 December 2020 Pillar 3 report under “Pillar 3 disclosures”
at ubs.com/investors, for the following reasons: (i) exclusion of
394
394
Consolidated financial statements
The Group retains or purchases interests in unconsolidated
synthetic securitizations transacted with entities that are not
SEs in the form of direct investments, financing, guarantees,
SEs and transactions in which the Group did not have an
letters of credit, derivatives and through management contracts.
interest because it did not absorb any risk; (ii) a different
The Group’s maximum exposure to loss is generally equal to
measurement basis in certain cases (e.g., IFRS carrying amount
the carrying amount of the Group’s interest in the SE, with the
within the previous table compared with net exposure amount
exception of guarantees, letters of credit and credit derivatives,
at default
for Pillar 3 disclosures); and
(iii) different
for which the contract’s notional amount, adjusted for losses
classification of vehicles viewed as sponsored by the Group
already incurred, represents the maximum loss that the Group is
versus sponsored by third parties.
exposed to. In addition, the current fair value of derivative swap
instruments with a positive replacement value only, such as total
return swaps, is presented as the maximum exposure to loss.
› Refer to the 31 December 2020 Pillar 3 report under “Pillar 3
disclosures” at ubs.com/investors for more information
Risk exposure for these swap instruments could change over
Interests in client vehicles
time with market movements.
Client vehicles are established predominantly for clients to invest
The maximum exposure to loss disclosed in the table on the
in specific assets or risk exposures. As of 31 December 2020 and
previous page does not reflect the Group’s risk management
31 December 2019, the Group retained interests in client
activities, including effects from financial instruments that may
vehicles sponsored by UBS and third parties that relate to
be used to economically hedge the risks inherent in the
financing and derivative activities, and to hedge structured
unconsolidated SE or the risk-reducing effects of collateral or
product offerings.
Included within these
investments are
other credit enhancements.
securities guaranteed by US government agencies.
In 2020 and 2019, the Group did not provide support,
financial or otherwise, to an unconsolidated SE when not
Interests in investment funds
contractually obligated to do so, nor does the Group have any
Investment funds have a collective investment objective, and are
intention to do so in the future.
managed by an investment manager. The Group holds interests
In 2020 and 2019, income and expenses from interests in
in a number of investment funds, primarily resulting from seed
unconsolidated SEs primarily resulted from mark-to-market
investments or in order to hedge structured product offerings. In
movements recognized in Other net income from financial
addition to the interests disclosed in the table on the previous
instruments measured at fair value through profit of loss,
page, the Group manages the assets of various pooled
which have generally been hedged with other financial
investment funds and receives fees that are based, in whole or
instruments, as well as fee and commission income received
part, on the net asset value of the fund and / or the
from UBS-sponsored funds.
Interests in securitization vehicles
performance of the fund. The specific fee structure
is
determined on the basis of various market factors and considers
the nature of the fund and the jurisdiction of incorporation, as
As of 31 December 2020 and 31 December 2019, the Group
well as fee schedules negotiated with clients. These fee contracts
held
interests, both
retained and acquired,
in various
represent an interest in the fund as they align the Group’s
securitization vehicles, half of which are held within Group
exposure with investors, providing a variable return that is based
Functions – Non-core and Legacy Portfolio. The Investment Bank
on the performance of the entity. Depending on the structure of
also retained interests in securitization vehicles related to
the fund, these fees may be collected directly from the fund
financing, underwriting, secondary market and derivative trading
assets and / or from the investors. Any amounts due are
activities.
collected on a regular basis and are generally backed by the
The numbers outlined in the table on the previous page may
assets of the fund. The Group did not have any material
differ from the securitization positions presented in the
exposure to loss from these interests as of 31 December 2020 or
31 December 2020 Pillar 3 report under “Pillar 3 disclosures”
as of 31 December 2019. The total net asset value of the funds
at ubs.com/investors, for the following reasons: (i) exclusion of
sponsored by UBS are included in the table on the previous
page.
Note 28 Interests in subsidiaries and other entities (continued)
Note 28 Interests in subsidiaries and other entities (continued)
Sponsored unconsolidated structured entities in which UBS did
not have an interest
For several sponsored SEs, no interest was held by the Group at
year-end. However, during the respective reporting period the
Group transferred assets, provided services and held instruments
that did not qualify as an interest in these sponsored SEs, and
accordingly earned income or incurred expenses from these
entities. The table below presents the income earned and
expenses incurred directly from these entities during the year, as
well as corresponding asset information. The table does not
incurred from risk
include
management activities, including income and expenses from
financial instruments used to economically hedge instruments
transacted with the unconsolidated SEs.
income earned and expenses
The majority of the fee income arose from investment funds
that are sponsored and administrated by the Group, but
managed by third parties. As the Group does not provide any
investment management services, UBS was not exposed to risk
from the performance of these entities and was therefore
deemed not to have an interest in them. In certain structures,
the fees receivable may be collected directly from the investors
and have therefore not been included in the table below.
The Group also recorded other net income from financial
instruments measured at fair value through profit or loss from
mark-to-market movements arising primarily from derivatives,
such as interest rate and currency swaps, as well as credit
derivatives, through which the Group purchases protection, and
financial liabilities designated at fair value, which do not qualify
as interests because the Group does not absorb variability from
the performance of the entity. Total income reported does not
reflect economic hedges or other mitigating effects from the
Group’s risk management activities.
During 2020, UBS and third parties did not transfer any assets
into sponsored securitization vehicles created in the year (2019:
USD 1 billion and USD 1 billion, respectively). UBS and third
parties transferred assets, alongside deposits and debt issuances,
of USD 0 billion and USD 9 billion, respectively, into sponsored
client vehicles created in the year (2019: USD 0 billion and
USD 1 billion, respectively). For sponsored investment funds,
transfers arose during the period as investors invested and
redeemed positions, thereby changing the overall size of the
funds, which, when combined with market movements, resulted
in a total closing net asset value of USD 37 billion (31 December
2019: USD 42 billion).
Sponsored unconsolidated structured entities in which UBS did not have an interest at year-end
USD million, except where indicated
Net interest income
Net fee and commission income
Other net income from financial instruments measured at fair value through profit or loss
TToottaall iinnccoommee
AAsssseett iinnffoorrmmaattiioonn ((UUSSDD bbiilllliioonn))
USD million, except where indicated
Net interest income
Net fee and commission income
Other net income from financial instruments measured at fair value through profit or loss
TToottaall iinnccoommee
AAsssseett iinnffoorrmmaattiioonn ((UUSSDD bbiilllliioonn))
As of or for the year ended
3311..1122..2200
CClliieenntt
vveehhiicclleess
1122
11
1177
3300
9922
IInnvveessttmmeenntt
ffuunnddss
22
5588
((1155))
4455
337733
As of or for the year ended
31.12.19
Client
vehicles
0
13
(18)
(5)
12
Investment
funds
(1)
50
9
58
423
SSeeccuurriittiizzaattiioonn
vveehhiicclleess
11
00
11
0011
Securitization
vehicles
(1)
19
19
21
TToottaall
1155
6600
22
7766
Total
(2)
63
11
72
11 Represents the amount of assets transferred to the respective securitization vehicles. 22 Represents the amount of assets transferred to the respective client vehicles. 33 Represents the total net asset value of the
respective investment funds.
394
395
395
Financial statements
Consolidated financial statements
Note 29 Changes in organization and acquisitions and disposals of subsidiaries and businesses
Disposals of subsidiaries and businesses
Strategic partnership with Sumitomo Mitsui Trust
Holdings
Sale of a majority stake in Fondcenter AG
In the third quarter of 2020, UBS completed the sale of a 51.2%
stake in Fondcenter AG to Clearstream, Deutsche Börse Group’s
post-trade services provider, and deconsolidated the entity in
accordance with IFRS 10, Consolidated Financial Statements. The
sale resulted in a post-tax gain of USD 631 million, which was
recognized in Other income. Fondcenter AG has been combined
with Clearstream’s Fund Desk business to form Clearstream
Fund Centre. UBS retains a 48.8% shareholding in the entity
and accounts for this minority interest as an investment in an
associate with a carrying amount of USD 399 million as of
31 December 2020.
Banking partnership with Banco do Brasil
In the third quarter of 2020, UBS completed the transaction with
Banco do Brasil, establishing a strategic investment banking
partnership in Brazil and selected countries in South America.
The partnership was established by UBS issuing a 49.99% stake
in UBS Brasil Serviços in exchange for exclusive access to Banco
do Brasil’s corporate clients. This resulted in UBS recognizing an
intangible asset of USD 147 million. UBS retains a controlling
interest of 50.01% in UBS Brasil Serviços and continues to
consolidate the entity. Upon completion, UBS Group’s equity
attributable to non-controlling interests increased by USD 115
million, with no material effect on UBS Group’s equity
attributable to shareholders.
In 2019, UBS entered into a strategic wealth management
partnership in Japan with Sumitomo Mitsui Trust Holdings, Inc.
(SuMi Trust Holdings). In January 2020, the first phase was
launched, with operations commencing in the newly established
joint venture, UBS SuMi TRUST Wealth Advisory, which is owned
equally by UBS Securities Japan and SuMi Trust Holdings and is
accounted for as an investment in a joint venture by UBS. UBS
and SuMi Trust Holdings have also started offering each other’s
products and services to their respective current clients.
The second phase of the partnership is expected to launch in
the second half of 2021 with the establishment of a new entity
which will be 51% owned and controlled by UBS, requiring UBS
to consolidate this entity. UBS does not expect a material effect
on shareholders’ equity of the Group upon closing.
Sale of wealth management business in Austria in 2021
In December 2020, UBS signed an agreement to sell its domestic
wealth management business in Austria to LGT. The agreement
includes the transition of employees, client relationships,
products and services of the wealth management business of
UBS Austria. The transaction is subject to customary closing
conditions and is expected to close in the third quarter of 2021.
UBS expects to record a pre-tax gain of approximately USD 0.1
billion upon closing of the transaction.
396
396
Consolidated financial statements
Note 29 Changes in organization and acquisitions and disposals of subsidiaries and businesses
Note 30 Finance lease receivables
Disposals of subsidiaries and businesses
Strategic partnership with Sumitomo Mitsui Trust
Sale of a majority stake in Fondcenter AG
Holdings
In the third quarter of 2020, UBS completed the sale of a 51.2%
In 2019, UBS entered into a strategic wealth management
stake in Fondcenter AG to Clearstream, Deutsche Börse Group’s
partnership in Japan with Sumitomo Mitsui Trust Holdings, Inc.
post-trade services provider, and deconsolidated the entity in
(SuMi Trust Holdings). In January 2020, the first phase was
accordance with IFRS 10, Consolidated Financial Statements. The
launched, with operations commencing in the newly established
sale resulted in a post-tax gain of USD 631 million, which was
joint venture, UBS SuMi TRUST Wealth Advisory, which is owned
recognized in Other income. Fondcenter AG has been combined
equally by UBS Securities Japan and SuMi Trust Holdings and is
with Clearstream’s Fund Desk business to form Clearstream
accounted for as an investment in a joint venture by UBS. UBS
Fund Centre. UBS retains a 48.8% shareholding in the entity
and SuMi Trust Holdings have also started offering each other’s
and accounts for this minority interest as an investment in an
products and services to their respective current clients.
associate with a carrying amount of USD 399 million as of
The second phase of the partnership is expected to launch in
31 December 2020.
Banking partnership with Banco do Brasil
the second half of 2021 with the establishment of a new entity
which will be 51% owned and controlled by UBS, requiring UBS
to consolidate this entity. UBS does not expect a material effect
on shareholders’ equity of the Group upon closing.
In the third quarter of 2020, UBS completed the transaction with
Banco do Brasil, establishing a strategic investment banking
Sale of wealth management business in Austria in 2021
partnership in Brazil and selected countries in South America.
The partnership was established by UBS issuing a 49.99% stake
In December 2020, UBS signed an agreement to sell its domestic
in UBS Brasil Serviços in exchange for exclusive access to Banco
wealth management business in Austria to LGT. The agreement
do Brasil’s corporate clients. This resulted in UBS recognizing an
includes the transition of employees, client relationships,
intangible asset of USD 147 million. UBS retains a controlling
products and services of the wealth management business of
interest of 50.01% in UBS Brasil Serviços and continues to
UBS Austria. The transaction is subject to customary closing
consolidate the entity. Upon completion, UBS Group’s equity
conditions and is expected to close in the third quarter of 2021.
attributable to non-controlling interests increased by USD 115
UBS expects to record a pre-tax gain of approximately USD 0.1
million, with no material effect on UBS Group’s equity
billion upon closing of the transaction.
attributable to shareholders.
UBS acts as a lessor and leases a variety of assets to third parties
under finance leases, such as industrial equipment and aircraft.
At the end of the respective lease term, assets may be sold to
third parties or further leased. Lessees may participate in any
sales proceeds achieved. Lease payments cover the cost of the
assets (net of their residual value), as well as financing costs. As
of 31 December 2020, unguaranteed residual values of USD 185
million (31 December 2019: USD 246 million) had been accrued.
The ECL stage 3 allowance for uncollectible minimum lease
payments receivable was USD 7 million (31 December 2019:
USD 6 million). No contingent rents were received in 2020.
Amounts in the table below are disclosed on a gross basis. The
finance lease receivables in Note 14a of USD 1,447 million are
presented net of expected credit loss allowances.
Lease receivables
USD million
2021
2022–2025
Thereafter
TToottaall
USD million
2020
2021–2024
Thereafter
TToottaall
TToottaall mmiinniimmuumm lleeaassee
ppaayymmeennttss
450
856
215
11,,552211
3311..1122..2200
UUnneeaarrnneedd ffiinnaannccee
iinnccoommee
25
31
4
6600
Total minimum lease
payments
31.12.19
Unearned finance
income
448
874
221
11,,554444
31
52
6
8899
PPrreesseenntt vvaalluuee
426
825
210
11,,446611
Present value
417
822
215
11,,445555
396
397
397
Financial statements
Consolidated financial statements
Note 31 Related parties
UBS defines related parties as associates (entities that are
significantly influenced by UBS), joint ventures (entities in which
UBS shares control with another party), post-employment
benefit plans for UBS employees, key management personnel,
close family members of key management personnel and entities
that are, directly or indirectly, controlled or jointly controlled by
key management personnel or their close family members. Key
management personnel is defined as members of the Board of
Directors (BoD) and Group Executive Board (GEB).
a) Remuneration of key management personnel
The Chairman of the BoD has a specific management employment contract and receives pension benefits upon retirement. Total
remuneration of the Chairman of the BoD and all GEB members is included in the table below.
Remuneration of key management personnel
USD million, except where indicated
Base salaries and other cash payments1
Incentive awards – cash2
Annual incentive award under DCCP
Employer’s contributions to retirement benefit plans
Benefits in kind, fringe benefits (at market value)
Equity-based compensation3
TToottaall
3311..1122..2200
31.12.19
31.12.18
3333
1188
2277
33
11
4477
112299
32
14
21
3
1
37
108
27
15
22
3
2
40
109
TToottaall ((CCHHFF mmiilllliioonn))44
11 May include role-based allowances in line with market practice and regulatory requirements. 22 The cash portion may also include blocked shares in line with regulatory requirements. 33 Compensation expense
is based on the share price on grant date taking into account performance conditions. Refer to Note 27 for more information. For GEB members, equity-based compensation for 2020 and 2019 was entirely
composed of LTIP awards and equity-based compensation for 2018 was entirely composed of EOP awards. For the Chairman of the BoD the equity-based compensation for 2020, 2019 and 2018 was entirely
composed of UBS shares. 44 Swiss franc amounts disclosed represent the respective US dollar amounts translated at the applicable performance award currency exchange rates (2020: USD / CHF 0.94; 2019: USD /
CHF 0.99; 2018: USD / CHF 0.98).
107
107
112211
The independent members of the BoD do not have employment
or service contracts with UBS, and thus are not entitled to
benefits upon termination of their service on the BoD. Payments
to these individuals for their services as external board members
amounted to USD 7.0 million (CHF 6.6 million) in 2020, USD 7.3
million (CHF 7.3 million) in 2019 and USD 7.6 million (CHF 7.4
million) in 2018.
b) Equity holdings of key management personnel
Equity holdings of key management personnel1
3311..1122..2200
31.12.19
Number of shares held by members of the BoD, GEB and parties closely linked to them2
11 No options were held in 2020 and 2019 by non-independent menbers of the BoD and any GEB member or any of its related parties. 22 Excludes shares granted under variable compensation plans with forfeiture
provisions.
6,887,826
55,,228888,,331177
Of the share totals above, no shares were held by close family
members of key management personnel on 31 December 2020
and 31 December 2019. No shares were held by entities that are
directly or indirectly controlled or jointly controlled by key
management personnel or their close family members on
31 December 2020 and 31 December 2019. As of 31 December
2020, no member of the BoD or GEB was the beneficial owner
of more than 1% of UBS Group AG’s shares.
398
398
BBaallaannccee aatt tthhee eenndd ooff tthhee yyeeaarr ((CCHHFF mmiilllliioonn))2, 3
11 All loans are secured loans. 22 There were no unused uncommitted credit facilities as of 31 December 2020 and 31 December 2019. 33 Swiss franc amounts disclosed represent the respective US dollar amounts
translated at the relevant year-end closing exchange rate.
Consolidated financial statements
Note 31 Related parties
Note 31 Related parties (continued)
UBS defines related parties as associates (entities that are
that are, directly or indirectly, controlled or jointly controlled by
c) Loans, advances and mortgages to key management personnel
significantly influenced by UBS), joint ventures (entities in which
key management personnel or their close family members. Key
UBS shares control with another party), post-employment
management personnel is defined as members of the Board of
benefit plans for UBS employees, key management personnel,
Directors (BoD) and Group Executive Board (GEB).
close family members of key management personnel and entities
a) Remuneration of key management personnel
The non-independent members of the BoD and GEB members
are granted loans, fixed advances and mortgages in the ordinary
course of business on substantially the same terms and
conditions that are available to other employees, including
interest rates and collateral, and neither involve more than the
normal risk of collectability nor contain any other unfavorable
features for the firm. Independent BoD members are granted
loans and mortgages in the ordinary course of business at
general market conditions.
Movements in the loan, advances and mortgage balances are
as follows.
The Chairman of the BoD has a specific management employment contract and receives pension benefits upon retirement. Total
remuneration of the Chairman of the BoD and all GEB members is included in the table below.
Loans, advances and mortgages to key management personnel1
USD million, except where indicated
Balance at the beginning of the year
Additions
Reductions
BBaallaannccee aatt tthhee eenndd ooff tthhee yyeeaarr2
22002200
3333
1144
((88))
3388
2019
34
9
(11)
33
3311..1122..2200
31.12.19
31.12.18
3333
1188
2277
33
11
4477
112299
112211
32
14
21
3
1
37
108
107
27
15
22
3
2
40
109
107
Remuneration of key management personnel
USD million, except where indicated
Base salaries and other cash payments1
Incentive awards – cash2
Annual incentive award under DCCP
Employer’s contributions to retirement benefit plans
Benefits in kind, fringe benefits (at market value)
Equity-based compensation3
TToottaall
TToottaall ((CCHHFF mmiilllliioonn))44
CHF 0.99; 2018: USD / CHF 0.98).
11 May include role-based allowances in line with market practice and regulatory requirements. 22 The cash portion may also include blocked shares in line with regulatory requirements. 33 Compensation expense
is based on the share price on grant date taking into account performance conditions. Refer to Note 27 for more information. For GEB members, equity-based compensation for 2020 and 2019 was entirely
composed of LTIP awards and equity-based compensation for 2018 was entirely composed of EOP awards. For the Chairman of the BoD the equity-based compensation for 2020, 2019 and 2018 was entirely
composed of UBS shares. 44 Swiss franc amounts disclosed represent the respective US dollar amounts translated at the applicable performance award currency exchange rates (2020: USD / CHF 0.94; 2019: USD /
The independent members of the BoD do not have employment
amounted to USD 7.0 million (CHF 6.6 million) in 2020, USD 7.3
or service contracts with UBS, and thus are not entitled to
million (CHF 7.3 million) in 2019 and USD 7.6 million (CHF 7.4
benefits upon termination of their service on the BoD. Payments
million) in 2018.
to these individuals for their services as external board members
b) Equity holdings of key management personnel
Equity holdings of key management personnel1
Number of shares held by members of the BoD, GEB and parties closely linked to them2
11 No options were held in 2020 and 2019 by non-independent menbers of the BoD and any GEB member or any of its related parties. 22 Excludes shares granted under variable compensation plans with forfeiture
provisions.
3311..1122..2200
31.12.19
55,,228888,,331177
6,887,826
directly or indirectly controlled or jointly controlled by key
of more than 1% of UBS Group AG’s shares.
d) Other related-party transactions with entities controlled by key management personnel
In 2020 and 2019, UBS did not enter into transactions with
entities that are directly or indirectly controlled or jointly
controlled by UBS’s key management personnel or their close
family members and as of 31 December 2020, 31 December
2019 and 31 December 2018, there were no outstanding
balances related to such transactions. Furthermore, in 2020 and
2019, entities controlled by key management personnel did not
sell any goods or provide any services to UBS, and therefore did
not receive any fees from UBS. UBS also did not provide services
to such entities in 2020 and 2019, and therefore also received
no fees.
e) Transactions with associates and joint ventures
Loans to and outstanding receivables from associates and joint ventures
USD million
Carrying amount at the beginning of the year
Additions
Reductions
Foreign currency translation
Carrying amount at the end of the year
of which: unsecured loans and receivables
Of the share totals above, no shares were held by close family
management personnel or their close family members on
Other transactions with associates and joint ventures
members of key management personnel on 31 December 2020
31 December 2020 and 31 December 2019. As of 31 December
and 31 December 2019. No shares were held by entities that are
2020, no member of the BoD or GEB was the beneficial owner
USD million
Payments to associates and joint ventures for goods and services received
Fees received for services provided to associates and joint ventures
Liabilities to associates and joint ventures
Commitments and contingent liabilities to associates and joint ventures
› Refer to Note 28 for an overview of investments in associates and joint ventures
22002200
998822
552277
((11,,000011))
112233
663300
662211
2019
829
145
(5)
13
982
971
As of or for the year ended
3311..1122..2200
31.12.19
113399
112288
9911
99
124
1
101
1,598
398
399
399
3344
32
Financial statements
Consolidated financial statements
Note 32 Invested assets and net new money
Invested assets
Net new money
Invested assets consist of all client assets managed by or
deposited with UBS for investment purposes. Invested assets
include managed fund assets, managed institutional assets,
discretionary and advisory wealth management portfolios,
fiduciary deposits, time deposits, savings accounts and wealth
management securities or brokerage accounts. All assets held
for purely transactional purposes and custody-only assets,
including corporate client assets held for cash management and
transactional purposes, are excluded from invested assets as the
Group only administers the assets and does not offer advice on
how the assets should be invested. Also excluded are non-
bankable assets (e.g., art collections) and deposits from third-
party banks for funding or trading purposes.
Discretionary assets are defined as client assets that UBS
decides how to invest. Other invested assets are those where the
client ultimately decides how the assets are invested. When a
single product is created in one business division and sold in
another, it is counted in both the business division that manages
the investment and the one that distributes it. This results in
double counting within UBS total invested assets, as both
business divisions are independently providing a service to their
respective clients, and both add value and generate revenue.
Net new money in a reporting period is the amount of invested
assets that are entrusted to UBS by new and existing clients, less
those withdrawn by existing clients and clients who terminated
their relationship with UBS.
Net new money is calculated using the direct method, under
which inflows and outflows to / from invested assets are
determined at the client level based on transactions. Interest and
dividend income from invested assets are not counted as net new
money inflows. Market and currency movements as well as fees,
commissions and interest on loans charged are excluded from net
new money, as are the effects resulting from any acquisition or
divestment of a UBS subsidiary or business. Reclassifications
between invested assets and custody-only assets as a result of a
change in the service level delivered are generally treated as net
new money flows. However, where the change in service level
directly results from an externally imposed regulation or from a
strategic decision by UBS to exit a market or specific service
offering, the one-time net effect is reported as Other effects.
The Investment Bank does not track invested assets and net
new money. However, when a client is transferred from the
Investment Bank to another business division, this may produce
net new money even though client assets were already
with UBS.
As of or for the year ended
3311..1122..2200
31.12.19
339977
11,,445599
22,,333311
44,,118877
331111
112277
22002200
33,,660077
112277
335599
9966
((11))
00
358
1,209
2,040
3,607
248
51
2019
3,101
51
444
6
5
(1)
44,,118877
3,607
Invested assets and net new money
USD billion
Fund assets managed by UBS
Discretionary assets
Other invested assets
TToottaall iinnvveesstteedd aasssseettss11
of which: double counts
NNeett nneeww mmoonneeyy11
11 Includes double counts.
Development of invested assets
USD billion
Total invested assets at the beginning of the year1
Net new money
Market movements2
Foreign currency translation
Other effects
of which: acquisitions / (divestments)
TToottaall iinnvveesstteedd aasssseettss aatt tthhee eenndd ooff tthhee yyeeaarr11
11 Includes double counts. 22 Includes interest and dividend income.
400
400
Consolidated financial statements
Note 32 Invested assets and net new money
Note 33 Currency translation rates
Invested assets
Net new money
Invested assets consist of all client assets managed by or
Net new money in a reporting period is the amount of invested
deposited with UBS for investment purposes. Invested assets
assets that are entrusted to UBS by new and existing clients, less
include managed fund assets, managed institutional assets,
those withdrawn by existing clients and clients who terminated
discretionary and advisory wealth management portfolios,
their relationship with UBS.
fiduciary deposits, time deposits, savings accounts and wealth
Net new money is calculated using the direct method, under
management securities or brokerage accounts. All assets held
which inflows and outflows to / from invested assets are
for purely transactional purposes and custody-only assets,
determined at the client level based on transactions. Interest and
including corporate client assets held for cash management and
dividend income from invested assets are not counted as net new
transactional purposes, are excluded from invested assets as the
money inflows. Market and currency movements as well as fees,
Group only administers the assets and does not offer advice on
commissions and interest on loans charged are excluded from net
how the assets should be invested. Also excluded are non-
new money, as are the effects resulting from any acquisition or
bankable assets (e.g., art collections) and deposits from third-
divestment of a UBS subsidiary or business. Reclassifications
party banks for funding or trading purposes.
between invested assets and custody-only assets as a result of a
Discretionary assets are defined as client assets that UBS
change in the service level delivered are generally treated as net
decides how to invest. Other invested assets are those where the
new money flows. However, where the change in service level
client ultimately decides how the assets are invested. When a
directly results from an externally imposed regulation or from a
single product is created in one business division and sold in
strategic decision by UBS to exit a market or specific service
another, it is counted in both the business division that manages
offering, the one-time net effect is reported as Other effects.
the investment and the one that distributes it. This results in
The Investment Bank does not track invested assets and net
double counting within UBS total invested assets, as both
new money. However, when a client is transferred from the
business divisions are independently providing a service to their
Investment Bank to another business division, this may produce
respective clients, and both add value and generate revenue.
net new money even though client assets were already
with UBS.
The following table shows the rates of the main currencies used to translate the financial information of UBS’s operations with a
functional currency other than the US dollar into US dollars.
1 CHF
1 EUR
1 GBP
100 JPY
CClloossiinngg eexxcchhaannggee rraattee
As of
AAvveerraaggee rraattee11
For the year ended
3311..1122..2200
31.12.19
3311..1122..2200
31.12.19
31.12.18
11..1133
11..2222
11..3377
00..9977
1.03
1.12
1.32
0.92
11..0077
11..1155
11..2299
00..9944
1.01
1.12
1.28
0.92
1.02
1.18
1.33
0.91
11 Monthly income statement items of operations with a functional currency other than the US dollar are translated with month-end rates into US dollars. Disclosed average rates for a year represent an average of 12
month-end rates, weighted according to the income and expense volumes of all operations of the Group with the same functional currency for each month. Weighted average rates for individual business divisions
may deviate from the weighted average rates for the Group.
Note 34 Events after the reporting period
Events subsequent to the publication of the unaudited fourth
quarter 2020 report
The 2020 results and the balance sheet as of 31 December 2020
differ from those presented in the unaudited fourth quarter
2020 report published on 26 January 2021 as a result of events
adjusted for after the balance sheet date. Provisions for
litigation, regulatory and similar matters increased, which
reduced 2020 operating profit before tax and 2020 net profit
attributable to shareholders each by USD 72 million. As a result,
basic earnings per share decreased by USD 0.02 and diluted
earnings per share decreased by USD 0.02.
› Refer to Note 18 for more information about provisions for
litigation, regulatory and similar matters
Invested assets and net new money
USD billion
Fund assets managed by UBS
Discretionary assets
Other invested assets
TToottaall iinnvveesstteedd aasssseettss11
of which: double counts
NNeett nneeww mmoonneeyy11
11 Includes double counts.
Development of invested assets
USD billion
Total invested assets at the beginning of the year1
Net new money
Market movements2
Foreign currency translation
Other effects
of which: acquisitions / (divestments)
TToottaall iinnvveesstteedd aasssseettss aatt tthhee eenndd ooff tthhee yyeeaarr11
11 Includes double counts. 22 Includes interest and dividend income.
As of or for the year ended
3311..1122..2200
31.12.19
339977
11,,445599
22,,333311
44,,118877
331111
112277
22002200
33,,660077
112277
335599
9966
((11))
00
358
1,209
2,040
3,607
248
51
2019
3,101
51
444
6
5
(1)
44,,118877
3,607
400
401
401
Financial statements
not held to maturity, i.e., instruments which are available for
sale, as well as equity instruments with no permanent holding
intent, are classified as Financial investments and measured at
the lower of (amortized) cost or market value. Market value
adjustments up to the original cost amount and realized gains or
losses upon disposal of the investment are recorded in the
income statement as Other income from ordinary activities.
Equity
intent are
classified as participations in Non-consolidated investments in
subsidiaries and other participations and are measured at cost
less impairment.
instruments with a permanent holding
Impairment losses are recorded in the income statement as
Impairment of investments in non-consolidated subsidiaries and
other participations. Reversals of impairments up to the original
cost amount as well as realized gains or losses upon disposal of
/
the
Extraordinary expenses in the income statement.
recorded as Extraordinary
investment are
income
3. Fair value option applied to financial liabilities
Under IFRS, UBS applies the fair value option to certain financial
liabilities not held for trading. Instruments for which the fair
value option is applied are accounted for at FVTPL. The amount
of change in the fair value that is attributable to changes in
UBS’s own credit is presented in Other comprehensive income
directly within Retained earnings. The fair value option is applied
primarily to issued structured debt instruments, certain non-
structured debt instruments, certain payables under repurchase
lending
agreements and
agreements, amounts due under unit-linked
investment
contracts, and brokerage payables.
collateral on
securities
cash
Under Swiss GAAP, the fair value option can only be applied
to structured debt instruments that consist of a debt host
contract and one or more embedded derivatives that do not
relate to own equity. Furthermore, unrealized changes in fair
value attributable to changes in UBS’s own credit are not
recognized, whereas realized own credit is recognized in Net
trading income.
Consolidated financial statements
Note 35 Main differences between IFRS and Swiss GAAP
IFRS
The consolidated financial statements of UBS Group AG are
prepared in accordance with International Financial Reporting
(IFRS). The Swiss Financial Market Supervisory
Standards
Authority (FINMA) requires financial groups that present their
financial statements under
to provide a narrative
explanation of the main differences between IFRS and Swiss
GAAP (the FINMA Accounting Ordinance, FINMA Circular
2020/1 "Accounting – banks" and the Banking Ordinance).
Included in this Note are the significant differences in the
recognition and measurement between IFRS and the provisions
of the Banking Ordinance and the guidelines of FINMA
governing true and fair view financial statement reporting
pursuant to Art. 25 through Art. 42 of the Banking Ordinance.
1. Consolidation
Under IFRS, all entities that are controlled by the holding entity
are consolidated.
Under Swiss GAAP, controlled entities that are deemed
immaterial to the Group or that are held temporarily only are
exempt from consolidation, but
instead are recorded as
participations accounted for under the equity method of
accounting or as financial investments measured at the lower of
cost or market value.
2. Classification and measurement of financial assets
Under IFRS, debt instruments are measured at amortized cost,
fair value through other comprehensive income (FVOCI) or fair
value through profit or loss (FVTPL), depending on the nature of
the business model within which the asset is held and the
characteristics of the contractual cash flows of the asset. Equity
instruments are accounted for at FVTPL by UBS.
Under Swiss GAAP, trading assets and derivatives are
measured at FVTPL in line with IFRS. However, non-trading debt
instruments are generally measured at amortized cost, even
when the assets are managed on a fair value basis. In addition,
the measurement of financial assets in the form of securities
depends on the nature of the asset: debt instruments that are
402
402
Consolidated financial statements
prepared in accordance with International Financial Reporting
sale, as well as equity instruments with no permanent holding
Standards
(IFRS). The Swiss Financial Market Supervisory
intent, are classified as Financial investments and measured at
Authority (FINMA) requires financial groups that present their
the lower of (amortized) cost or market value. Market value
financial statements under
IFRS
to provide a narrative
adjustments up to the original cost amount and realized gains or
explanation of the main differences between IFRS and Swiss
losses upon disposal of the investment are recorded in the
GAAP (the FINMA Accounting Ordinance, FINMA Circular
income statement as Other income from ordinary activities.
2020/1 "Accounting – banks" and the Banking Ordinance).
Equity
instruments with a permanent holding
intent are
Included in this Note are the significant differences in the
classified as participations in Non-consolidated investments in
recognition and measurement between IFRS and the provisions
subsidiaries and other participations and are measured at cost
of the Banking Ordinance and the guidelines of FINMA
less impairment.
governing true and fair view financial statement reporting
Impairment losses are recorded in the income statement as
pursuant to Art. 25 through Art. 42 of the Banking Ordinance.
Impairment of investments in non-consolidated subsidiaries and
other participations. Reversals of impairments up to the original
cost amount as well as realized gains or losses upon disposal of
the
investment are
recorded as Extraordinary
income
/
1. Consolidation
are consolidated.
Under IFRS, all entities that are controlled by the holding entity
Extraordinary expenses in the income statement.
Under Swiss GAAP, controlled entities that are deemed
3. Fair value option applied to financial liabilities
immaterial to the Group or that are held temporarily only are
exempt from consolidation, but
instead are recorded as
Under IFRS, UBS applies the fair value option to certain financial
participations accounted for under the equity method of
liabilities not held for trading. Instruments for which the fair
accounting or as financial investments measured at the lower of
value option is applied are accounted for at FVTPL. The amount
2. Classification and measurement of financial assets
directly within Retained earnings. The fair value option is applied
primarily to issued structured debt instruments, certain non-
Under IFRS, debt instruments are measured at amortized cost,
structured debt instruments, certain payables under repurchase
fair value through other comprehensive income (FVOCI) or fair
agreements and
cash
collateral on
securities
lending
value through profit or loss (FVTPL), depending on the nature of
agreements, amounts due under unit-linked
investment
the business model within which the asset is held and the
contracts, and brokerage payables.
characteristics of the contractual cash flows of the asset. Equity
Under Swiss GAAP, the fair value option can only be applied
instruments are accounted for at FVTPL by UBS.
to structured debt instruments that consist of a debt host
Under Swiss GAAP, trading assets and derivatives are
contract and one or more embedded derivatives that do not
measured at FVTPL in line with IFRS. However, non-trading debt
relate to own equity. Furthermore, unrealized changes in fair
instruments are generally measured at amortized cost, even
value attributable to changes in UBS’s own credit are not
when the assets are managed on a fair value basis. In addition,
recognized, whereas realized own credit is recognized in Net
the measurement of financial assets in the form of securities
trading income.
depends on the nature of the asset: debt instruments that are
Note 35 Main differences between IFRS and Swiss GAAP
Note 35 Main differences between IFRS and Swiss GAAP (continued)
The consolidated financial statements of UBS Group AG are
not held to maturity, i.e., instruments which are available for
4. Allowances and provisions for credit losses
6. Goodwill and intangible assets
Swiss GAAP permits the use of IFRS for the accounting for
allowances and provisions for credit losses based on an expected
credit loss (ECL) model. UBS has chosen to apply the IFRS 9 ECL
approach to the substantial majority of exposures in scope of the
Swiss GAAP ECL requirements, including all exposures in scope
of ECL under both Swiss GAAP and IFRS.
In addition, for a small population of exposures in scope of
the Swiss GAAP ECL requirements, which are not subject to ECL
under IFRS due to classification and measurements differences,
UBS applies an alternative approach. Where the Pillar 1 internal
ratings-based (IRB) models are applied for measurement of credit
risk, ECL for such exposures is determined by the regulatory
expected loss (EL), with an add-on for scaling up to the residual
maturity of exposures maturing beyond the next 12 months. For
detailed information on regulatory EL, refer to the “Risk
management and control” section of this report. For exposures
for which the Pillar 1 standardized approach (SA) is applied for
the measurement of credit risk, ECL is determined using a
portfolio approach that derives conservative probability of
default (PD) and loss given default (LGD) for the entire portfolio.
cost or market value.
of change in the fair value that is attributable to changes in
UBS’s own credit is presented in Other comprehensive income
5. Hedge accounting
Under IFRS, when cash flow hedge accounting is applied, the
fair value gain or loss on the effective portion of the derivative
designated as a cash flow hedge is recognized in equity. When
fair value hedge accounting is applied, the fair value gains or
losses of the derivative and the hedged item are recognized in
the income statement.
Under Swiss GAAP, the effective portion of the fair value
change of the derivative instrument designated as a cash flow or
as a fair value hedge is deferred on the balance sheet as Other
assets or Other liabilities. The carrying amount of the hedged
item designated in fair value hedges is not adjusted for fair value
changes attributable to the hedged risk.
Under IFRS, goodwill acquired in a business combination is not
amortized but tested annually for impairment. Intangible assets
with an indefinite useful life are also not amortized but tested
annually for impairment.
Under Swiss GAAP, goodwill and intangible assets with
indefinite useful lives are amortized over a period not exceeding
five years, unless a longer useful life, which may not exceed 10
years, can be justified. In addition, these assets are tested
annually for impairment.
7. Post-employment benefit plans
Swiss GAAP permits the use of IFRS or Swiss accounting
standards for post-employment benefit plans, with the election
made on a plan-by-plan basis.
UBS has elected to apply IFRS (IAS 19) for the non-Swiss
defined benefit plans in UBS AG standalone financial statements
and Swiss GAAP (FER 16) for the Swiss pension plan in the UBS
AG and
financial
the UBS Switzerland AG standalone
statements. The requirements of Swiss GAAP are better aligned
with the specific nature of Swiss pension plans, which are hybrid
in that they combine elements of defined contribution and
defined benefit plans, but are treated as defined benefit plans
under IFRS. Key differences between Swiss GAAP and IFRS
include the treatment of dynamic elements, such as future salary
increases and future interest credits on retirement savings, which
are not considered under the static method used in accordance
with Swiss GAAP. Also, the discount rate used to determine the
defined benefit obligation in accordance with IFRS is based on
the yield of high-quality corporate bonds of the market in the
respective pension plan country. The discount rate used in
accordance with Swiss GAAP (i.e., the technical interest rate) is
determined by the Pension Foundation Board based on the
expected returns of the Board’s investment strategy.
402
403
403
Financial statements Consolidated financial statements
Note 35 Main differences between IFRS and Swiss GAAP (continued)
administrative expenses on a straight-line basis over the lease
term, which commences with control of the physical use of the
asset. Lease incentives are treated as a reduction of rental
expense and are recognized on a consistent basis over the lease
term.
9. Netting of derivative assets and liabilities
Under IFRS, derivative assets, derivative liabilities and related
cash collateral that are not settled to market are reported on a
gross basis unless the restrictive IFRS netting requirements are
met: i) existence of master netting agreements and related
collateral arrangements that are unconditional and legally
enforceable, both in the normal course of business and in the
event of default, bankruptcy or insolvency of UBS and its
counterparties; and ii) UBS’s intention to either settle on a net
basis or to realize the asset and settle the liability simultaneously.
Under Swiss GAAP, derivative assets, derivative liabilities and
related cash collateral that are not settled to market are
generally reported on a net basis, provided the master netting
and the related collateral agreements are legally enforceable in
the event of default, bankruptcy or insolvency of UBS’s
counterparties.
10. Negative interest
Under IFRS, negative interest income arising on a financial asset
does not meet the definition of interest income and, therefore,
negative interest on financial assets and negative interest on
financial liabilities are presented within interest expense and
interest income, respectively.
Under Swiss GAAP, negative interest on financial assets is
presented within interest income and negative interest on
financial liabilities is presented within interest expense.
11. Extraordinary income and expense
Certain non-recurring and non-operating income and expense
items, such as realized gains or losses from the disposal of
participations, fixed and intangible assets, as well as reversals of
impairments of participations and fixed assets, are classified as
extraordinary items under Swiss GAAP. This distinction is not
available under IFRS.
For defined benefit plans, IFRS requires the full defined
benefit obligation net of the plan assets to be recorded on the
balance sheet, with changes resulting from remeasurements
recognized directly in equity. However, for non-Swiss defined
benefit plans for which IFRS accounting is elected, changes due
to remeasurements are recognized in the income statement of
UBS AG standalone under Swiss GAAP.
Swiss GAAP requires that employer contributions to the
pension fund are recognized as personnel expenses in the
income statement. Furthermore, Swiss GAAP requires an
assessment as to whether, based on the financial statements of
the pension fund prepared in accordance with Swiss accounting
standards (FER 26), an economic benefit to, or obligation of, the
employer arises from the pension fund which is recognized in
the balance sheet when conditions are met. Conditions for
recording a pension asset or liability would be met if, for
example, an employer contribution reserve is available or the
employer is required to contribute to the reduction of a pension
deficit (on an FER 26 basis).
8. Leasing
Under IFRS, a single lease accounting model applies that requires
UBS to record a right-of-use (RoU) asset and a corresponding
lease liability on the balance sheet when UBS is a lessee in a
lease arrangement. The RoU asset and the lease liability are
recognized when UBS acquires control of the physical use of the
asset. The lease liability is measured based on the present value
of the lease payments over the lease term, discounted using
UBS’s unsecured borrowing rate. The RoU asset is recorded at an
amount equal to the lease liability but is adjusted for rent
prepayments, initial direct costs, any costs to refurbish the leased
is
asset and/or
depreciated over the shorter of the lease term or the useful life
of the underlying asset.
incentives received. The RoU asset
lease
Under Swiss GAAP, leases that transfer substantially all the
risks and rewards, but not necessarily legal title in the underlying
assets, are classified as finance leases. All other leases are
classified as operating leases. Whereas finance leases are
recognized on the balance sheet and measured in line with IFRS,
operating lease payments are recognized as General and
404
404
Standalone
financial statements
Table of contents
406 UBS Group AG standalone financial statements
406
407
408
Income statement
Balance sheet
Statement of proposed appropriation of total profit and
dividend distribution out of total profit and capital
contribution reserve
409
410
1
2
Corporate information
Accounting policies
415
415
416
416
417
417
418
420
420
420
11 Other short-term receivables
12
Accrued income and prepaid expenses
Investments in subsidiaries
Financial assets
Current interest-bearing liabilities
Accrued expenses and deferred income
Long-term interest-bearing liabilities
Compensation-related long-term liabilities
Share capital
Treasury shares
13
14
15
16
17
18
19
20
413
413
413
413
413
414
414
415
415
415
Income statement notes
3
Dividend income from investments in subsidiaries
Other operating income
Financial income
Personnel expenses
Other operating expenses
Financial expenses
4
5
6
7
8
421 Additional information
421
21
421
422
423
22
23
24
425
25
Assets pledged to secure own liabilities
Contingent liabilities
Significant shareholders
Share and option ownership of the members of the
Board of Directors, the Group Executive Board and
other employees
Related parties
Balance sheet notes
9
10 Marketable securities
Liquid assets
426
Report of the statutory auditor on the financial statements
405
UBS Group AG standalone financial statements
UBS Group AG standalone financial
statements
Audited |
Income statement
Dividend income from investments in subsidiaries
Other operating income
Financial income
OOppeerraattiinngg iinnccoommee
Personnel expenses
Other operating expenses
Amortization of intangible assets
Financial expenses
OOppeerraattiinngg eexxppeennsseess
Profit / (loss) before income taxes
Tax expense / (benefit)
NNeett pprrooffiitt // ((lloossss))
USD million
For the year ended
CHF million
For the year ended
Note
3311..1122..2200
3
4
5
6
7
8
33,,885533
1177
11,,883366
55,,770066
1199
6699
44
11,,776655
11,,885588
33,,884488
66
33,,884411
31.12.19
3,400
155
498
4,052
21
81
4
625
732
3,320
0
3,320
3311..1122..2200
33,,664466
1166
11,,771144
55,,337766
1188
6633
44
11,,665500
11,,773355
33,,664411
66
33,,663355
31.12.19
3,464
153
491
4,108
21
80
4
618
724
3,384
0
3,384
406
406
UBS Group AG standalone financial statements
UBS Group AG standalone financial
statements
Dividend income from investments in subsidiaries
Audited |
Income statement
Other operating income
Financial income
OOppeerraattiinngg iinnccoommee
Personnel expenses
Other operating expenses
Amortization of intangible assets
Financial expenses
OOppeerraattiinngg eexxppeennsseess
Profit / (loss) before income taxes
Tax expense / (benefit)
NNeett pprrooffiitt // ((lloossss))
USD million
For the year ended
Note
3311..1122..2200
CHF million
For the year ended
3311..1122..2200
3
4
5
6
7
8
33,,885533
1177
11,,883366
55,,770066
1199
6699
44
11,,776655
11,,885588
33,,884488
66
33,,884411
31.12.19
3,400
155
498
4,052
21
81
4
625
732
3,320
0
3,320
33,,664466
1166
11,,771144
55,,337766
1188
6633
44
11,,665500
11,,773355
33,,664411
66
33,,663355
31.12.19
3,464
153
491
4,108
21
80
4
618
724
3,384
0
3,384
Balance sheet
Assets
Liquid assets
Marketable securities
Other short-term receivables
Accrued income and prepaid expenses
TToottaall ccuurrrreenntt aasssseettss
Investments in subsidiaries
of which: investment in UBS AG
Financial assets
Other intangible assets
Other non-current assets
TToottaall nnoonn--ccuurrrreenntt aasssseettss
TToottaall aasssseettss
of which: amounts due from subsidiaries
Liabilities
Current interest-bearing liabilities
Accrued expenses and deferred income
TToottaall sshhoorrtt--tteerrmm lliiaabbiilliittiieess
Long-term interest-bearing liabilities
Compensation-related long-term liabilities
TToottaall lloonngg--tteerrmm lliiaabbiilliittiieess
TToottaall lliiaabbiilliittiieess
of which: amounts due to subsidiaries
Equity
Share capital
General reserves
of which: statutory capital reserve
of which: capital contribution reserve
Voluntary earnings reserve
Treasury shares
of which: against capital contribution reserve
Reserve for own shares held by subsidiaries
Net profit / (loss)
EEqquuiittyy aattttrriibbuuttaabbllee ttoo sshhaarreehhoollddeerrss
TToottaall lliiaabbiilliittiieess aanndd eeqquuiittyy
USD million
CHF million
Note
3311..1122..2200
31.12.19
3311..1122..2200
31.12.19
9
10
11
12
13
14
15
16
17
18
19
20
22,,119988
8844
55,,555555
994477
88,,778844
4411,,119999
4400,,888899
5500,,006622
44
2211
9911,,228866
110000,,007711
5588,,334400
33,,885533
22,,009977
55,,995500
5500,,999933
33,,112288
5544,,112200
6600,,007711
1,177
83
2,412
1,010
4,682
41,209
40,889
47,113
8
15
88,346
93,028
51,295
2,547
2,102
4,649
45,989
2,938
48,927
53,576
11,,994466
7744
44,,991199
883399
77,,777799
3366,,448833
3366,,220099
4444,,333322
33
1199
8800,,883377
8888,,661166
5511,,666622
33,,441122
11,,885577
55,,226699
4455,,115566
22,,777700
4477,,992255
5533,,119944
1,140
80
2,335
978
4,533
39,896
39,586
45,612
8
15
85,530
90,063
49,660
2,466
2,035
4,501
44,523
2,845
47,368
51,869
11,,226688
987
11,,112233
955
339933
2277,,004488
2277,,004488
2277,,004488
1122,,773388
((44,,002200))
((118800))
00
33,,884411
4400,,000000
110000,,007711
393
28,352
28,352
28,352
10,682
(3,297)
0
1
3,320
39,452
93,028
338866
2266,,550066
2266,,550066
2266,,550066
88,,881122
((33,,991177))
((117744))
00
33,,663355
3355,,442211
8888,,661166
386
27,730
27,730
27,730
9,937
(3,244)
0
1
3,384
38,194
90,063
406
407
407
Financial statements UBS Group AG standalone financial statements
Statement of proposed appropriation of total profit and dividend distribution out of total profit and capital
contribution reserve
The Board of Directors proposes that the Annual General
Meeting of Shareholders (AGM) on 8 April 2021 approve the
total profit and an ordinary dividend
appropriation of
distribution of USD 0.37 (gross) in cash per share of CHF 0.10
nominal value under the terms set out below:
Net profit for the period
Profit / (loss) carried forward
TToottaall pprrooffiitt aavvaaiillaabbllee ffoorr aapppprroopprriiaattiioonn
AApppprroopprriiaattiioonn ooff ttoottaall pprrooffiitt
Appropriation to voluntary earnings reserve
Dividend distribution: USD 0.37 (gross) per dividend-bearing share, USD 0.185 of which out of total profit1
PPrrooffiitt // ((lloossss)) ccaarrrriieedd ffoorrwwaarrdd
USD million
CHF million
For the year ended
For the year ended
3311..1122..2200
33,,884411
00
33,,884411
((33,,112277))
((771144))
00
3311..1122..2200
33,,663355
00
33,,663355
((33,,000044))
((663322))22
00
11 Dividend-bearing shares are all shares issued except for treasury shares held by UBS Group AG as of the record date. The amount of USD 714 million presented is based on the total number of shares issued as of
31 December 2020. If the final total amount of the dividend is higher / lower, the difference will be balanced through the appropriation to the voluntary earnings reserve. 22 For illustrative purposes, translated at
closing exchange rate as of 31 December 2020 (CHF / USD 1.13).
Total statutory capital reserve: capital contribution reserve before proposed distribution1
Dividend distribution: USD 0.37 (gross) per dividend-bearing share, USD 0.185 of which out of capital contribution reserve2
TToottaall ssttaattuuttoorryy ccaappiittaall rreesseerrvvee:: ccaappiittaall ccoonnttrriibbuuttiioonn rreesseerrvvee aafftteerr pprrooppoosseedd ddiissttrriibbuuttiioonn
USD million
CHF million
For the year ended
For the year ended
3311..1122..2200
2277,,004488
((771144))
2266,,333344
3311..1122..2200
2266,,550066
((663322))33
2255,,887744
11 The Swiss Federal Tax Administration’s current position is that, of the CHF 26.5 billion capital contribution reserve available as of 31 December 2020, an amount limited to CHF 11.9 billion is available from which
dividends may be paid without a Swiss withholding tax deduction. 22 Dividend-bearing shares are all shares issued except for treasury shares held by UBS Group AG as of the record date. The amount of USD 714
million presented is based on the total number of shares issued as of 31 December 2020. 33 For illustrative purposes, translated at closing exchange rate as of 31 December 2020 (CHF / USD 1.13).
As set out above, half of the ordinary dividend distribution of
USD 0.37 (gross) in cash per share is payable out of total profit
and the other half is payable out of the capital contribution
reserve. The portion of the dividend paid out of total profit will
be subject to a 35% Swiss withholding tax.
The ordinary dividend distribution is declared in USD.
Shareholders whose shares are held through SIX SIS AG will
receive dividends in CHF, based on a published exchange rate
calculated up to five decimal places on the day prior to the ex-
dividend date. Shareholders holding shares through DTC or
directly registered in the US share register with Computershare
will be paid dividends in USD. The total amount of the dividend
distribution will be capped at CHF 2,628 million (the Cap). To
the extent that the CHF equivalent of the total dividend
distribution would exceed the Cap on the day of the AGM,
based on the exchange rate determined by the Board of
Directors in its reasonable opinion, the USD per share amount of
the dividend will be reduced on a pro rata basis so that the total
CHF amount does not exceed the Cap.
Provided that the proposed dividend distribution out of the
total profit and the capital contribution reserve is approved, the
payment of the dividend will be made on 15 April 2021 to
holders of shares on the record date 14 April 2021. The shares
will be traded ex-dividend as of 13 April 2021 and, accordingly,
the last day on which the shares may be traded with entitlement
to receive the dividend will be 12 April 2021.
408
408
UBS Group AG standalone financial statements
Statement of proposed appropriation of total profit and dividend distribution out of total profit and capital
Note 1 Corporate information
contribution reserve
UBS Group AG is incorporated and domiciled in Switzerland and
its registered office is at Bahnhofstrasse 45, CH-8001 Zurich,
Switzerland. UBS Group AG operates under Art. 620 et seq. of
the Swiss Code of Obligations as an Aktiengesellschaft (a
corporation limited by shares).
UBS Group AG is the ultimate holding company of the UBS
Group, the grantor of the majority of UBS’s deferred
compensation plans and the issuer of loss-absorbing capital
notes which qualify as Basel III additional tier 1 (AT1) capital on a
consolidated UBS Group basis and senior unsecured debt which
contributes to the total loss-absorbing capacity (TLAC) of the
Group.
The proceeds from the issuances of loss-absorbing AT1
senior unsecured debt
capital notes and TLAC-eligible
instruments are on-lent to UBS AG.
› Refer to Notes 15 and 17 for more information about the main
terms and conditions of the loss-absorbing AT1 capital notes and
TLAC-eligible senior unsecured debt instruments issued
Furthermore, UBS Group AG grants Deferred Contingent
Capital Plan (DCCP) awards to UBS Group employees. These
DCCP awards also qualify as Basel III AT1 capital on a
consolidated UBS Group basis.
As of 31 December 2020, UBS Group AG’s distributable items
for the purpose of AT1 capital instruments were USD 39.5 billion
(31 December 2019: USD 39.0 billion
(CHF 35.0 billion)
(CHF 37.7 billion)). For this purpose, distributable items are
defined in the terms and conditions of the relevant instruments
as the aggregate of (i) net profits carried forward and (ii) freely
distributable reserves, in each case, less any amounts that must
be contributed to legal reserves under applicable law.
The Board of Directors proposes that the Annual General
distribution of USD 0.37 (gross) in cash per share of CHF 0.10
Meeting of Shareholders (AGM) on 8 April 2021 approve the
nominal value under the terms set out below:
appropriation of
total profit and an ordinary dividend
Net profit for the period
Profit / (loss) carried forward
TToottaall pprrooffiitt aavvaaiillaabbllee ffoorr aapppprroopprriiaattiioonn
AApppprroopprriiaattiioonn ooff ttoottaall pprrooffiitt
Appropriation to voluntary earnings reserve
PPrrooffiitt // ((lloossss)) ccaarrrriieedd ffoorrwwaarrdd
USD million
CHF million
For the year ended
For the year ended
3311..1122..2200
33,,884411
00
33,,884411
((33,,112277))
((771144))
00
3311..1122..2200
2277,,004488
((771144))
2266,,333344
3311..1122..2200
33,,663355
00
33,,663355
((33,,000044))
((663322))22
00
3311..1122..2200
2266,,550066
((663322))33
2255,,887744
USD million
CHF million
For the year ended
For the year ended
Dividend distribution: USD 0.37 (gross) per dividend-bearing share, USD 0.185 of which out of total profit1
11 Dividend-bearing shares are all shares issued except for treasury shares held by UBS Group AG as of the record date. The amount of USD 714 million presented is based on the total number of shares issued as of
31 December 2020. If the final total amount of the dividend is higher / lower, the difference will be balanced through the appropriation to the voluntary earnings reserve. 22 For illustrative purposes, translated at
closing exchange rate as of 31 December 2020 (CHF / USD 1.13).
Total statutory capital reserve: capital contribution reserve before proposed distribution1
Dividend distribution: USD 0.37 (gross) per dividend-bearing share, USD 0.185 of which out of capital contribution reserve2
TToottaall ssttaattuuttoorryy ccaappiittaall rreesseerrvvee:: ccaappiittaall ccoonnttrriibbuuttiioonn rreesseerrvvee aafftteerr pprrooppoosseedd ddiissttrriibbuuttiioonn
11 The Swiss Federal Tax Administration’s current position is that, of the CHF 26.5 billion capital contribution reserve available as of 31 December 2020, an amount limited to CHF 11.9 billion is available from which
dividends may be paid without a Swiss withholding tax deduction. 22 Dividend-bearing shares are all shares issued except for treasury shares held by UBS Group AG as of the record date. The amount of USD 714
million presented is based on the total number of shares issued as of 31 December 2020. 33 For illustrative purposes, translated at closing exchange rate as of 31 December 2020 (CHF / USD 1.13).
As set out above, half of the ordinary dividend distribution of
the extent that the CHF equivalent of the total dividend
USD 0.37 (gross) in cash per share is payable out of total profit
distribution would exceed the Cap on the day of the AGM,
and the other half is payable out of the capital contribution
based on the exchange rate determined by the Board of
reserve. The portion of the dividend paid out of total profit will
Directors in its reasonable opinion, the USD per share amount of
be subject to a 35% Swiss withholding tax.
the dividend will be reduced on a pro rata basis so that the total
The ordinary dividend distribution
is declared in USD.
CHF amount does not exceed the Cap.
Shareholders whose shares are held through SIX SIS AG will
Provided that the proposed dividend distribution out of the
receive dividends in CHF, based on a published exchange rate
total profit and the capital contribution reserve is approved, the
calculated up to five decimal places on the day prior to the ex-
payment of the dividend will be made on 15 April 2021 to
dividend date. Shareholders holding shares through DTC or
holders of shares on the record date 14 April 2021. The shares
directly registered in the US share register with Computershare
will be traded ex-dividend as of 13 April 2021 and, accordingly,
will be paid dividends in USD. The total amount of the dividend
the last day on which the shares may be traded with entitlement
distribution will be capped at CHF 2,628 million (the Cap). To
to receive the dividend will be 12 April 2021.
408
409
409
Financial statements
UBS Group AG standalone financial statements
Note 2 Accounting policies
The UBS Group AG standalone financial statements are prepared
in accordance with the principles of the Swiss law on accounting
and financial reporting (32nd title of the Swiss Code of
Obligations).
The functional currency of UBS Group AG is the US dollar.
The significant accounting and valuation principles applied are
described below.
Presentation currencies
As the primary presentation currency of the standalone financial
statements of UBS Group AG is the US dollar, amounts in Swiss
francs are additionally presented for each component of the
financial statements. UBS Group AG applies the modified closing
rate method for converting US dollar amounts into Swiss francs:
assets and liabilities are translated at the closing rate, equity
positions at historic rates and income and expense items at the
weighted average rate for the period. All resulting currency
translation effects are recognized separately
in Voluntary
earnings reserve, amounting to a negative currency translation
effect of CHF 3,867 million as of 31 December 2020
(31 December 2019: negative CHF 544 million).
Foreign currency translation
Transactions denominated in foreign currency are translated into
US dollars at the spot exchange rate on the date of the
transaction. At the balance sheet date, all current assets and
short-term liabilities as well as Financial assets measured at fair
value that are denominated in a foreign currency are translated
into US dollars using the closing exchange rate. For Other non-
current assets and long-term liabilities, where the asset mirrors
the terms of a corresponding liability or the asset and liability
otherwise form an economic hedge relationship, the asset and
liability are treated as one unit of account for foreign currency
translation purposes, with offsetting unrealized foreign currency
translation gains and losses based on the closing exchange rate
presented net
in
subsidiaries measured at historic cost are translated at the spot
exchange rate on the date of the transaction. Currency
translation effects from dividends paid in Swiss francs are
recognized in equity. All other currency translation effects are
recognized in the income statement.
income statement.
Investments
in the
The main currency translation rates used by UBS Group AG
are provided in Note 33 of the consolidated financial statements.
410
410
Marketable securities
include
securities
investments
in alternative
Marketable
investment vehicles (AIVs) with a short-term holding period. The
holding period is deemed short term if the vesting of the awards
hedged by the AIV is within 12 months after the balance sheet
date. These are equity instruments and are measured at fair
value based on quoted market prices or other observable market
prices as of the balance sheet date. Gains and losses resulting
from fair value changes are recognized in Financial income and
Financial expenses, respectively.
Financial assets
Financial assets include investments in AIVs with a long-term
holding period. The holding period is deemed long term if the
vesting of the awards hedged by the AIV is more than 12
months after the balance sheet date. These are equity
instruments and are measured at fair value based on their
quoted market prices or other observable market prices as of the
balance sheet date. Gains and losses resulting from fair value
changes are recognized in Financial income and Financial
expenses, respectively.
Investments in AIVs that have no quoted market price or no
other observable market price are recognized as Financial assets
and are measured at their acquisition cost adjusted for
impairment losses.
Financial assets further include loans granted to UBS AG that
substantially mirror the terms of the perpetual AT1 capital notes
and the TLAC-eligible senior unsecured debt instruments issued
as well as fixed-term deposits with UBS AG with maturities more
than 12 months after the balance sheet date. The loans and
deposits are measured at nominal value.
› Refer to Note 14 for more information
Derivative instruments
UBS Group AG uses derivative instruments to manage exposures
to foreign currency risks from investments in foreign subsidiaries.
The derivative instruments are entered into with UBS AG,
mirroring the conditions of the closing transactions UBS AG
enters into with third parties.
Derivative instruments are measured at fair value based on
quoted market prices or other observable market prices as of the
balance sheet date. Unrealized gains and losses are recognized
on the balance sheet as Accrued income and prepaid expenses
and Accrued expenses and deferred income, respectively.
Corresponding gains and losses resulting from fair value changes
are recognized in Financial income and Financial expenses,
respectively.
UBS Group AG standalone financial statements
Note 2 Accounting policies
The UBS Group AG standalone financial statements are prepared
Marketable securities
in accordance with the principles of the Swiss law on accounting
and financial reporting (32nd title of the Swiss Code of
Marketable
securities
include
investments
in alternative
Obligations).
investment vehicles (AIVs) with a short-term holding period. The
The functional currency of UBS Group AG is the US dollar.
holding period is deemed short term if the vesting of the awards
The significant accounting and valuation principles applied are
hedged by the AIV is within 12 months after the balance sheet
described below.
Presentation currencies
date. These are equity instruments and are measured at fair
value based on quoted market prices or other observable market
prices as of the balance sheet date. Gains and losses resulting
from fair value changes are recognized in Financial income and
As the primary presentation currency of the standalone financial
Financial expenses, respectively.
statements of UBS Group AG is the US dollar, amounts in Swiss
francs are additionally presented for each component of the
Financial assets
financial statements. UBS Group AG applies the modified closing
rate method for converting US dollar amounts into Swiss francs:
Financial assets include investments in AIVs with a long-term
assets and liabilities are translated at the closing rate, equity
holding period. The holding period is deemed long term if the
positions at historic rates and income and expense items at the
vesting of the awards hedged by the AIV is more than 12
weighted average rate for the period. All resulting currency
months after the balance sheet date. These are equity
translation effects are recognized separately
in Voluntary
instruments and are measured at fair value based on their
earnings reserve, amounting to a negative currency translation
quoted market prices or other observable market prices as of the
effect of CHF 3,867 million as of 31 December 2020
balance sheet date. Gains and losses resulting from fair value
(31 December 2019: negative CHF 544 million).
changes are recognized in Financial income and Financial
Foreign currency translation
expenses, respectively.
Investments in AIVs that have no quoted market price or no
other observable market price are recognized as Financial assets
Transactions denominated in foreign currency are translated into
and are measured at their acquisition cost adjusted for
US dollars at the spot exchange rate on the date of the
impairment losses.
short-term liabilities as well as Financial assets measured at fair
substantially mirror the terms of the perpetual AT1 capital notes
value that are denominated in a foreign currency are translated
and the TLAC-eligible senior unsecured debt instruments issued
into US dollars using the closing exchange rate. For Other non-
as well as fixed-term deposits with UBS AG with maturities more
current assets and long-term liabilities, where the asset mirrors
than 12 months after the balance sheet date. The loans and
the terms of a corresponding liability or the asset and liability
deposits are measured at nominal value.
otherwise form an economic hedge relationship, the asset and
liability are treated as one unit of account for foreign currency
› Refer to Note 14 for more information
translation purposes, with offsetting unrealized foreign currency
Derivative instruments
translation gains and losses based on the closing exchange rate
presented net
in the
income statement.
Investments
in
UBS Group AG uses derivative instruments to manage exposures
subsidiaries measured at historic cost are translated at the spot
to foreign currency risks from investments in foreign subsidiaries.
exchange rate on the date of the transaction. Currency
The derivative instruments are entered into with UBS AG,
translation effects from dividends paid in Swiss francs are
mirroring the conditions of the closing transactions UBS AG
recognized in equity. All other currency translation effects are
enters into with third parties.
recognized in the income statement.
Derivative instruments are measured at fair value based on
The main currency translation rates used by UBS Group AG
quoted market prices or other observable market prices as of the
are provided in Note 33 of the consolidated financial statements.
balance sheet date. Unrealized gains and losses are recognized
on the balance sheet as Accrued income and prepaid expenses
and Accrued expenses and deferred income, respectively.
Corresponding gains and losses resulting from fair value changes
are recognized in Financial income and Financial expenses,
respectively.
Note 2 Accounting policies (continued)
Investments in subsidiaries
Investments in subsidiaries are equity interests that are held to
carry on the business of the UBS Group or for other strategic
purposes. They include all subsidiaries directly held by UBS
Group AG through which UBS conducts its business on a global
basis. The investments are measured individually and carried at
cost less impairment.
› Refer to Note 13 for more information
› Refer to Note 2 in the “Consolidated financial statements”
section of this report for a description of businesses of the UBS
Group
income statement as Financial
the
income and Financial
expenses, respectively. For settlement of related share-based
awards, the realized gains and losses on treasury shares
represent the difference between the market price of the
treasury shares at settlement and their acquisition cost.
For UBS Group AG shares acquired by a direct or indirect
subsidiary, a Reserve for own shares held by subsidiaries is
generally created in UBS Group AG’s equity. However, where
UBS AG or UBS Switzerland AG acquire UBS Group AG shares
and hold such in their trading portfolios, no Reserve for own
shares held by subsidiaries is created.
› Refer to Note 20 for more information
Long-term interest-bearing liabilities
Share-based and other deferred compensation plans
transaction. At the balance sheet date, all current assets and
Financial assets further include loans granted to UBS AG that
Treasury shares
Long-term interest-bearing liabilities include perpetual loss-
absorbing capital notes that qualify as Basel III AT1 capital and
TLAC-eligible senior unsecured debt instruments at Group level.
They are measured at nominal value. Any difference to nominal
value, e.g., premium, discount or external costs that are directly
related to the issue, is deferred as Accrued income and prepaid
expenses or Accrued expenses and deferred income and
amortized to Financial expenses or Financial income over the
maturity of the instrument or until the first call date or optional
redemption date, where applicable.
› Refer to Note 17 for more information
Treasury shares acquired by UBS Group AG are recognized at
acquisition cost and are presented as a deduction from
shareholders’ equity.
Policy applicable from 1 January 2020
Upon disposal of treasury shares or settlement of related share-
based awards, any realized gain or loss is recognized in
Voluntary earnings reserve. Realized gains and losses from
settlement of share-based awards represent the difference
between the acquisition cost of the UBS Group AG shares and
the grant date fair value of the share-based awards. For the year
ended 31 December 2020, a net gain of USD 38 million (CHF 37
million) from settlement of share-based awards was recognized
in Voluntary earnings reserve (2019 comparative period: a net
loss of USD 191 million (CHF 191 million) was recognized in the
income statement under the previously applied accounting
policy as outlined below). UBS deems the revised prospectively
applied accounting policy a more reliable presentation of the
related gains and losses.
Policy applicable prior to 1 January 2020
Upon disposal of treasury shares or settlement of related share-
based awards, any realized gain or loss is recognized through
Share-based compensation plans
The grant date fair value of equity-settled share-based
compensation awards granted to employees
is generally
recognized over the vesting period of the awards. Awards
granted in the form of UBS Group AG shares and notional
shares are settled by delivering UBS Group AG shares at vesting
except in jurisdictions where this is not permitted for legal or tax
reasons. They are recognized as Compensation-related long-
term liabilities if vesting is more than 12 months after the
balance sheet date or as Accrued expenses and deferred income
if vesting is within 12 months of the balance sheet date. The
amount recognized is adjusted for forfeiture assumptions, such
that the amount ultimately recognized is based on the number
of awards that meet the related service conditions at the vesting
date. The grant date fair value is based on the UBS Group AG
share price on the date of grant, taking into consideration post-
vesting sale and hedge restrictions, dividend rights, non-vesting
conditions and market conditions, where applicable.
Policy applicable from 1 January 2020
Upon settlement of the share-based awards, any realized gain or
loss on the treasury shares is recognized in Voluntary earnings
reserve. Realized gains and losses from settlement of share-
based awards represent the difference between the acquisition
cost of the UBS Group AG shares and the grant date fair value
of the share-based awards.
Policy applicable prior to 1 January 2020
Upon settlement of the share-based awards, any realized gain or
loss is recognized in the income statement as Other operating
income and Other operating expenses, respectively. Realized
gains and losses on share-based awards represent the difference
between the market price of the UBS Group AG shares at
settlement and the grant date fair value of the share-based
awards.
410
411
411
Financial statements Recharge of compensation expenses
Expenses related to deferred compensation plans are recharged
by UBS Group AG to its subsidiaries employing the personnel.
Upon recharge, UBS Group AG recognizes a receivable from its
subsidiaries corresponding
its
to a
obligation toward the employees.
representing
liability
Dispensations in the standalone financial statements
As UBS Group AG prepares consolidated financial statements in
accordance with IFRS, UBS Group AG is exempt from various
disclosures
financial statements. The
dispensations include the management report and the statement
of cash flows, as well as certain note disclosures.
the standalone
in
UBS Group AG standalone financial statements
Note 2 Accounting policies (continued)
Other deferred compensation plans
Deferred compensation plans that are not share-based, including
DCCP awards and awards in the form of AIVs, are accounted for
as cash-settled awards. The present value or fair value of the
amount payable to employees that is settled in cash is
recognized as a liability generally over the vesting period, as
Compensation-related long-term liabilities if vesting is more than
12 months after the balance sheet date and as Accrued
expenses and deferred income if vesting is within 12 months
from the balance sheet date. The liabilities are remeasured at
each balance sheet date at the present value of the
corresponding DCCP award and the fair value of investments in
AIVs. Gains and losses resulting from remeasurement of the
liabilities are recognized in Other operating income and Other
operating expenses, respectively.
412
412
UBS Group AG standalone financial statements
Note 2 Accounting policies (continued)
Income statement notes
Other deferred compensation plans
Recharge of compensation expenses
Deferred compensation plans that are not share-based, including
Expenses related to deferred compensation plans are recharged
DCCP awards and awards in the form of AIVs, are accounted for
by UBS Group AG to its subsidiaries employing the personnel.
as cash-settled awards. The present value or fair value of the
Upon recharge, UBS Group AG recognizes a receivable from its
amount payable to employees that is settled in cash is
subsidiaries corresponding
to a
liability
representing
its
recognized as a liability generally over the vesting period, as
obligation toward the employees.
Compensation-related long-term liabilities if vesting is more than
12 months after the balance sheet date and as Accrued
Dispensations in the standalone financial statements
expenses and deferred income if vesting is within 12 months
from the balance sheet date. The liabilities are remeasured at
As UBS Group AG prepares consolidated financial statements in
each balance sheet date at the present value of the
accordance with IFRS, UBS Group AG is exempt from various
corresponding DCCP award and the fair value of investments in
disclosures
in
the standalone
financial statements. The
AIVs. Gains and losses resulting from remeasurement of the
dispensations include the management report and the statement
liabilities are recognized in Other operating income and Other
of cash flows, as well as certain note disclosures.
operating expenses, respectively.
Note 3 Dividend income from investments in subsidiaries
Dividend income from investments in subsidiaries in 2020
consisted of USD 3,848 million (CHF 3,641 million) received
from UBS AG related to the 2019 financial year, which was
approved by the Annual General Meeting of the Shareholders of
UBS AG on 27 April 2020 (USD 2,550 million (CHF 2,462
million)) and the Extraordinary General Meeting of the
Shareholders of UBS AG on 19 November 2020 (USD 1,298
million (CHF 1,179 million)), and USD 5 million (CHF 5 million)
net liquidation dividend received from UBS Group Funding
(Switzerland) AG in Liquidation following liquidation of the
entity in the course of 2020, which was approved by the
Extraordinary General Meeting of the Shareholders of UBS
Group Funding
in Liquidation held on
8 October 2020. In 2019, dividend income from investments in
(Switzerland) AG
subsidiaries consisted of USD 3,250 million (CHF 3,311 million)
received from UBS AG related to the financial year ended
31 December 2018, which was approved by the Annual General
Meeting of the Shareholders of UBS AG on 18 April 2019,
USD 143 million (CHF 146 million) received from UBS Business
Solutions AG related to the financial year ended 31 December
2018, which was approved by the Annual General Meeting of
the Shareholders of UBS Business Solutions AG on 17 April
2019, and USD 6 million (CHF 6 million) received from UBS
Group Funding (Switzerland) AG related to the financial year
ended 31 December 2018, which was approved by the Annual
General Meeting of the Shareholders of UBS Group Funding
(Switzerland) AG on 8 March 2019.
Note 4 Other operating income
Gains related to equity-settled and cash-settled awards
Commission income from guarantees issued
TToottaall ootthheerr ooppeerraattiinngg iinnccoommee
Note 5 Financial income
Fair value gains on investments in AIVs
Interest income on onward lending to UBS AG1
Interest income on other interest-bearing assets
Other
TToottaall ffiinnaanncciiaall iinnccoommee
USD million
For the year ended
CHF million
For the year ended
3311..1122..2200
31.12.19
3311..1122..2200
31.12.19
1177
00
1177
120
35
155
1166
00
1166
119
34
153
USD million
For the year ended
CHF million
For the year ended
3311..1122..2200
31.12.19
3311..1122..2200
31.12.19
4499
11,,776699
1144
44
11,,883366
45
421
29
3
498
4444
11,,665533
1133
44
11,,771144
45
414
28
3
491
11 In October 2019, onward lending was transferred from UBS Group Funding (Switzerland) AG to UBS Group AG. Interest income for the year ended 31 December 2019 includes interest for the period from the
transfer date until the end of the year.
Note 6 Personnel expenses
Personnel expenses include recharges from UBS AG and UBS
Business Solutions AG for personnel-related costs for activities
performed by the personnel of those companies for the benefit
of UBS Group AG.
UBS Group AG had no employees throughout 2020 and
2019. All employees of the UBS Group, including the members
of the Group Executive Board (GEB) of UBS Group AG, were
employed by
subsidiaries of UBS Group AG. As of
31 December 2020, the UBS Group employed 71,551 personnel
(31 December 2019: 68,601) on a full-time equivalent basis.
412
413
413
Financial statements
UBS Group AG standalone financial statements
Note 7 Other operating expenses
Fair value losses on AIV awards
Capital tax
Other
TToottaall ootthheerr ooppeerraattiinngg eexxppeennsseess
Note 8 Financial expenses
Treasury share losses1
Interest expense on interest-bearing liabilities2
Other
TToottaall ffiinnaanncciiaall eexxppeennsseess
USD million
For the year ended
CHF million
For the year ended
3311..1122..2200
31.12.19
3311..1122..2200
31.12.19
4488
99
1122
6699
45
13
22
81
4433
88
1122
6633
45
13
22
80
USD million
For the year ended
CHF million
For the year ended
3311..1122..2200
31.12.19
3311..1122..2200
31.12.19
00
11,,775566
1100
11,,776655
191
429
5
625
00
11,,664411
99
11,,665500
191
422
5
618
11 As of 1 January 2020, a new accounting policy for the recognition of realized gains and losses on treasury shares was applied. Refer to Note 2 for more information. 22 In October 2019, loss-absorbing AT1
capital notes and TLAC-eligible senior unsecured debt instruments that had previously been issued by UBS Group Funding (Switzerland) AG were transferred to UBS Group AG. Related interest expense for the year
ended 31 December 2019 includes interest for the period from the transfer date until the end of the year.
414
414
UBS Group AG standalone financial statements
Note 7 Other operating expenses
Fair value losses on AIV awards
Capital tax
Other
TToottaall ootthheerr ooppeerraattiinngg eexxppeennsseess
Note 8 Financial expenses
Treasury share losses1
Interest expense on interest-bearing liabilities2
Other
TToottaall ffiinnaanncciiaall eexxppeennsseess
USD million
For the year ended
CHF million
For the year ended
3311..1122..2200
31.12.19
3311..1122..2200
31.12.19
4488
99
1122
6699
00
11,,775566
1100
11,,776655
45
13
22
81
191
429
5
625
4433
88
1122
6633
11,,664411
00
99
11,,665500
45
13
22
80
191
422
5
618
11 As of 1 January 2020, a new accounting policy for the recognition of realized gains and losses on treasury shares was applied. Refer to Note 2 for more information. 22 In October 2019, loss-absorbing AT1
capital notes and TLAC-eligible senior unsecured debt instruments that had previously been issued by UBS Group Funding (Switzerland) AG were transferred to UBS Group AG. Related interest expense for the year
ended 31 December 2019 includes interest for the period from the transfer date until the end of the year.
Balance sheet notes
Note 9 Liquid assets
As of 31 December 2020, liquid assets comprised USD 987
million
(CHF 874 million) held on current accounts at
UBS Switzerland AG and UBS AG and USD 1,211 million
(CHF 1,072 million) of time deposits placed with UBS AG. As of
31 December 2019, liquid assets comprised USD 794 million
(CHF 769 million) held on current accounts at UBS Switzerland
AG and UBS AG and USD 383 million (CHF 371 million) of time
deposits placed with UBS AG.
USD million
For the year ended
CHF million
For the year ended
3311..1122..2200
31.12.19
3311..1122..2200
31.12.19
Note 10 Marketable securities
Marketable securities include investments in AIVs related to compensation awards vesting within 12 months after the balance sheet date.
Note 11 Other short-term receivables
Onward lending to UBS AG1
Receivables from employing entities related to compensation awards
Other
TToottaall ootthheerr sshhoorrtt--tteerrmm rreecceeiivvaabblleess
USD million
CHF million
3311..1122..2200
44,,998877
551177
5511
55,,555555
31.12.19
1,870
482
60
2,412
3311..1122..2200
44,,441166
445588
4455
44,,991199
31.12.19
1,811
466
59
2,335
11 Short-term receivables from the onward lending of the proceeds from the issuances of TLAC-eligible senior unsecured debt and loss-absorbing additional tier 1 perpetual capital notes to UBS AG. Refer to Note 1
for more information.
Note 12 Accrued income and prepaid expenses
Accrued interest income
Other accrued income and prepaid expenses
TToottaall aaccccrruueedd iinnccoommee aanndd pprreeppaaiidd eexxppeennsseess
USD million
CHF million
3311..1122..2200
31.12.19
3311..1122..2200
31.12.19
775544
119933
994477
816
194
1,010
666688
117711
883399
790
188
978
414
415
415
Financial statements
UBS Group AG standalone financial statements
Note 13 Investments in subsidiaries
Unless otherwise stated, the subsidiaries listed below have share
capital consisting solely of ordinary shares, which are held by
UBS Group AG or UBS AG. The proportion of ownership interest
held is equal to the voting rights held by UBS Group AG or UBS
AG. The country where the respective registered office is located
is also the principal place of business. UBS AG operates through
a global network of branches and a significant proportion of its
business activity is conducted outside Switzerland in the UK, the
US, Singapore, Hong Kong and other countries. UBS Europe SE
has branches and offices in a number of EU Member States,
including Germany, Italy, Luxembourg, Spain and Austria. Share
capital is provided in the currency of the legally registered office.
Individually significant subsidiaries of UBS Group AG as of 31 December 2020
Company
UBS AG
Registered office
Zurich and Basel, Switzerland
UBS Business Solutions AG1
11 UBS Business Solutions AG holds subsidiaries in Poland, China and India.
Zurich, Switzerland
Share capital in million
Equity interest accumulated in %
CHF
CHF
385.8
1.0
100.0
100.0
Individually significant subsidiaries of UBS AG as of 31 December 20201
Company
Registered office
UBS Americas Holding LLC
Wilmington, Delaware, USA
UBS Americas Inc.
Wilmington, Delaware, USA
Primary business
Group Functions
Group Functions
UBS Asset Management AG
Zurich, Switzerland
Asset Management
UBS Bank USA
UBS Europe SE
Salt Lake City, Utah, USA
Global Wealth Management
Frankfurt, Germany
Global Wealth Management
UBS Financial Services Inc.
Wilmington, Delaware, USA
Global Wealth Management
UBS Securities LLC
UBS Switzerland AG
Wilmington, Delaware, USA
Investment Bank
Zurich, Switzerland
Personal & Corporate Banking
Share capital in million
3,150.02
USD
USD
CHF
USD
EUR
USD
USD
CHF
0.0
43.2
0.0
446.0
0.0
1,283.13
10.0
Equity interest accumulated in %
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
11 Includes direct and indirect subsidiaries of UBS AG. 22 Consists of common share capital of USD 1,000 and non-voting preferred share capital of USD 3,150,000,000. 33 Consists of common share capital of
USD 100,000 and non-voting preferred share capital of USD 1,283,000,000.
Individually significant subsidiaries of UBS AG are those entities
that contribute significantly to the Group’s financial position or
results of operations, based on a number of criteria, including
the subsidiaries’ equity and their contribution to the Group’s
total assets and profit or loss before tax, in accordance with
Swiss regulations.
› Refer to Note 28 in the “Consolidated financial statements”
section of this report for more information
Note 14 Financial assets
Long-term receivables from UBS AG1
Investments in alternative investment vehicles at fair value related to awards vesting after 12 months
Investments in alternative investment vehicles at cost less impairment
Other
TToottaall ffiinnaanncciiaall aasssseettss
USD million
CHF million
3311..1122..2200
4499,,555544
31.12.19
46,644
3311..1122..2200
4433,,888822
31.12.19
45,158
224488
22
225588
229
4
236
221199
22
222299
222
4
229
5500,,006622
47,113
4444,,333322
45,612
11 Long-term receivables from UBS AG include the onward lending of the proceeds from the issuances of TLAC-eligible senior unsecured debt and loss-absorbing additional tier 1 perpetual capital notes for the total
amount of USD 48,598 million (CHF 43,035 million) as of 31 December 2020 (31 December 2019: USD 45,682 million (CHF 44,226 million)). Refer to Note 1 for more information.
416
416
00
00
00
00
00
nn//aa
nn//aa
nn//aa
300
300
iinn CCHHFF
in CHF
in USD
iinn UUSSDD
22..9955%%
CCoouuppoonn11
1155..0044..2211
2244..0099..2200
1144..0044..2211
2244..0099..2200
33MM UUSSDD LLIIBBOORR ++ 114444 bbppss
33MM UUSSDD LLIIBBOORR ++ 117788 bbppss
CCoonnttrraaccttuuaall
mmaattuurriittyy
FFiirrsstt ooppttiioonnaall
ccaallll ddaattee
iinn ttrraannssaaccttiioonn
ccuurrrreennccyy
in transaction
currency
UBS Group AG standalone financial statements
Note 13 Investments in subsidiaries
Note 15 Current interest-bearing liabilities
Unless otherwise stated, the subsidiaries listed below have share
a global network of branches and a significant proportion of its
capital consisting solely of ordinary shares, which are held by
business activity is conducted outside Switzerland in the UK, the
UBS Group AG or UBS AG. The proportion of ownership interest
US, Singapore, Hong Kong and other countries. UBS Europe SE
held is equal to the voting rights held by UBS Group AG or UBS
has branches and offices in a number of EU Member States,
AG. The country where the respective registered office is located
including Germany, Italy, Luxembourg, Spain and Austria. Share
is also the principal place of business. UBS AG operates through
capital is provided in the currency of the legally registered office.
As of 31 December 2020, current interest-bearing liabilities
totaled USD 3,853 million (CHF 3,412 million) comprising TLAC-
eligible senior unsecured debt instruments of USD 2,850 million
(CHF 2,524 million) and
loans from UBS AG and UBS
Switzerland AG of USD 1,003 million (CHF 889 million). As of
31 December 2019, current interest-bearing liabilities totaled
USD 2,547 million (CHF 2,466 million) comprising TLAC-eligible
instruments of USD 1,800 million
senior unsecured debt
loans from UBS AG and UBS
(CHF 1,743 million) and
Switzerland AG of USD 747 million (CHF 723 million).
Individually significant subsidiaries of UBS Group AG as of 31 December 2020
Notes issued, overview by amount, maturity and coupon
3311..1122..2200
CCaarrrryyiinngg aammoouunntt
31.12.19
Carrying amount
In million, except where indicated
US dollar-denominated TLAC-eligible senior
unsecured notes
US dollar-denominated TLAC-eligible senior
unsecured notes
US dollar-denominated TLAC-eligible senior
unsecured notes
US dollar-denominated TLAC-eligible senior
unsecured notes2
0
TToottaall nnootteess iissssuueedd
11,,774433
11 For TLAC-eligible senior unsecured notes, the disclosed coupon rate refers to the contractual coupon rate applied from the issue date up to the contractual maturity date or, if applicable, to the first optional call
date. 22 Instrument was partially repurchased on 7 December 2020.
Company
UBS AG
Registered office
Zurich and Basel, Switzerland
UBS Business Solutions AG1
Zurich, Switzerland
11 UBS Business Solutions AG holds subsidiaries in Poland, China and India.
Individually significant subsidiaries of UBS AG as of 31 December 20201
Company
Registered office
UBS Americas Holding LLC
Wilmington, Delaware, USA
UBS Americas Inc.
Wilmington, Delaware, USA
Primary business
Group Functions
Group Functions
UBS Asset Management AG
Zurich, Switzerland
Asset Management
UBS Bank USA
UBS Europe SE
Salt Lake City, Utah, USA
Global Wealth Management
Frankfurt, Germany
Global Wealth Management
UBS Financial Services Inc.
Wilmington, Delaware, USA
Global Wealth Management
UBS Securities LLC
UBS Switzerland AG
Wilmington, Delaware, USA
Investment Bank
Zurich, Switzerland
Personal & Corporate Banking
USD
USD
CHF
USD
EUR
USD
USD
CHF
3,150.02
0.0
43.2
0.0
446.0
0.0
1,283.13
10.0
Share capital in million
Equity interest accumulated in %
CHF
CHF
385.8
1.0
Share capital in million
Equity interest accumulated in %
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
11 Includes direct and indirect subsidiaries of UBS AG. 22 Consists of common share capital of USD 1,000 and non-voting preferred share capital of USD 3,150,000,000. 33 Consists of common share capital of
USD 100,000 and non-voting preferred share capital of USD 1,283,000,000.
Individually significant subsidiaries of UBS AG are those entities
total assets and profit or loss before tax, in accordance with
that contribute significantly to the Group’s financial position or
Swiss regulations.
results of operations, based on a number of criteria, including
the subsidiaries’ equity and their contribution to the Group’s
› Refer to Note 28 in the “Consolidated financial statements”
section of this report for more information
Note 14 Financial assets
Long-term receivables from UBS AG1
Investments in alternative investment vehicles at fair value related to awards vesting after 12 months
Investments in alternative investment vehicles at cost less impairment
Other
TToottaall ffiinnaanncciiaall aasssseettss
USD million
CHF million
3311..1122..2200
4499,,555544
31.12.19
46,644
3311..1122..2200
4433,,888822
31.12.19
45,158
224488
22
225588
229
4
236
221199
22
222299
222
4
229
5500,,006622
47,113
4444,,333322
45,612
11 Long-term receivables from UBS AG include the onward lending of the proceeds from the issuances of TLAC-eligible senior unsecured debt and loss-absorbing additional tier 1 perpetual capital notes for the total
amount of USD 48,598 million (CHF 43,035 million) as of 31 December 2020 (31 December 2019: USD 45,682 million (CHF 44,226 million)). Refer to Note 1 for more information.
Note 16 Accrued expenses and deferred income
Short-term portion of compensation liabilities
of which: Deferred Contingent Capital Plan
of which: other deferred compensation plans
Accrued interest expense
Other
TToottaall aaccccrruueedd eexxppeennsseess aanndd ddeeffeerrrreedd iinnccoommee
USD million
CHF million
3311..1122..2200
11,,331122
31.12.19
1,268
3311..1122..2200
11,,116622
31.12.19
1,228
551188
779944
772288
5577
497
771
784
50
445588
770033
664444
5511
482
746
759
48
22,,009977
2,102
11,,885577
2,035
416
417
417
0
11,,880000
11,,663388
22,,552244
11,,885500
22,,885500
11,,000000
1,452
11,,885500
11,,000000
1,500
1,500
290
888866
33%%
nn//aa
0
0
00
0
0
Financial statements UBS Group AG standalone financial statements
Note 17 Long-term interest-bearing liabilities
As of 31 December 2020, long-term interest-bearing liabilities
totaled USD 50,993 million (CHF 45,156 million) comprising
loss-absorbing AT1 perpetual capital notes and TLAC-eligible
senior unsecured debt instruments of USD 50,735 million
(CHF 44,927 million) and fixed-term loans from UBS AG of
USD 258 million (CHF 229 million). As of 31 December 2019,
long-term interest-bearing liabilities totaled USD 45,989 million
(CHF 44,523 million) comprising loss-absorbing AT1 perpetual
senior unsecured debt
capital notes and TLAC-eligible
instruments of USD 45,752 million (CHF 44,294 million) and
fixed-term loans from UBS AG of USD 236 million (CHF 229
million).
Notes issued, overview by amount, maturity and coupon
CCoonnttrraaccttuuaall
mmaattuurriittyy
FFiirrsstt ooppttiioonnaall
ccaallll ddaattee
PPeerrppeettuuaall
1199..0022..2200
1188..1111..3344
1188..1111..2200
CCoouuppoonn11
77..112255%%
33..0033%%
1144..0044..2211
nn//aa
33MM UUSSDD LLIIBBOORR ++ 117788 bbppss
1155..0044..2211
nn//aa
33%%
3311..1122..2200
CCaarrrryyiinngg aammoouunntt
31.12.19
Carrying amount
iinn ttrraannssaaccttiioonn
ccuurrrreennccyy
iinn UUSSDD
iinn CCHHFF
in transaction
currency
in USD
in CHF
00
00
00
00
00
00
00
00
00
00
00
00
1,250
1,250
1,210
100
70
68
1,000
1,000
968
2,000
2,000
1,936
0011..0022..2222
nn//aa
33MM UUSSDD LLIIBBOORR ++ 115533 bbppss
550000
550000
444433
500
500
484
0011..0022..2222
2222..0022..2222
nn//aa
nn//aa
22..6655%%
00..7755%%
22,,000000
22,,000000
11,,777711
2,000
2,000
1,936
330000
333399
330000
300
310
300
2200..0099..2222
2200..0099..2211
33MM EEUURR LLIIBBOORR ++ 7700 bbppss
11,,775500
22,,113377
11,,889922
1,750
1,962
1,900
1166..1111..2222
nn//aa
11..7755%%
11,,225500
11,,552266
11,,335522
1,250
1,402
1,357
2233..0055..2233
2233..0055..2222
33..449911%%
22,,000000
22,,000000
11,,777711
2,000
2,000
1,936
2233..0055..2233
2233..0055..2222
33MM UUSSDD LLIIBBOORR ++ 112222 bbppss
11,,000000
11,,000000
888866
1,000
1,000
968
1155..0088..2233
1155..0088..2222
33MM UUSSDD LLIIBBOORR ++ 9955 bbppss
11,,225500
11,,225500
11,,110077
1,250
1,250
1,210
1155..0088..2233
1155..0088..2222
22..885599%%
22,,000000
22,,000000
11,,777711
2,000
2,000
1,936
0044..0033..2244
nn//aa
1188..0055..2244
1188..0055..2233
22..112255%%
00..662255%%
775500
991166
881111
750
841
814
440000
445522
440000
400
413
400
3300..0077..2244
3300..0077..2233
11..000088%%
11,,330000
11,,330000
11,,115511
0
0
0
0088..1111..2244
0088..1111..2233
00..771199%%
113300,,000000
11,,225599
11,,111155
130,000
1,196
1,157
3300..1111..2244
3300..1111..2233
11..55%%
11,,225500
11,,552266
11,,335522
1,250
1,402
1,357
3300..0011..2255
3300..0011..2244
00..887755%%
440000
445522
440000
400
413
400
1177..0044..2255
1177..0044..2244
11..2255%%
11,,775500
22,,113377
11,,889922
1,750
1,962
1,900
2244..0099..2255
nn//aa
44..112255%%
22,,550000
22,,550000
22,,221144
2,500
2,500
2,420
2299..0011..2266
2299..0011..2255
2233..0022..2266
1155..0044..2266
0011..0099..2266
nn//aa
nn//aa
nn//aa
00..2255%%
11..2255%%
11,,550000
11,,883322
11,,662222
0
0
0
115500
116699
115500
150
155
150
44..112255%%
22,,000000
22,,000000
11,,777711
2,000
2,000
1,936
11..2255%%
11,,225500
11,,552266
11,,335522
1,250
1,402
1,357
3300..0011..2277
3300..0011..2266
11..336644%%
11,,330000
11,,330000
11,,115511
0
0
0
In million, except where indicated
US dollar-denominated high-trigger loss-absorbing
additional tier 1 perpetual capital notes2
Australian dollar-denominated TLAC-eligible
senior unsecured notes3
US dollar-denominated TLAC-eligible senior
unsecured notes
US dollar-denominated TLAC-eligible senior
unsecured notes
US dollar-denominated TLAC-eligible senior
unsecured notes
US dollar-denominated TLAC-eligible senior
unsecured notes
Swiss franc-denominated TLAC-eligible senior
unsecured notes
Euro-denominated TLAC-eligible senior
unsecured notes
Euro-denominated TLAC-eligible senior
unsecured notes
US dollar-denominated TLAC-eligible senior
unsecured notes
US dollar-denominated TLAC-eligible senior
unsecured notes
US dollar-denominated TLAC-eligible senior
unsecured notes
US dollar-denominated TLAC-eligible senior
unsecured notes
Euro-denominated TLAC-eligible senior
unsecured notes
Swiss franc-denominated TLAC-eligible senior
unsecured notes
US dollar-denominated TLAC-eligible senior
unsecured notes
Yen-denominated TLAC-eligible senior
unsecured notes
Euro-denominated TLAC-eligible senior
unsecured notes
Swiss franc-denominated TLAC-eligible senior
unsecured notes
Euro-denominated TLAC-eligible senior
unsecured notes
US dollar-denominated TLAC-eligible senior
unsecured notes
Euro-denominated TLAC-eligible senior
unsecured notes
Swiss franc-denominated TLAC-eligible senior
unsecured notes
US dollar-denominated TLAC-eligible senior
unsecured notes
Euro-denominated TLAC-eligible senior
unsecured notes
US dollar-denominated TLAC-eligible senior
unsecured notes
418
418
Note 17 Long-term interest-bearing liabilities
Note 17 Long-term interest-bearing liabilities (continued)
As of 31 December 2020, long-term interest-bearing liabilities
long-term interest-bearing liabilities totaled USD 45,989 million
Notes issued, overview by amount, maturity and coupon (continued)
3311..1122..2200
CCaarrrryyiinngg aammoouunntt
31.12.19
Carrying amount
CCoonnttrraaccttuuaall
mmaattuurriittyy
FFiirrsstt ooppttiioonnaall
ccaallll ddaattee
iinn ttrraannssaaccttiioonn
ccuurrrreennccyy
in transaction
currency
CCoouuppoonn1
0
0
0
0
0
0
0
0
0
0
0
0
0
0
3311
3355
4455
3355
4400
4400
2255
3366
2288
220066
110099
220066
112244
136
141
141
112299
114466
114466
112244
178
184
117711
119944
1,452
1,500
1,500
11,,332288
11,,550000
11,,550000
11,,662222
11,,883322
11,,550000
1,936
2,000
2,000
11,,777711
22,,000000
22,,000000
in CHF
iinn CCHHFF
in USD
iinn UUSSDD
22..2211%%
00..2255%%
2200,,000000
20,000
00..997733%%
44..225533%%
2222..0055..2255
1144..0044..2255
0044..0033..2255
0044..1111..2222
0033..1122..2233
2244..1111..2233
1188..0088..3300
1133..0088..2299
0099..1111..2277
0055..1111..2277
2233..0033..2277
1144..0044..5500
0044..0033..5500
0044..1111..4499
0033..1122..3355
1188..0088..3355
1133..0088..3300
0099..1111..2288
0055..1111..2288
2277..0055..5500
2222..0055..5500
2244..1111..3355
2233..0033..2288
33..112266%%
ZZeerroo ccoouuppoonn aaccccrreettiinngg
((aannnnuuaall yyiieelldd ooff 22..55%%))
22..33%%
ZZeerroo ccoouuppoonn aaccccrreettiinngg
((aannnnuuaall yyiieelldd ooff 33..88%%))
ZZeerroo ccoouuppoonn aaccccrreettiinngg
((aannnnuuaall yyiieelldd ooff 33..66%%))
ZZeerroo ccoouuppoonn aaccccrreettiinngg
((aannnnuuaall yyiieelldd ooff 44%%))
ZZeerroo ccoouuppoonn aaccccrreettiinngg
((aannnnuuaall yyiieelldd ooff 33..55%%))
ZZeerroo ccoouuppoonn aaccccrreettiinngg
((aannnnuuaall yyiieelldd ooff 33..55%%))
ZZeerroo ccoouuppoonn aaccccrreettiinngg
((aannnnuuaall yyiieelldd ooff 22..88%%))
In million, except where indicated
US dollar-denominated TLAC-eligible senior
unsecured notes
Euro-denominated TLAC-eligible senior
unsecured notes
Yen-denominated TLAC-eligible senior
unsecured notes
US dollar-denominated TLAC-eligible senior
unsecured notes
Australian dollar-denominated TLAC-eligible
senior unsecured notes
US dollar-denominated TLAC-eligible senior
unsecured notes
Australian dollar-denominated TLAC-eligible
senior unsecured notes
US dollar-denominated TLAC-eligible senior
unsecured notes
US dollar-denominated TLAC-eligible senior
unsecured notes
US dollar-denominated TLAC-eligible senior
unsecured notes
US dollar-denominated TLAC-eligible senior
unsecured notes
US dollar-denominated TLAC-eligible senior
unsecured notes
US dollar-denominated TLAC-eligible senior
unsecured notes
US dollar-denominated high-trigger loss-absorbing
additional tier 1 perpetual capital notes4
US dollar-denominated high-trigger loss-absorbing
additional tier 1 perpetual capital notes
Euro-denominated low-trigger loss-absorbing
additional tier 1 perpetual capital notes
US dollar-denominated high-trigger loss-absorbing
additional tier 1 perpetual capital notes
Singapore dollar-denominated high-trigger loss-
absorbing additional tier 1 perpetual capital notes
US dollar-denominated high-trigger loss-absorbing
additional tier 1 perpetual capital notes
Australian dollar-denominated high-trigger loss-
absorbing additional tier 1 perpetual capital notes
Singapore dollar-denominated high-trigger loss-
absorbing additional tier 1 perpetual capital notes
US dollar-denominated low-trigger loss-absorbing
additional tier 1 perpetual capital notes
US dollar-denominated high-trigger loss-absorbing
additional tier 1 perpetual capital notes
Swiss franc-denominated high-trigger loss-
absorbing additional tier 1 perpetual capital notes
US dollar-denominated high-trigger loss-absorbing
0
additional tier 1 perpetual capital notes
TToottaall nnootteess iissssuueedd
4455,,775522 4444,,229944
11 For TLAC-eligible senior unsecured notes, the disclosed coupon rate refers to the contractual coupon rate applied from the issue date up to the contractual maturity date or, if applicable, to the first optional call
date. For the loss-absorbing additional tier 1 perpetual capital notes, the disclosed coupon rate refers to the contractual fixed coupon rate from the issue date up to the first optional call date. 22 Instrument was
redeemed on 19 February 2020. 33 Instrument was redeemed on 18 November 2020. 44 Instrument was called on 10 February 2021.
666644
5500,,773355 4444,,992277
PPeerrppeettuuaall
PPeerrppeettuuaall
PPeerrppeettuuaall
PPeerrppeettuuaall
PPeerrppeettuuaall
PPeerrppeettuuaall
PPeerrppeettuuaall
PPeerrppeettuuaall
PPeerrppeettuuaall
PPeerrppeettuuaall
PPeerrppeettuuaall
PPeerrppeettuuaall
2222..0099..5500
2277..0088..2244
0044..0099..2244
1199..0022..2255
0077..0088..2255
2299..0077..2266
2277..0055..2255
2222..0099..2233
2222..0033..2211
1100..0088..2211
1199..0022..2222
3311..0011..2233
2288..1111..2233
3311..0011..2244
1133..1111..2255
44..337755%%
66..887755%%
55..112255%%
66..887755%%
77..112255%%
55..887755%%
44..8855%%
55..7755%%
22,,550000
22,,550000
22,,221144
2,500
2,500
2,420
11,,225500
11,,225500
11,,110077
1,250
1,250
1,210
11,,557755
11,,557755
11,,339955
1,575
1,575
1,525
11,,550000
11,,550000
11,,332288
1,500
1,500
1,452
11,,110000
11,,110000
1,100
1,100
1,065
11,,000000
11,,222211
11,,008811
1,000
1,121
1,086
22,,000000
22,,000000
11,,777711
2,000
2,000
1,936
770000
554400
447788
700
491
475
775500
556677
550022
750
558
540
775500
775500
118822
110022
110022
551100
551100
445522
997744
770000
552299
446699
700
521
504
227755
331111
227755
275
284
275
77%%
55%%
77%%
33%%
9900
5555
5555
4499
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
UBS Group AG standalone financial statements
totaled USD 50,993 million (CHF 45,156 million) comprising
(CHF 44,523 million) comprising loss-absorbing AT1 perpetual
loss-absorbing AT1 perpetual capital notes and TLAC-eligible
capital notes and TLAC-eligible
senior unsecured debt
senior unsecured debt instruments of USD 50,735 million
instruments of USD 45,752 million (CHF 44,294 million) and
(CHF 44,927 million) and fixed-term loans from UBS AG of
fixed-term loans from UBS AG of USD 236 million (CHF 229
USD 258 million (CHF 229 million). As of 31 December 2019,
million).
Notes issued, overview by amount, maturity and coupon
3311..1122..2200
CCaarrrryyiinngg aammoouunntt
31.12.19
Carrying amount
CCoonnttrraaccttuuaall
FFiirrsstt ooppttiioonnaall
mmaattuurriittyy
ccaallll ddaattee
iinn ttrraannssaaccttiioonn
in transaction
CCoouuppoonn11
ccuurrrreennccyy
iinn UUSSDD
iinn CCHHFF
currency
in USD
in CHF
In million, except where indicated
US dollar-denominated high-trigger loss-absorbing
additional tier 1 perpetual capital notes2
PPeerrppeettuuaall
1199..0022..2200
Australian dollar-denominated TLAC-eligible
senior unsecured notes3
US dollar-denominated TLAC-eligible senior
US dollar-denominated TLAC-eligible senior
US dollar-denominated TLAC-eligible senior
US dollar-denominated TLAC-eligible senior
Swiss franc-denominated TLAC-eligible senior
unsecured notes
unsecured notes
unsecured notes
unsecured notes
unsecured notes
unsecured notes
unsecured notes
unsecured notes
unsecured notes
unsecured notes
unsecured notes
unsecured notes
unsecured notes
unsecured notes
unsecured notes
unsecured notes
unsecured notes
unsecured notes
unsecured notes
unsecured notes
unsecured notes
unsecured notes
unsecured notes
unsecured notes
Euro-denominated TLAC-eligible senior
Euro-denominated TLAC-eligible senior
US dollar-denominated TLAC-eligible senior
US dollar-denominated TLAC-eligible senior
US dollar-denominated TLAC-eligible senior
US dollar-denominated TLAC-eligible senior
Euro-denominated TLAC-eligible senior
Swiss franc-denominated TLAC-eligible senior
US dollar-denominated TLAC-eligible senior
Yen-denominated TLAC-eligible senior
Euro-denominated TLAC-eligible senior
Swiss franc-denominated TLAC-eligible senior
Euro-denominated TLAC-eligible senior
US dollar-denominated TLAC-eligible senior
Euro-denominated TLAC-eligible senior
Swiss franc-denominated TLAC-eligible senior
US dollar-denominated TLAC-eligible senior
Euro-denominated TLAC-eligible senior
US dollar-denominated TLAC-eligible senior
1188..1111..3344
1188..1111..2200
1144..0044..2211
nn//aa
33MM UUSSDD LLIIBBOORR ++ 117788 bbppss
77..112255%%
33..0033%%
33%%
22..6655%%
00..7755%%
00
00
00
00
00
00
00
00
00
00
00
00
1,250
1,250
1,210
100
70
68
1,000
1,000
968
2,000
2,000
1,936
22,,000000
22,,000000
11,,777711
2,000
2,000
1,936
330000
333399
330000
300
310
300
0011..0022..2222
nn//aa
33MM UUSSDD LLIIBBOORR ++ 115533 bbppss
550000
550000
444433
500
500
484
2200..0099..2222
2200..0099..2211
33MM EEUURR LLIIBBOORR ++ 7700 bbppss
11,,775500
22,,113377
11,,889922
1,750
1,962
1,900
11..7755%%
11,,225500
11,,552266
11,,335522
1,250
1,402
1,357
2233..0055..2233
2233..0055..2222
33..449911%%
22,,000000
22,,000000
11,,777711
2,000
2,000
1,936
2233..0055..2233
2233..0055..2222
33MM UUSSDD LLIIBBOORR ++ 112222 bbppss
11,,000000
11,,000000
888866
1,000
1,000
968
1155..0088..2233
1155..0088..2222
33MM UUSSDD LLIIBBOORR ++ 9955 bbppss
11,,225500
11,,225500
11,,110077
1,250
1,250
1,210
1155..0088..2233
1155..0088..2222
22..885599%%
22,,000000
22,,000000
11,,777711
2,000
2,000
1,936
0044..0033..2244
nn//aa
1188..0055..2244
1188..0055..2233
22..112255%%
00..662255%%
775500
991166
881111
750
841
814
440000
445522
440000
400
413
400
3300..0077..2244
3300..0077..2233
11..000088%%
11,,330000
11,,330000
11,,115511
0
0
0
0088..1111..2244
0088..1111..2233
00..771199%%
113300,,000000
11,,225599
11,,111155
130,000
1,196
1,157
3300..1111..2244
3300..1111..2233
11..55%%
11,,225500
11,,552266
11,,335522
1,250
1,402
1,357
3300..0011..2255
3300..0011..2244
00..887755%%
440000
445522
440000
400
413
400
1177..0044..2255
1177..0044..2244
11..2255%%
11,,775500
22,,113377
11,,889922
1,750
1,962
1,900
2299..0011..2266
2299..0011..2255
11,,550000
11,,883322
11,,662222
0
0
0
44..112255%%
22,,550000
22,,550000
22,,221144
2,500
2,500
2,420
00..2255%%
11..2255%%
115500
116699
115500
150
155
150
44..112255%%
22,,000000
22,,000000
11,,777711
2,000
2,000
1,936
11..2255%%
11,,225500
11,,552266
11,,335522
1,250
1,402
1,357
3300..0011..2277
3300..0011..2266
11..336644%%
11,,330000
11,,330000
11,,115511
0
0
0
1155..0044..2211
0011..0022..2222
2222..0022..2222
1166..1111..2222
2244..0099..2255
2233..0022..2266
1155..0044..2266
0011..0099..2266
nn//aa
nn//aa
nn//aa
nn//aa
nn//aa
nn//aa
nn//aa
nn//aa
418
419
419
Financial statements UBS Group AG standalone financial statements
Note 18 Compensation-related long-term liabilities
Long-term portion of compensation liabilities
of which: Deferred Contingent Capital Plan
of which: other deferred compensation plans
TToottaall ccoommppeennssaattiioonn--rreellaatteedd lloonngg--tteerrmm lliiaabbiilliittiieess
Note 19 Share capital
USD million
CHF million
3311..1122..2200
31.12.19
3311..1122..2200
31.12.19
33,,112288
11,,332266
11,,880022
33,,112288
2,938
1,340
1,598
2,938
22,,777700
11,,117744
11,,559955
22,,777700
2,845
1,298
1,547
2,845
As of 31 December 2020, the issued share capital consisted of 3,859,055,395 (31 December 2019: 3,859,055,395) registered
shares with a nominal value of CHF 0.10 each.
› Refer to “UBS shares” in the “Capital, liquidity and funding, and balance sheet” section of this report for more information about UBS
Group AG shares
Note 20 Treasury shares
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22001188
of which: treasury shares held by UBS Group AG
of which: treasury shares held by UBS AG and other subsidiaries
Acquisitions
Disposals
Delivery of shares to settle equity-settled awards
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22001199
of which: treasury shares held by UBS Group AG 1
of which: treasury shares held by UBS AG and other subsidiaries
Acquisitions
Disposals
Delivery of shares to settle equity-settled awards
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22002200
of which: treasury shares held by UBS Group AG 1
of which: treasury shares held by UBS AG and other subsidiaries
Number of registered shares
Average price in USD
Average price in CHF
116666,,446677,,880022
166,203,791
264,011
146,876,692
(5,999,827)
(64,323,371)
224433,,002211,,229966
242,930,084
91,212
112288,,337722,,225577
((1100,,118888,,005599))
((5533,,772288,,449922))
330077,,447777,,000022
330066,,111144,,551133
11,,336622,,449900
1155..7711
15.71
12.27
11.86
11.88
15.35
1133..5577
13.57
12.65
1122..2277
1111..1122
1133..4400
1133..1144
1133..1133
1144..1133
1155..4455
15.46
12.05
11.75
11.50
15.28
1133..3355
13.35
12.75
1111..5533
99..8855
1122..8855
1122..8800
1122..8800
1122..6622
11 Treasury shares held by UBS Group AG had a carrying value of USD 4,020 million / CHF 3,917 million as of 31 December 2020 (31 December 2019: USD 3,297 million / CHF 3,244 million). Shares repurchased
under our 2018-2021 share repurchase program are expected to be canceled by means of a capital reduction, whereby the capital contribution reserve within the statutory capital reserve is expected to be reduced
by USD 180 million (CHF 173 million, based on purchase price). Refer to “UBS shares” in the “Capital, liquidity and funding, and balance sheet” section of this report for more information.
420
420
USD million
CHF million
3311..1122..2200
31.12.19
3311..1122..2200
31.12.19
33,,112288
11,,332266
11,,880022
33,,112288
2,938
1,340
1,598
2,938
22,,777700
11,,117744
11,,559955
22,,777700
2,845
1,298
1,547
2,845
Additional information
Note 21 Assets pledged to secure own liabilities
As of 31 December 2020, total pledged assets of UBS Group AG
amounted to USD 2,623 million (CHF 2,323 million). These
assets consisted of certain liquid assets, marketable securities
and financial assets and were pledged to UBS AG. As of
31 December 2019, total pledged assets of UBS Group AG
amounted to USD 2,021 million
(CHF 1,957 million). The
associated liabilities secured by these pledged assets were
USD 1,208 million (CHF 1,070 million) and USD 933 million
(CHF 903 million) as of 31 December 2020 and 31 December
2019, respectively.
As of 31 December 2020, the issued share capital consisted of 3,859,055,395 (31 December 2019: 3,859,055,395) registered
shares with a nominal value of CHF 0.10 each.
› Refer to “UBS shares” in the “Capital, liquidity and funding, and balance sheet” section of this report for more information about UBS
Note 22 Contingent liabilities
UBS Group AG is jointly and severally liable for the combined value added tax (VAT) liability of UBS entities that belong to the VAT
group of UBS in Switzerland.
UBS Group AG standalone financial statements
Note 18 Compensation-related long-term liabilities
Long-term portion of compensation liabilities
of which: Deferred Contingent Capital Plan
of which: other deferred compensation plans
TToottaall ccoommppeennssaattiioonn--rreellaatteedd lloonngg--tteerrmm lliiaabbiilliittiieess
Note 19 Share capital
Group AG shares
Note 20 Treasury shares
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22001188
of which: treasury shares held by UBS Group AG
of which: treasury shares held by UBS AG and other subsidiaries
Acquisitions
Disposals
Acquisitions
Disposals
Delivery of shares to settle equity-settled awards
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22001199
of which: treasury shares held by UBS Group AG 1
of which: treasury shares held by UBS AG and other subsidiaries
Delivery of shares to settle equity-settled awards
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22002200
of which: treasury shares held by UBS Group AG 1
of which: treasury shares held by UBS AG and other subsidiaries
Number of registered shares
Average price in USD
Average price in CHF
116666,,446677,,880022
166,203,791
264,011
146,876,692
(5,999,827)
(64,323,371)
224433,,002211,,229966
242,930,084
91,212
112288,,337722,,225577
((1100,,118888,,005599))
((5533,,772288,,449922))
330077,,447777,,000022
330066,,111144,,551133
11,,336622,,449900
1155..7711
15.71
12.27
11.86
11.88
15.35
1133..5577
13.57
12.65
1122..2277
1111..1122
1133..4400
1133..1144
1133..1133
1144..1133
1155..4455
15.46
12.05
11.75
11.50
15.28
1133..3355
13.35
12.75
1111..5533
99..8855
1122..8855
1122..8800
1122..8800
1122..6622
11 Treasury shares held by UBS Group AG had a carrying value of USD 4,020 million / CHF 3,917 million as of 31 December 2020 (31 December 2019: USD 3,297 million / CHF 3,244 million). Shares repurchased
under our 2018-2021 share repurchase program are expected to be canceled by means of a capital reduction, whereby the capital contribution reserve within the statutory capital reserve is expected to be reduced
by USD 180 million (CHF 173 million, based on purchase price). Refer to “UBS shares” in the “Capital, liquidity and funding, and balance sheet” section of this report for more information.
420
421
421
Financial statements
UBS Group AG standalone financial statements
Note 23 Significant shareholders
Shareholders registered in the UBS Group AG share register with 3% or more of the total share capital1
% of share capital
Chase Nominees Ltd., London2
Nortrust Nominees Ltd., London2
3311..1122..2200
1100..3399
55..1155
31.12.19
10.94
4.90
DTC (Cede & Co.), New York2,3
11 As registration in the UBS share register is optional, shareholders crossing the threshold percentages requiring SIX notification under the FMIA do not necessarily appear in this table. 22 Nominee companies and
securities clearing organizations cannot autonomously decide how voting rights are exercised and are therefore not obligated to notify UBS and SIX if they reach, exceed or fall below the threshold percentages
requiring disclosure notification under the FMIA. Consequently, they do not appear under “Shareholders subject to FMIA disclosure notifications” below. 33 DTC (Cede & Co.), New York, “The Depository Trust
Company,” is a US securities clearing organization.
44..9999
7.57
General rules
Under the Swiss Federal Act on Financial Market Infrastructures
and Market Conduct in Securities and Derivatives Trading of
19 June 2015 (FMIA), anyone directly or indirectly, or acting in
concert with third parties, holding shares in a company listed in
Switzerland or holding derivative rights related to shares in such
a company must notify the company and the SIX Swiss Exchange
(SIX) if the holding reaches, falls below or exceeds one of the
following thresholds: 3, 5, 10, 15, 20, 25, 331⁄3, 50 or 662⁄3% of
voting rights, regardless of whether or not such rights may be
exercised. Nominee companies that cannot autonomously
decide how voting rights are exercised are not required to notify
the company and SIX if they reach, exceed or fall below the
above-mentioned thresholds.
Pursuant to the Swiss Code of Obligations, UBS Group AG
discloses
identity of any
shareholder with a holding of more than 5% of the total share
capital of UBS Group AG.
its financial statements the
in
Shareholders subject to FMIA disclosure notifications
According to the mandatory FMIA disclosure notifications filed
with UBS Group AG and SIX, as of 31 December 2020, the
following entities held more than 3% of the total share capital
of UBS Group AG: Artisan Partners Limited Partnership,
Milwaukee, which disclosed a holding of 3.15% on 18
November 2020; BlackRock Inc., New York, which disclosed a
holding of 4.70% on 26 May 2020; and Norges Bank, Oslo,
which disclosed a holding of 3.01% on 24 July 2019. As
registration in the UBS share register is optional, shareholders
crossing
SIX
notification under the FMIA do not necessarily appear in the
table above.
aforementioned
thresholds
requiring
the
No new disclosures of significant shareholdings have been
made since 31 December 2020.
In accordance with the FMIA, the aforementioned holdings
are calculated in relation to the total share capital of UBS Group
AG reflected in its Articles of Association at the time of the
respective disclosure notification.
› Refer to ser-ag.com/en/resources/notifications-market-
participants/significant-shareholders.html for information about
disclosures under the FMIA
Shareholders registered in the UBS Group AG share register with
3% or more of the share capital of UBS Group AG
As a supplement to the mandatory disclosure requirements
according to the SIX Swiss Exchange Corporate Governance
Directive, the shareholders (acting in their own name or in their
capacity as nominees for other investors or beneficial owners)
who were registered in the UBS share register with 3% or more
of
total share capital of UBS Group AG as of
31 December 2020 or as of 31 December 2019 are listed in the
table above.
the
Cross-shareholdings
UBS Group AG has no cross-shareholdings where reciprocal
ownership would be in excess of 5% of capital or voting rights
with any other company.
422
422
UBS Group AG standalone financial statements
Note 23 Significant shareholders
% of share capital
Chase Nominees Ltd., London2
Nortrust Nominees Ltd., London2
DTC (Cede & Co.), New York2,3
Shareholders registered in the UBS Group AG share register with 3% or more of the total share capital1
3311..1122..2200
31.12.19
Shares awarded
Note 24 Share and option ownership of the members of the Board of Directors, the Group Executive Board and other
employees
1100..3399
55..1155
44..9999
10.94
4.90
7.57
Awarded to members of the BoD
Awarded to members of the GEB
Awarded to other UBS Group employees
TToottaall
FFoorr tthhee yyeeaarr eennddeedd 3311..1122..2200
For the year ended 31.12.19
NNuummbbeerr ooff sshhaarreess
445577,,336622
55,,119922,,339911
6677,,005577,,776666
7722,,770077,,551199
VVaalluuee ooff sshhaarreess iinn
UUSSDD mmiilllliioonn
77
VVaalluuee ooff sshhaarreess iinn
CCHHFF mmiilllliioonn
66
6666
771133
778866
5588
663322
669966
Number of shares
560,889
4,878,908
72,763,001
78,202,798
Value of shares in
USD million
7
Value of shares in
CHF million
7
58
812
878
56
787
850
› Refer to the “Compensation” section of this report for more information about the terms and conditions of the shares and options
awarded to the members of the Board of Directors and the Group Executive Board
voting rights, regardless of whether or not such rights may be
Shareholders registered in the UBS Group AG share register with
exercised. Nominee companies that cannot autonomously
3% or more of the share capital of UBS Group AG
William C. Dudley, member
Number of shares of BoD members1
Name, function
Axel A. Weber, Chairman
David Sidwell, former Vice Chairman and Senior Independent Director2
Jeremy Anderson, Vice Chairman and Senior Independent Director
Reto Francioni, member
Fred Hu, member
Mark Hughes, member2
Nathalie Rachou, member2
Julie G. Richardson, member
Isabelle Romy, former member2
Robert W. Scully, former member2
Beatrice Weder di Mauro, member
Dieter Wemmer, member
Jeanette Wong, member
TToottaall
oonn 3311 DDeecceemmbbeerr
22002200
NNuummbbeerr ooff sshhaarreess hheelldd
11,,004466,,999944
Voting rights in %
0.062
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
993388,,662277
--
116677,,559955
6666,,774444
3311,,445566
2266,,118811
00
115544,,008866
112255,,662288
4422,,442288
1155,,114455
44,,992200
--
00
--
8888,,440011
4466,,228833
--
114433,,992288
--
7711,,554400
119988,,557788
117722,,339977
8888,,774433
6600,,228855
3333,,772222
00
11,,775500,,779977
0.053
0.009
0.004
0.002
0.002
0.000
0.009
0.007
0.003
0.001
0.000
0.000
0.005
0.003
0.008
0.004
0.012
0.010
0.005
0.003
0.002
0.000
0.104
11 As registration in the UBS share register is optional, shareholders crossing the threshold percentages requiring SIX notification under the FMIA do not necessarily appear in this table. 22 Nominee companies and
securities clearing organizations cannot autonomously decide how voting rights are exercised and are therefore not obligated to notify UBS and SIX if they reach, exceed or fall below the threshold percentages
requiring disclosure notification under the FMIA. Consequently, they do not appear under “Shareholders subject to FMIA disclosure notifications” below. 33 DTC (Cede & Co.), New York, “The Depository Trust
Company,” is a US securities clearing organization.
General rules
No new disclosures of significant shareholdings have been
made since 31 December 2020.
Under the Swiss Federal Act on Financial Market Infrastructures
In accordance with the FMIA, the aforementioned holdings
and Market Conduct in Securities and Derivatives Trading of
are calculated in relation to the total share capital of UBS Group
19 June 2015 (FMIA), anyone directly or indirectly, or acting in
AG reflected in its Articles of Association at the time of the
concert with third parties, holding shares in a company listed in
respective disclosure notification.
Switzerland or holding derivative rights related to shares in such
a company must notify the company and the SIX Swiss Exchange
(SIX) if the holding reaches, falls below or exceeds one of the
following thresholds: 3, 5, 10, 15, 20, 25, 331⁄3, 50 or 662⁄3% of
› Refer to ser-ag.com/en/resources/notifications-market-
participants/significant-shareholders.html for information about
disclosures under the FMIA
decide how voting rights are exercised are not required to notify
As a supplement to the mandatory disclosure requirements
the company and SIX if they reach, exceed or fall below the
according to the SIX Swiss Exchange Corporate Governance
above-mentioned thresholds.
Directive, the shareholders (acting in their own name or in their
Pursuant to the Swiss Code of Obligations, UBS Group AG
capacity as nominees for other investors or beneficial owners)
discloses
in
its financial statements the
identity of any
who were registered in the UBS share register with 3% or more
shareholder with a holding of more than 5% of the total share
of
the
total share capital of UBS Group AG as of
capital of UBS Group AG.
31 December 2020 or as of 31 December 2019 are listed in the
Shareholders subject to FMIA disclosure notifications
According to the mandatory FMIA disclosure notifications filed
Cross-shareholdings
with UBS Group AG and SIX, as of 31 December 2020, the
table above.
following entities held more than 3% of the total share capital
UBS Group AG has no cross-shareholdings where reciprocal
of UBS Group AG: Artisan Partners Limited Partnership,
ownership would be in excess of 5% of capital or voting rights
Milwaukee, which disclosed a holding of 3.15% on 18
with any other company.
November 2020; BlackRock Inc., New York, which disclosed a
holding of 4.70% on 26 May 2020; and Norges Bank, Oslo,
which disclosed a holding of 3.01% on 24 July 2019. As
registration in the UBS share register is optional, shareholders
crossing
the
aforementioned
thresholds
requiring
SIX
notification under the FMIA do not necessarily appear in the
table above.
0.100
11 Includes blocked and unblocked shares held by BoD members, including those held by related parties. No options were granted in 2020 and 2019. 22 At the 2020 AGM, Mark Hughes and Nathalie Rachou were
newly elected and David Sidwell, Isabelle Romy and Robert W. Scully did not stand for re-election.
11,,777722,,888844
22001199
422
423
423
Financial statements UBS Group AG standalone financial statements
Note 24 Share and option ownership of the members of the Board of Directors, the Group Executive Board and other
employees (continued)
Share ownership / entitlements of GEB members1
Name, function
Ralph A.J.G. Hamers, Group Chief Executive Officer
Sergio P. Ermotti, former Group Chief Executive Officer
Christian Bluhm, Group Chief Risk Officer
Markus U. Diethelm, Group General Counsel
Kirt Gardner, Group Chief Financial Officer
Suni Harford, President Asset Management
Robert Karofsky, Co-President Investment Bank
Sabine Keller-Busse, Group Chief Operating Officer and President UBS EMEA
Iqbal Khan, Co-President Global Wealth Management
Edmund Koh, President Asia Pacific
Axel P. Lehmann, President Personal & Corporate Banking and President UBS Switzerland
Tom Naratil, Co-President Global Wealth Management and President UBS Americas
Piero Novelli, Co-President Investment Bank
Markus Ronner, Group Chief Compliance and Governance Officer
TToottaall
oonn
3311 DDeecceemmbbeerr
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
Number of
vested shares
0
TToottaall nnuummbbeerr
ooff sshhaarreess
1144,,884411
Potentially
conferred
voting
rights in %
0.001
Number of
unvested
shares / at
risk2
14,841
-
-
-
-
1,862,480
582,787
2,150,003
218
440,953
706,845
698,402
696,500
532,643
352,329
63,211
627,748
577,606
639,087
423,778
742,546
712,342
421,930
380,340
690,537
522,202
1,383,854
1,307,554
660,240
599,156
302,584
214,850
0
617,858
458,426
165,223
129,807
0
0
357,621
492,476
349,834
315,922
68,253
0
337,062
183,104
331,677
277,978
770,780
609,477
408,897
429,652
130,097
68,097
--
--
44,,001122,,448833
558833,,000055
444400,,995533
11,,332244,,770033
11,,115566,,882288
886611,,772233
666622,,445500
335522,,332299
6633,,221111
998855,,336699
11,,007700,,008822
998888,,992211
773399,,770000
881100,,779999
771122,,334422
775588,,999922
556633,,444444
11,,002222,,221144
880000,,118800
22,,115544,,663344
11,,991177,,003311
11,,006699,,113377
11,,002288,,880088
443322,,668811
228822,,994477
-
0.227
0.035
0.025
0.079
0.065
0.051
0.037
0.021
0.004
0.059
0.061
0.059
0.042
0.048
0.040
0.045
0.032
0.061
0.045
0.128
0.108
0.064
0.058
0.026
0.016
0.675
7,821,828
3,537,520
1111,,335599,,334488
0.761
11 Includes all vested and unvested shares of GEB members, including those held by related parties. No options were held in 2020 and 2019 by any GEB member or any of its related parties. Refer to “Note 27
Employee benefits: variable compensation” in the “Consolidated financial statements” section of our Annual Report 2020 for more information. 22 Includes shares granted under variable compensation plans with
forfeiture provisions. LTIP values reflect the fair value awarded at grant. The actual number of shares vesting in the future will be calculated under the terms of the plans. Refer to “Group compensation” in the
“Compensation” section of this report for more information about the plans.
1133,,445500,,445599
5,114,942
8,335,517
22001199
424
424
Note 24 Share and option ownership of the members of the Board of Directors, the Group Executive Board and other
Note 25 Related parties
Related parties are defined under the Swiss Code of Obligations
as direct and indirect participants with voting rights of 20% or
more, management bodies (BoD and GEB), external auditors,
and direct and indirect investments in subsidiaries. Payables due
to members of the GEB and the external auditors are provided in
the table below. Amounts due from and due to subsidiaries are
provided on the face of the balance sheet.
Payables due to the members of the GEB
of which: Deferred Contingent Capital Plan
of which: other deferred compensation plans
Payables due to external auditors
USD million
CHF million
3311..1122..2200
31.12.19
3311..1122..2200
31.12.19
115555
6699
8866
00
178
76
101
0
113388
6622
7766
00
172
74
98
0
UBS Group AG standalone financial statements
employees (continued)
Share ownership / entitlements of GEB members1
Name, function
Ralph A.J.G. Hamers, Group Chief Executive Officer
Sergio P. Ermotti, former Group Chief Executive Officer
Christian Bluhm, Group Chief Risk Officer
Markus U. Diethelm, Group General Counsel
Kirt Gardner, Group Chief Financial Officer
Suni Harford, President Asset Management
Robert Karofsky, Co-President Investment Bank
Sabine Keller-Busse, Group Chief Operating Officer and President UBS EMEA
Iqbal Khan, Co-President Global Wealth Management
Edmund Koh, President Asia Pacific
Axel P. Lehmann, President Personal & Corporate Banking and President UBS Switzerland
Tom Naratil, Co-President Global Wealth Management and President UBS Americas
Piero Novelli, Co-President Investment Bank
Markus Ronner, Group Chief Compliance and Governance Officer
TToottaall
3311 DDeecceemmbbeerr
risk2
vested shares
Number of
TToottaall nnuummbbeerr
Potentially
conferred
voting
ooff sshhaarreess
rights in %
1144,,884411
0.001
1,862,480
2,150,003
44,,001122,,448833
Number of
unvested
shares / at
14,841
-
-
582,787
440,953
706,845
698,402
696,500
532,643
352,329
63,211
627,748
577,606
639,087
423,778
742,546
712,342
421,930
380,340
690,537
522,202
1,383,854
1,307,554
660,240
599,156
302,584
214,850
oonn
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
22002200
22001199
0
-
-
0
0
218
0
617,858
458,426
165,223
129,807
357,621
492,476
349,834
315,922
68,253
0
337,062
183,104
331,677
277,978
770,780
609,477
408,897
429,652
130,097
68,097
--
--
558833,,000055
444400,,995533
11,,332244,,770033
11,,115566,,882288
11,,007700,,008822
886611,,772233
666622,,445500
335522,,332299
6633,,221111
998855,,336699
998888,,992211
773399,,770000
881100,,779999
771122,,334422
775588,,999922
556633,,444444
11,,002222,,221144
880000,,118800
22,,115544,,663344
11,,991177,,003311
11,,006699,,113377
11,,002288,,880088
443322,,668811
228822,,994477
-
0.227
0.035
0.025
0.079
0.065
0.051
0.037
0.021
0.004
0.059
0.061
0.059
0.042
0.048
0.040
0.045
0.032
0.061
0.045
0.128
0.108
0.064
0.058
0.026
0.016
0.675
0.761
11 Includes all vested and unvested shares of GEB members, including those held by related parties. No options were held in 2020 and 2019 by any GEB member or any of its related parties. Refer to “Note 27
Employee benefits: variable compensation” in the “Consolidated financial statements” section of our Annual Report 2020 for more information. 22 Includes shares granted under variable compensation plans with
forfeiture provisions. LTIP values reflect the fair value awarded at grant. The actual number of shares vesting in the future will be calculated under the terms of the plans. Refer to “Group compensation” in the
“Compensation” section of this report for more information about the plans.
7,821,828
3,537,520
1111,,335599,,334488
8,335,517
5,114,942
1133,,445500,,445599
424
425
425
Financial statements
Ernst & Young Ltd
Aeschengraben 27
P.O. Box
CH-4002 Basle
Phone:
Fax:
www.ey.com/ch
+41 58 286 86 86
+41 58 286 86 00
To the General Meeting of
UBS Group AG, Zurich
Basel, 4 March 2021
Report of the statutory auditor on the financial statements
As statutory auditor, we have audited the financial statements of UBS Group AG, which comprise the
balance sheet, income statement and notes, for the year ended 31 December 2020.
Board of Directors’ responsibility
The Board of Directors is responsible for the preparation of the financial statements in accordance with
the requirements of Swiss law and the company’s articles of incorporation. This responsibility includes
designing, implementing and maintaining an internal control system relevant to the preparation of financial
statements that are free from material misstatement, whether due to fraud or error. The Board of Directors
is further responsible for selecting and applying appropriate accounting policies and making accounting
estimates that are reasonable in the circumstances.
Auditor’s responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted
our audit in accordance with Swiss law and Swiss Auditing Standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance whether the financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
In making those risk assessments, the auditor considers the internal control system relevant to the entity’s
preparation of the financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal
control system. An audit also includes evaluating the appropriateness of the accounting policies used and
the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the
financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements for the year ended 31 December 2020 comply with Swiss law and
the company’s articles of incorporation.
Report on key audit matters based on the circular 1/2015 of the Federal Audit Oversight Authority
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the financial statements of the current period. We have determined that there are no key audit
matters to communicate in our report.
426
2
Report on other legal requirements
We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA)
and independence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible
with our independence.
In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that
an internal control system exists, which has been designed for the preparation of financial statements
according to the instructions of the Board of Directors.
We further confirm that the proposed appropriation of available earnings complies with Swiss law and the
company’s articles of incorporation. We recommend that the financial statements submitted to you be
approved.
Ernst & Young Ltd
Maurice McCormick
Licensed audit expert
(Auditor in charge)
Bruno Patusi
Licensed audit expert
427
Financial statements Significant
regulated
subsidiary and
sub-group
information
6
Significant regulated subsidiary and sub-group information
Financial and regulatory key figures for our significant regulated
subsidiaries and sub-groups
UBS AG
(standalone)
USD million,
except where indicated
31.12.19
3311..1122..2200
UBS Switzerland AG
(standalone)
CHF million,
except where indicated
31.12.19
3311..1122..2200
UBS Europe SE
(consolidated)1
EUR million,
except where indicated
31.12.192
3311..1122..2200
UBS Americas Holding LLC
(consolidated)
USD million,
except where indicated
3311..1122..220033
31.12.194
As of or for the year ended
Financial information5,6,7
Income statement
Total operating income
Total operating expenses
Operating profit / (loss) before tax
Net profit / (loss)
Balance sheet
Total assets
Total liabilities
Total equity
Capital6,7,8,9
Common equity tier 1 capital
Additional tier 1 capital
Tier 1 capital
Total going concern capital
Tier 2 capital
Total gone concern loss-absorbing capacity
Total capital
Total loss-absorbing capacity
Risk-weighted assets and leverage ratio
denominator6,7,8,9
Risk-weighted assets
Leverage ratio denominator
Leverage ratio denominator (with temporary FINMA exemption)12
Supplementary leverage ratio denominator13
Capital and leverage ratios (%)6,7,8,9
Common equity tier 1 capital ratio
Tier 1 capital ratio
Going concern capital ratio
Total capital ratio
Total loss-absorbing capacity ratio
Tier 1 leverage ratio
Supplementary tier 1 leverage ratio13
Going concern leverage ratio
Going concern leverage ratio (with temporary FINMA exemption)12
Total loss-absorbing capacity leverage ratio
Gone concern capital coverage ratio
Liquidity9,14,15
High-quality liquid assets (billion)
Net cash outflows (billion)
Liquidity coverage ratio (%)16,17
1122,,995511
88,,337700
44,,558811
44,,553399
11,975
8,086
3,889
3,848
77,,118855
55,,559900
11,,559955
11,,227711
7,688
6,351
1,337
1,039
550099,,002244
445566,,662288
5522,,339966
478,946
427,242
51,705
331166,,882299
330044,,119944
1122,,663344
285,014
272,341
12,673
5500,,226699
1144,,443300
6644,,669999
6644,,669999
4455,,552200
49,521
11,958
61,479
61,479
1122,,223344
55,,117766
1177,,441100
1177,,441100
10,895
4,711
15,606
15,606
1100,,882244
10,915
111100,,221199
61,479
2288,,223344
26,521
11,,005544
887788
117766
116633
4488,,559911
4433,,889966
44,,669966
33,,770033
229900
33,,999933
33,,999933
997
810
186
188
46,247
41,756
4,490
3,691
290
3,981
3,981
11,,77884410
33,,999933
55,,777777
1,84010
3,981
5,821
330055,,557755
559955,,001177
559955,,001177
287,999
589,127
110077,,225533
333355,,225511
225544,,775577
99,667
302,304
1133,,117755
4411,,337766
15,146
41,924
1122,,667755
1100,,884422
11,,883333
997755
117722,,338855
114444,,110033
2288,,228833
1144,,338844
33,,004477
1177,,443311
773366
55,,66000011
1188,,116666
2233,,003311
6633,,992299
115544,,660099
115500,,001199
2222..55
2277..33
2288..44
3366..00
1111..33
1111..66
12,169
10,830
1,339
810
138,994
111,070
27,924
11,896
3,048
14,944
714
5,50011
15,658
20,444
54,057
127,290
22.0
27.6
29.0
37.8
11.7
2288..11
3300..33
3300..33
4433..88
99..77
24.4
26.3
26.3
38.4
9.5
1166..55
2211..22
1100..99
1100..99
113355..77
8844
5533
115599
17.2
23.1
10.4
74
54
137
1111..44
1166..22
2266..33
55..22
66..88
88..44
9922
6622
114488
10.9
15.7
26.6
5.2
8.8
67
52
130
1144..00
13.9
1144..99
16.0
1177
1111
115511
14
10
147
99
17
Other
Joint and several liability between UBS AG and UBS Switzerland AG
(billion)18
11 As a result of the cross-border merger of UBS Limited into UBS Europe SE effective 1 March 2019, UBS Europe SE became a significant regulated subsidiary of UBS Group AG. The size, scope and business model
of the merged entity is now materially different. 22 Comparative figures have been restated to align with the UBS Europe SE Pillar 3 report and other regulatory reports as submitted to the European Central Bank
(the ECB), which reflect the ECB’s recommendation to EU financial institutions to refrain from making capital distributions until the ECB changes its guidance on dividend payments. 33 UBS Americas Holding LLC,
as a designated category III bank, has been subject to a simplification of regulatory capital rules since 1 April 2020. The revisions simplify the framework for regulatory capital deductions and increase risk weights
for certain assets, impacting the CET1 capital ratio by 0.3% as of 31 December 2020. 44 Refer to the "Accounting and financial reporting" and "Consolidated financial statements" sections of this report for
information on the restatement of comparative information, where applicable. 55 UBS AG and UBS Switzerland AG financial information is prepared in accordance with Swiss GAAP (the FINMA Accounting
Ordinance, FINMA Circular 2020/1 and the Banking Ordinance) but does not represent financial statements under Swiss GAAP. 66 UBS Europe SE financial information is prepared in accordance with International
Financial Reporting Standards (IFRS) but does not represent financial statements under IFRS. Regulatory figures are based on applicable EU regulatory rules. 77 UBS Americas Holding LLC financial information
presented in the table is prepared in accordance with accounting principles generally accepted in the US (US GAAP) but does not represent financial statements under US GAAP. Regulatory figures are based on
applicable US Basel III rules. 88 For UBS AG and UBS Switzerland AG, based on applicable Swiss systemically relevant bank (SRB) framework. 99 Refer to the 31 December 2020 Pillar 3 report, available under
“Pillar 3 disclosures” at ubs.com/investors, for more information. 1100 Consists of positions that meet the conditions laid down in Art. 72a–b of the Capital Requirements Regulation (CRR) II with regard to
contractual, structural or legal subordination. 1111 Consists of eligible long-term debt that meets the conditions specified in 12 CFR 252.162 of the final TLAC rules. Total loss-absorbing capacity is the sum of tier 1
capital and eligible long-term debt. 1122 Refer to the “Regulatory and legal developments” and “Capital, liquidity and funding, and balance sheet” sections of this report for further details about the temporary
FINMA exemption. 1133 UBS Americas Holding LLC, as a designated category III bank, has been subject to supplementary leverage ratio (SLR) reporting since 1 April 2020. US regulatory authorities have temporarily
eased the requirements for the SLR, allowing for the exclusion of US Treasury securities and deposits at the Federal Reserve Banks from the SLR denominator through March 2021. This exclusion resulted in an
increase in the SLR of 170 bps on 31 December 2020. 1144 There was no local disclosure requirement for UBS Americas Holding LLC as of 31 December 2020 or 31 December 2019. 1155 For UBS Europe SE, figures
as of 31 December 2019 are based on a ten-month average, rather than a twelve-month average, as data produced on the same basis is only available for the period since the cross-border merger. 1166 In the
fourth quarter of 2020, the UBS AG liquidity coverage ratio (LCR) was 159%, remaining above the prudential requirements communicated by FINMA. 1177 In the fourth quarter of 2020, the liquidity coverage ratio
(LCR) of UBS Switzerland AG, which is a Swiss SRB, was 148%, remaining above the prudential requirement communicated by FINMA in connection with the Swiss Emergency Plan. 1188 Refer to the “Capital,
liquidity and funding, and balance sheet” sections of this report for more information about the joint and several liability. Under certain circumstances, the Swiss Banking Act and FINMA’s Banking Insolvency
Ordinance authorize FINMA to modify, extinguish or convert to common equity liabilities of a bank in connection with a resolution or insolvency of such bank.
430
430
UBS Group AG is a holding company and conducts substantially
all of its operations through UBS AG and subsidiaries thereof.
UBS Group AG and UBS AG have contributed a significant
portion of their respective capital to, and provide substantial
liquidity to, such subsidiaries. Many of these subsidiaries are
subject to regulations requiring compliance with minimum
capital, liquidity and similar requirements. The table in this
section summarizes the regulatory capital components and
capital ratios of our significant regulated subsidiaries and sub-
groups determined under the regulatory framework of each
subsidiary’s or sub-group’s home jurisdiction.
› Refer to “Capital and capital ratios of our significant regulated
subsidiaries” in the “Capital, liquidity and funding, and balance
sheet” section of this report for more information
› Refer to “Note 23 Restricted and transferred financial assets” in
the “Consolidated financial statements” section of this report for
more information.
Supervisory authorities generally have discretion to impose
higher requirements or to otherwise limit the activities of
subsidiaries. Supervisory authorities also may require entities to
measure capital and leverage ratios on a stressed basis and may
limit the ability of an entity to engage in new activities or take
capital actions based on the results of those tests.
In June 2020, the Federal Reserve Board released the results
of
(DFAST) and
its annual Dodd–Frank Act Stress Tests
Comprehensive Capital Analysis and Review (CCAR). UBS’s
intermediate holding company, UBS Americas Holding LLC,
exceeded minimum capital requirements under the severely
adverse scenario and the Federal Reserve Board did not object to
its capital plan. As a result, UBS Americas Holding will no longer
be subject to the qualitative assessment component of CCAR.
› Refer to the “Regulatory and legal developments” section of this
report for more information about the results of the annual
Comprehensive Capital Analysis and Review
Standalone regulatory information for UBS AG and UBS
Switzerland AG, as well as consolidated regulatory information
for UBS Europe SE and UBS Americas Holding LLC is provided in
the 31 December 2020 Pillar 3 report, available under “Pillar 3
disclosures” at ubs.com/investors.
Standalone financial statements for UBS Group AG as well as
standalone financial statements and regulatory information for
UBS AG and UBS Switzerland AG are available under “Holding
company and significant regulatory subsidiaries and sub-groups” at
ubs.com/investors.
Significant regulated subsidiary and sub-group information
Financial and regulatory key figures for our significant regulated
subsidiaries and sub-groups
UBS AG
(standalone)
USD million,
UBS Switzerland AG
(standalone)
CHF million,
UBS Europe SE
(consolidated)1
EUR million,
UBS Americas Holding LLC
(consolidated)
USD million,
except where indicated
except where indicated
except where indicated
except where indicated
3311..1122..2200
31.12.19
3311..1122..2200
31.12.19
3311..1122..2200
31.12.192
3311..1122..220033
31.12.194
As of or for the year ended
Financial information5,6,7
Income statement
Total operating income
Total operating expenses
Operating profit / (loss) before tax
Net profit / (loss)
Balance sheet
Total assets
Total liabilities
Total equity
Capital6,7,8,9
Common equity tier 1 capital
Additional tier 1 capital
Total going concern capital
Tier 1 capital
Tier 2 capital
Total capital
Total loss-absorbing capacity
denominator6,7,8,9
Risk-weighted assets
Leverage ratio denominator
1122,,667755
1100,,884422
11,,883333
997755
117722,,338855
114444,,110033
2288,,228833
1144,,338844
33,,004477
1177,,443311
773366
55,,66000011
1188,,116666
2233,,003311
6633,,992299
115544,,660099
115500,,001199
2222..55
2277..33
2288..44
3366..00
1111..33
1111..66
12,169
10,830
1,339
810
138,994
111,070
27,924
11,896
3,048
14,944
714
5,50011
15,658
20,444
54,057
127,290
22.0
27.6
29.0
37.8
11.7
1122,,995511
11,975
88,,337700
44,,558811
44,,553399
8,086
3,889
3,848
77,,118855
55,,559900
11,,559955
11,,227711
7,688
6,351
1,337
1,039
550099,,002244
445566,,662288
5522,,339966
478,946
427,242
51,705
331166,,882299
330044,,119944
1122,,663344
285,014
272,341
12,673
49,521
11,958
61,479
61,479
1122,,223344
55,,117766
1177,,441100
1177,,441100
10,895
4,711
15,606
15,606
111100,,221199
61,479
2288,,223344
26,521
11,,005544
887788
117766
116633
4488,,559911
4433,,889966
44,,669966
33,,770033
229900
33,,999933
33,,999933
997
810
186
188
46,247
41,756
4,490
3,691
290
3,981
3,981
11,,77884410
33,,999933
55,,777777
1,84010
3,981
5,821
5500,,226699
1144,,443300
6644,,669999
6644,,669999
4455,,552200
1166..55
2211..22
1100..99
1100..99
113355..77
8844
5533
115599
Total gone concern loss-absorbing capacity
1100,,882244
10,915
Risk-weighted assets and leverage ratio
Leverage ratio denominator (with temporary FINMA exemption)12
330055,,557755
559955,,001177
559955,,001177
287,999
589,127
110077,,225533
333355,,225511
225544,,775577
99,667
302,304
1133,,117755
4411,,337766
15,146
41,924
Supplementary leverage ratio denominator13
Capital and leverage ratios (%)6,7,8,9
Common equity tier 1 capital ratio
Tier 1 capital ratio
Going concern capital ratio
Total capital ratio
Total loss-absorbing capacity ratio
Tier 1 leverage ratio
Supplementary tier 1 leverage ratio13
Going concern leverage ratio
Going concern leverage ratio (with temporary FINMA exemption)12
Total loss-absorbing capacity leverage ratio
Gone concern capital coverage ratio
Liquidity9,14,15
High-quality liquid assets (billion)
Net cash outflows (billion)
Liquidity coverage ratio (%)16,17
Other
(billion)18
Joint and several liability between UBS AG and UBS Switzerland AG
17.2
23.1
10.4
74
54
137
1111..44
1166..22
2266..33
55..22
66..88
88..44
9922
6622
114488
10.9
15.7
26.6
5.2
8.8
67
52
130
99
17
2288..11
3300..33
3300..33
4433..88
99..77
24.4
26.3
26.3
38.4
9.5
1177
1111
115511
14
10
147
1144..00
13.9
1144..99
16.0
11 As a result of the cross-border merger of UBS Limited into UBS Europe SE effective 1 March 2019, UBS Europe SE became a significant regulated subsidiary of UBS Group AG. The size, scope and business model
of the merged entity is now materially different. 22 Comparative figures have been restated to align with the UBS Europe SE Pillar 3 report and other regulatory reports as submitted to the European Central Bank
(the ECB), which reflect the ECB’s recommendation to EU financial institutions to refrain from making capital distributions until the ECB changes its guidance on dividend payments. 33 UBS Americas Holding LLC,
as a designated category III bank, has been subject to a simplification of regulatory capital rules since 1 April 2020. The revisions simplify the framework for regulatory capital deductions and increase risk weights
for certain assets, impacting the CET1 capital ratio by 0.3% as of 31 December 2020. 44 Refer to the "Accounting and financial reporting" and "Consolidated financial statements" sections of this report for
information on the restatement of comparative information, where applicable. 55 UBS AG and UBS Switzerland AG financial information is prepared in accordance with Swiss GAAP (the FINMA Accounting
Ordinance, FINMA Circular 2020/1 and the Banking Ordinance) but does not represent financial statements under Swiss GAAP. 66 UBS Europe SE financial information is prepared in accordance with International
Financial Reporting Standards (IFRS) but does not represent financial statements under IFRS. Regulatory figures are based on applicable EU regulatory rules. 77 UBS Americas Holding LLC financial information
presented in the table is prepared in accordance with accounting principles generally accepted in the US (US GAAP) but does not represent financial statements under US GAAP. Regulatory figures are based on
applicable US Basel III rules. 88 For UBS AG and UBS Switzerland AG, based on applicable Swiss systemically relevant bank (SRB) framework. 99 Refer to the 31 December 2020 Pillar 3 report, available under
“Pillar 3 disclosures” at ubs.com/investors, for more information. 1100 Consists of positions that meet the conditions laid down in Art. 72a–b of the Capital Requirements Regulation (CRR) II with regard to
contractual, structural or legal subordination. 1111 Consists of eligible long-term debt that meets the conditions specified in 12 CFR 252.162 of the final TLAC rules. Total loss-absorbing capacity is the sum of tier 1
capital and eligible long-term debt. 1122 Refer to the “Regulatory and legal developments” and “Capital, liquidity and funding, and balance sheet” sections of this report for further details about the temporary
FINMA exemption. 1133 UBS Americas Holding LLC, as a designated category III bank, has been subject to supplementary leverage ratio (SLR) reporting since 1 April 2020. US regulatory authorities have temporarily
eased the requirements for the SLR, allowing for the exclusion of US Treasury securities and deposits at the Federal Reserve Banks from the SLR denominator through March 2021. This exclusion resulted in an
increase in the SLR of 170 bps on 31 December 2020. 1144 There was no local disclosure requirement for UBS Americas Holding LLC as of 31 December 2020 or 31 December 2019. 1155 For UBS Europe SE, figures
as of 31 December 2019 are based on a ten-month average, rather than a twelve-month average, as data produced on the same basis is only available for the period since the cross-border merger. 1166 In the
fourth quarter of 2020, the UBS AG liquidity coverage ratio (LCR) was 159%, remaining above the prudential requirements communicated by FINMA. 1177 In the fourth quarter of 2020, the liquidity coverage ratio
(LCR) of UBS Switzerland AG, which is a Swiss SRB, was 148%, remaining above the prudential requirement communicated by FINMA in connection with the Swiss Emergency Plan. 1188 Refer to the “Capital,
liquidity and funding, and balance sheet” sections of this report for more information about the joint and several liability. Under certain circumstances, the Swiss Banking Act and FINMA’s Banking Insolvency
Ordinance authorize FINMA to modify, extinguish or convert to common equity liabilities of a bank in connection with a resolution or insolvency of such bank.
430
431
431
Significant regulated subsidiary andsub-group information
Appendix
Alternative performance measures
Alternative performance measures
An alternative performance measure (an APM) is a financial measure of historical or future financial performance, financial position
or cash flows other than a financial measure defined or specified in the applicable recognized accounting standards or in other
applicable regulations. We report a number of APMs in the discussion of the financial and operating performance of the Group, our
business divisions and our Group Functions. We use APMs to provide a more complete picture of our operating performance and to
reflect management’s view of the fundamental drivers of our business results. A definition of each APM, the method used to
calculate it and the information content are presented in the table below. Our APMs may qualify as non-GAAP measures as defined
by US Securities and Exchange Commission (SEC) regulations.
AAPPMM llaabbeell
CCaallccuullaattiioonn
IInnffoorrmmaattiioonn ccoonntteenntt
Invested assets (USD and CHF)
– GWM, P&C, AM
Client assets (USD and CHF)
– GWM, P&C
Recurring income (USD)
– GWM
Recurring net fee income
(USD and CHF)
– GWM, P&C
Transaction-based income
(USD and CHF)
– GWM, P&C
Cost / income ratio (%)
Calculated as the sum of managed fund assets,
managed institutional assets, discretionary and advisory
wealth management portfolios, fiduciary deposits, time
deposits, savings accounts, and wealth management
securities or brokerage accounts.
Calculated as the sum of invested assets and other
assets held purely for transactional purposes or custody
only.
This measure provides information about the volume
of client assets managed by or deposited with UBS for
investment purposes.
This measure provides information about the volume
of client assets managed by or deposited with UBS for
investment purposes, including other assets held
purely for transactional purposes or custody only.
Calculated as the total of net interest income and
recurring net fee income.
This measure provides information about the amount
of recurring net interest and fee income.
Calculated as the total of fees for services provided on
an ongoing basis, such as portfolio management fees,
asset-based investment fund fees and custody fees,
which are generated on client assets, and
administrative fees for accounts (as well as credit card
fees for GWM).
Calculated as the total of the non-recurring portion of
net fee and commission income, mainly composed of
brokerage and transaction-based investment fund fees,
as well as fees for payment and foreign exchange
transactions (and credit card fees for P&C), together
with other net income from financial instruments
measured at fair value through profit or loss.
Calculated as operating expenses divided by operating
income before credit loss expense or release.
This measure provides information about the amount
of recurring net fee income.
This measure provides information about the amount
of the non-recurring portion of net fee and
commission income.
This measure provides information about the
efficiency of the business by comparing operating
expenses with gross income.
Gross margin on invested assets (bps)
– GWM, AM
Calculated as operating income before credit loss
expense or release (annualized as applicable) divided by
average invested assets.
This measure provides information about the
operating income before credit loss expense or release
of the business in relation to invested assets.
Net interest margin (bps)
– P&C
Calculated as net interest income (annualized as
applicable) divided by average loans.
Net margin on invested assets (bps)
– GWM, AM
Calculated as operating profit before tax (annualized as
applicable) divided by average invested assets.
Business volume for Personal
Banking (CHF)
– P&C
Calculated as the sum of client assets and loans.
This measure provides information about the
profitability of the business by calculating the
difference between the price charged for lending and
the cost of funding, relative to loan value.
This measure provides information about the
operating profit before tax of the business in relation
to invested assets.
This measure provides information about the volume
of client assets and loans.
Net new business volume for Personal
Banking (CHF)
– P&C
Calculated as the sum of net inflows and outflows of
client assets and loans during a specific period
(annualized as applicable).
This measure provides information about the business
volume as a result of net new business volume flows
during a specific period.
Net new business volume growth for
Personal Banking (%)
– P&C
Calculated as the sum of net inflows and outflows of
client assets and loans during a specific period
(annualized as applicable) divided by total business
volume / client assets at the beginning of the period.
This measure provides information about the growth
of the business volume as a result of net new business
volume flows during a specific period.
432
432
Appendix
Alternative performance measures
Alternative performance measures
An alternative performance measure (an APM) is a financial measure of historical or future financial performance, financial position
or cash flows other than a financial measure defined or specified in the applicable recognized accounting standards or in other
applicable regulations. We report a number of APMs in the discussion of the financial and operating performance of the Group, our
business divisions and our Group Functions. We use APMs to provide a more complete picture of our operating performance and to
reflect management’s view of the fundamental drivers of our business results. A definition of each APM, the method used to
calculate it and the information content are presented in the table below. Our APMs may qualify as non-GAAP measures as defined
by US Securities and Exchange Commission (SEC) regulations.
AAPPMM llaabbeell
CCaallccuullaattiioonn
IInnffoorrmmaattiioonn ccoonntteenntt
Client assets (USD and CHF)
Calculated as the sum of invested assets and other
This measure provides information about the volume
– GWM, P&C
assets held purely for transactional purposes or custody
of client assets managed by or deposited with UBS for
only.
investment purposes, including other assets held
purely for transactional purposes or custody only.
Recurring income (USD)
Calculated as the total of net interest income and
This measure provides information about the amount
– GWM
recurring net fee income.
of recurring net interest and fee income.
Recurring net fee income
Calculated as the total of fees for services provided on
This measure provides information about the amount
an ongoing basis, such as portfolio management fees,
of recurring net fee income.
(USD and CHF)
– GWM, P&C
Transaction-based income
Calculated as the total of the non-recurring portion of
This measure provides information about the amount
(USD and CHF)
– GWM, P&C
net fee and commission income, mainly composed of
of the non-recurring portion of net fee and
brokerage and transaction-based investment fund fees,
commission income.
asset-based investment fund fees and custody fees,
which are generated on client assets, and
administrative fees for accounts (as well as credit card
fees for GWM).
as well as fees for payment and foreign exchange
transactions (and credit card fees for P&C), together
with other net income from financial instruments
measured at fair value through profit or loss.
Cost / income ratio (%)
Calculated as operating expenses divided by operating
This measure provides information about the
income before credit loss expense or release.
efficiency of the business by comparing operating
expenses with gross income.
Gross margin on invested assets (bps)
Calculated as operating income before credit loss
This measure provides information about the
– GWM, AM
expense or release (annualized as applicable) divided by
operating income before credit loss expense or release
average invested assets.
of the business in relation to invested assets.
Net interest margin (bps)
Calculated as net interest income (annualized as
This measure provides information about the
– P&C
applicable) divided by average loans.
profitability of the business by calculating the
difference between the price charged for lending and
the cost of funding, relative to loan value.
Net margin on invested assets (bps)
Calculated as operating profit before tax (annualized as
This measure provides information about the
– GWM, AM
applicable) divided by average invested assets.
operating profit before tax of the business in relation
Business volume for Personal
Calculated as the sum of client assets and loans.
This measure provides information about the volume
to invested assets.
of client assets and loans.
Net new business volume for Personal
Calculated as the sum of net inflows and outflows of
This measure provides information about the business
client assets and loans during a specific period
volume as a result of net new business volume flows
(annualized as applicable).
during a specific period.
Net new business volume growth for
Calculated as the sum of net inflows and outflows of
This measure provides information about the growth
Personal Banking (%)
– P&C
client assets and loans during a specific period
of the business volume as a result of net new business
(annualized as applicable) divided by total business
volume flows during a specific period.
volume / client assets at the beginning of the period.
Banking (CHF)
– P&C
Banking (CHF)
– P&C
432
AAPPMM llaabbeell
Net profit growth (%)
Pre-tax profit growth (%)
CCaallccuullaattiioonn
IInnffoorrmmaattiioonn ccoonntteenntt
Calculated as the change in net profit attributable to
shareholders from continuing operations between
current and comparison periods divided by net profit
attributable to shareholders from continuing
operations of the comparison period.
Calculated as the change in net profit before tax
attributable to shareholders from continuing
operations between current and comparison periods
divided by net profit before tax attributable to
shareholders from continuing operations of the
comparison period.
This measure provides information about profit
growth in comparison with the prior period.
This measure provides information about pre-tax
profit growth in comparison with the prior period.
Recurring income as a percentage of
income (%)
– GWM
Calculated as net interest income and recurring net
fee income divided by operating income before credit
loss expense or release.
This measure provides information about the
proportion of recurring income in operating income.
Return on common equity tier 1
capital (%)
Calculated as annualized net profit attributable to
shareholders divided by average common equity tier 1
capital.
This measure provides information about the
profitability of the business in relation to common
equity tier 1 capital.
Invested assets (USD and CHF)
Calculated as the sum of managed fund assets,
This measure provides information about the volume
– GWM, P&C, AM
managed institutional assets, discretionary and advisory
of client assets managed by or deposited with UBS for
Return on equity (%)
wealth management portfolios, fiduciary deposits, time
investment purposes.
deposits, savings accounts, and wealth management
securities or brokerage accounts.
Return on attributed equity (%)
Calculated as annualized net profit attributable to
shareholders divided by average equity attributable to
shareholders.
Calculated as annualized business division operating
profit before tax divided by average attributed equity.
This measure provides information about the
profitability of the business in relation to equity.
This measure provides information about the
profitability of the business divisions in relation to
attributed equity.
Return on leverage ratio denominator,
gross (%)
Calculated as annualized operating income before
credit loss expense or release divided by average
leverage ratio denominator.
This measure provides information about the revenues
of the business in relation to leverage ratio
denominator.
Return on risk-weighted
assets, gross (%)
Return on tangible equity (%)
Total book value per share
(USD and CHF1)
Tangible book value per share
(USD and CHF1)
Loan penetration (%)
– GWM
Mandate penetration (%)
– GWM
Net new mandates (USD)
– GWM
Calculated as annualized operating income before
credit loss expense or release divided by average risk-
weighted assets.
Calculated as annualized net profit attributable to
shareholders divided by average equity attributable to
shareholders less average goodwill and intangible
assets.
This measure provides information about the revenues
of the business in relation to risk-weighted assets.
This measure provides information about the
profitability of the business in relation to tangible
equity.
Calculated as equity attributable to shareholders
divided by the number of shares outstanding.
This measure provides information about net assets
on a per-share basis.
Calculated as equity attributable to shareholders less
goodwill and intangible assets divided by the number
of shares outstanding.
Calculated as loans divided by invested assets.
This measure provides information about tangible net
assets on a per-share basis.
This measure provides information about the loan
volume in relation to invested assets.
Calculated as mandate volume divided by invested
assets.
This measure provides information about mandate
volume in relation to invested assets.
Calculated as the sum of the net amount of mandate
inflows and outflows during a specific period.
This measure provides information about the
development of assets related to mandates during a
specific period as a result of net new mandate flows
and excludes movements due to market performance,
foreign exchange translation, dividends, interest and
fees.
This measure provides information about the
development of invested assets during a specific
period as a result of net new money flows and
excludes movements due to market performance,
foreign exchange translation, dividends, interest and
fees.
Net new money (USD)
– GWM, AM
Calculated as the sum of the net amount of inflows
and outflows of invested assets (as defined in UBS
policy) recorded during a specific period.
Impaired loan portfolio as a percentage
of total loan portfolio, gross (%)
– GWM, P&C
Secured loan portfolio as a percentage
of total loan portfolio, gross (%)
– P&C
Calculated as impaired loan portfolio divided by total
gross loan portfolio.
This measure provides information about the
proportion of impaired loan portfolio in the total gross
loan portfolio.
Calculated as secured loan portfolio divided by total
gross loan portfolio.
This measure provides information about the
proportion of secured loan portfolio in the total gross
loan portfolio.
433
433
Appendix
AAPPMM llaabbeell
CCaallccuullaattiioonn
IInnffoorrmmaattiioonn ccoonntteenntt
Active Digital Banking clients in
Personal Banking (%)
– P&C
Active Digital Banking clients in
Corporate & Institutional Clients (%)
– P&C
Calculated as the number of clients (within the
meaning of numbers of unique business relationships
operated by Personal Banking), excluding persons
under the age of 15, clients who do not have a
private account, clients domiciled outside Switzerland,
and clients who have defaulted on loans or credit
facilities, who have logged on at least once within the
past month divided by the total number of clients
(within the aforementioned meaning).
Calculated as the number of clients (within the
meaning of numbers of unique business relationships
or legal entities operated by Corporate & Institutional
Clients), excluding clients that do not have an
account, mono-product clients and clients that have
defaulted on loans or credit facilities, which have
logged on at least once within the past month divided
by the total number of clients (within the
aforementioned meaning).
This measure provides information about the
proportion of active Digital Banking clients in the total
number of UBS clients (within the aforementioned
meaning) who are serviced by Personal Banking.
This measure provides information about the
proportion of active Digital Banking clients in the total
number of UBS clients (within the aforementioned
meaning) which are serviced by Corporate &
Institutional Clients.
Mobile Banking log-in share in Personal
Banking (%)
– P&C
Calculated as the number of Mobile Banking app
log-ins divided by total log-ins via E-Banking and the
Mobile Banking app in Personal Banking.
This measure provides information about the
proportion of Mobile Banking app log-ins in the total
number of log-ins via E-Banking and the Mobile
Banking app in Personal Banking.
11 Total book value per share and tangible book value per share in Swiss francs are calculated based on a translation of equity under our US dollar presentation currency.
434
434
Appendix
AAPPMM llaabbeell
CCaallccuullaattiioonn
IInnffoorrmmaattiioonn ccoonntteenntt
Active Digital Banking clients in
Calculated as the number of clients (within the
This measure provides information about the
Personal Banking (%)
– P&C
meaning of numbers of unique business relationships
proportion of active Digital Banking clients in the total
operated by Personal Banking), excluding persons
number of UBS clients (within the aforementioned
under the age of 15, clients who do not have a
meaning) who are serviced by Personal Banking.
Active Digital Banking clients in
Calculated as the number of clients (within the
This measure provides information about the
Corporate & Institutional Clients (%)
meaning of numbers of unique business relationships
proportion of active Digital Banking clients in the total
– P&C
or legal entities operated by Corporate & Institutional
number of UBS clients (within the aforementioned
Clients), excluding clients that do not have an
meaning) which are serviced by Corporate &
account, mono-product clients and clients that have
Institutional Clients.
private account, clients domiciled outside Switzerland,
and clients who have defaulted on loans or credit
facilities, who have logged on at least once within the
past month divided by the total number of clients
(within the aforementioned meaning).
defaulted on loans or credit facilities, which have
logged on at least once within the past month divided
by the total number of clients (within the
aforementioned meaning).
Mobile Banking log-in share in Personal
Calculated as the number of Mobile Banking app
This measure provides information about the
Banking (%)
– P&C
log-ins divided by total log-ins via E-Banking and the
proportion of Mobile Banking app log-ins in the total
Mobile Banking app in Personal Banking.
number of log-ins via E-Banking and the Mobile
Banking app in Personal Banking.
11 Total book value per share and tangible book value per share in Swiss francs are calculated based on a translation of equity under our US dollar presentation currency.
Abbreviations frequently used in our financial reports
A
ABS
AGM
A-IRB
AIV
ALCO
AMA
AML
AoA
APM
ARR
ARS
ASF
AT1
AuM
B
BCBS
BIS
BoD
C
CAO
CCAR
CCF
CCP
CCR
CCRC
CCyB
asset-backed securities
Annual General Meeting of
shareholders
advanced internal
ratings-based
alternative investment
vehicle
Asset and Liability
Committee
advanced measurement
approach
anti-money laundering
Articles of Association
alternative performance
measure
alternative reference rate
auction rate securities
available stable funding
additional tier 1
assets under management
Basel Committee on
Banking Supervision
Bank for International
Settlements
Board of Directors
Capital Adequacy
Ordinance
Comprehensive Capital
Analysis and Review
credit conversion factor
central counterparty
counterparty credit risk
Corporate Culture and
Responsibility Committee
countercyclical buffer
CDO
CDS
CEA
CEM
CEO
CET1
CFO
CFTC
CGU
CHF
CIC
CIO
CLS
CMBS
C&ORC
CRD IV
CRM
CST
CVA
D
DBO
DCCP
DJSI
DM
DOJ
DTA
DVA
E
EAD
EB
EBA
EC
ECB
ECL
EGM
EIR
EL
EMEA
EOP
EPE
EPS
ESG
ETD
ETF
EU
EUR
EURIBOR
ESR
EVE
EY
F
FA
FCA
FCT
FINMA
FMIA
collateralized debt
obligation
credit default swap
Commodity Exchange Act
current exposure method
Chief Executive Officer
common equity tier 1
Chief Financial Officer
US Commodity Futures
Trading Commission
cash-generating unit
Swiss franc
Corporate & Institutional
Clients
Chief Investment Office
Continuous Linked
Settlement
commercial mortgage-
backed security
Compliance & Operational
Risk Control
EU Capital Requirements
Directive of 2013
credit risk mitigation (credit
risk) or comprehensive risk
measure (market risk)
combined stress test
credit valuation adjustment
defined benefit obligation
Deferred Contingent
Capital Plan
Dow Jones Sustainability
Indices
discount margin
US Department of Justice
deferred tax asset
debit valuation adjustment
exposure at default
Executive Board
European Banking Authority
European Commission
European Central Bank
expected credit loss
Extraordinary General
Meeting of shareholders
effective interest rate
expected loss
Europe, Middle East and
Africa
Equity Ownership Plan
expected positive exposure
earnings per share
environmental, social and
governance
exchange-traded derivatives
exchange-traded fund
European Union
euro
Euro Interbank Offered Rate
environmental and social
risk
economic value of equity
Ernst & Young Ltd
financial advisor
UK Financial Conduct
Authority
foreign currency translation
Swiss Financial Market
Supervisory Authority
Swiss Financial Market
Infrastructure Act
434
435
435
Appendix
Abbreviations frequently used in our financial reports (continued)
Financial Stability Board
Swiss Federal Tax
Administration
funding valuation
adjustment
fair value through other
comprehensive income
fair value through profit or
loss
foreign exchange
generally accepted
accounting principles
Group Compliance,
Regulatory & Governance
pound sterling
gross domestic product
Group Executive Board
greenhouse gas
Group Internal Audit
Group Managing Director
Global Reporting Initiative
government sponsored
entities
global systemically
important bank
high-quality liquid assets
human resources
International Accounting
Standards
International Accounting
Standards Board
interbank offered rate
International Financial
Reporting Interpretations
Committee
IFRS
IHC
IMA
IMM
IRB
IRC
IRRBB
ISDA
K
KRT
L
LAS
LCR
LGD
LIBOR
LLC
LoD
LRD
LTIP
LTV
M
M&A
MiFID II
MRT
N
NAV
NII
NSFR
NYSE
O
OCA
OCI
ORF
OTC
P
PD
PIT
P&L
POCI
PRA
PRV
R
RBA
RBC
RbM
REIT
RMBS
RniV
RoAE
RoCET1
RoTE
RoU
rTSR
RV
RW
RWA
International Financial
Reporting Standards
intermediate holding
company
internal models approach
internal model method
internal ratings-based
incremental risk charge
interest rate risk in the
banking book
International Swaps and
Derivatives Association
Key Risk Taker
liquidity-adjusted stress
liquidity coverage ratio
loss given default
London Interbank Offered
Rate
limited liability company
lines of defense
leverage ratio denominator
Long-Term Incentive Plan
loan-to-value
mergers and acquisitions
Markets in Financial
Instruments Directive II
Material Risk Taker
net asset value
net interest income
net stable funding ratio
New York Stock Exchange
own credit adjustment
other comprehensive
income
operational risk framework
over-the-counter
probability of default
point in time
profit or loss
purchased or originated
credit-impaired
UK Prudential Regulation
Authority
positive replacement value
role-based allowance
risk-based capital
risk-based monitoring
real estate investment trust
residential mortgage-
backed securities
risks not in VaR
return on attributed equity
return on CET1 capital
return on tangible equity
right-of-use
relative total shareholder
return
replacement value
risk weight
risk-weighted assets
FSB
FTA
FVA
FVOCI
FVTPL
FX
G
GAAP
GCRG
GBP
GDP
GEB
GHG
GIA
GMD
GRI
GSE
G-SIB
H
HQLA
HR
I
IAS
IASB
IBOR
IFRIC
436
436
Appendix
FSB
FTA
FVA
FX
G
GAAP
GCRG
GBP
GDP
GEB
GHG
GIA
GMD
GRI
GSE
H
HQLA
HR
I
IAS
IASB
IBOR
IFRIC
436
Abbreviations frequently used in our financial reports (continued)
Abbreviations frequently used in our financial reports (continued)
S
SA
SA-CCR
SAR
SBC
SDG
SE
SEC
SEEOP
SFT
standardized approach
standardized approach for
counterparty credit risk
stock appreciation right or
Special Administrative
Region
Swiss Bank Corporation
Sustainable Development
Goal
structured entity
US Securities and Exchange
Commission
Senior Executive Equity
Ownership Plan
securities financing
transaction
SI
SICR
SIX
SME
SMF
SNB
SPPI
SRB
SRM
SVaR
sustainable investing or
sustainable investments
significant increase in credit
risk
SIX Swiss Exchange
small and medium-sized
entities
Senior Management
Function
Swiss National Bank
solely payments of principal
and interest
systemically relevant bank
specific risk measure
stressed value-at-risk
T
TBTF
TCFD
TLAC
U
UoM
USD
V
VaR
VAT
too big to fail
Task Force on Climate-
related Financial Disclosures
total loss-absorbing capacity
units of measure
US dollar
value-at-risk
value added tax
Financial Stability Board
Swiss Federal Tax
Administration
funding valuation
adjustment
FVOCI
fair value through other
comprehensive income
FVTPL
fair value through profit or
loss
foreign exchange
generally accepted
accounting principles
Group Compliance,
Regulatory & Governance
pound sterling
gross domestic product
Group Executive Board
greenhouse gas
Group Internal Audit
Group Managing Director
Global Reporting Initiative
government sponsored
entities
high-quality liquid assets
human resources
International Accounting
Standards
International Accounting
Standards Board
interbank offered rate
International Financial
Reporting Interpretations
Committee
International Financial
Reporting Standards
intermediate holding
company
internal models approach
internal model method
internal ratings-based
incremental risk charge
interest rate risk in the
banking book
International Swaps and
Derivatives Association
Key Risk Taker
liquidity-adjusted stress
liquidity coverage ratio
loss given default
LIBOR
London Interbank Offered
Rate
mergers and acquisitions
Markets in Financial
Instruments Directive II
MRT
Material Risk Taker
net asset value
net interest income
net stable funding ratio
New York Stock Exchange
IFRS
IHC
IMA
IMM
IRB
IRC
IRRBB
ISDA
K
KRT
L
LAS
LCR
LGD
LLC
LoD
LRD
LTIP
LTV
M
M&A
MiFID II
N
NAV
NII
NSFR
NYSE
O
OCA
OCI
ORF
OTC
P
PD
PIT
P&L
POCI
PRA
PRV
R
RBA
RBC
RbM
REIT
RoTE
RoU
rTSR
RV
RW
RWA
own credit adjustment
other comprehensive
income
operational risk framework
over-the-counter
probability of default
point in time
profit or loss
purchased or originated
credit-impaired
UK Prudential Regulation
Authority
positive replacement value
role-based allowance
risk-based capital
risk-based monitoring
real estate investment trust
return on tangible equity
right-of-use
relative total shareholder
return
replacement value
risk weight
risk-weighted assets
G-SIB
global systemically
important bank
limited liability company
RMBS
residential mortgage-
lines of defense
leverage ratio denominator
Long-Term Incentive Plan
RniV
RoAE
backed securities
risks not in VaR
return on attributed equity
loan-to-value
RoCET1
return on CET1 capital
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.
437
437
Appendix
Information sources
Reporting publications
Other information
Website
The “Investor Relations” website at ubs.com/investors provides
the following information about UBS: news releases; financial
information,
including results-related filings with the US
Securities and Exchange Commission (the SEC); information for
shareholders, including UBS share price charts, as well as data
and dividend information, and for bondholders; the UBS
corporate calendar; and presentations by management for
investors and financial analysts. Information is available online in
English, with some information also available in German.
Results presentations
Our quarterly results presentations are webcast live. Playbacks
of most
from
can
ubs.com/presentations.
presentations
downloaded
be
Messaging service
Email alerts to news about UBS can be subscribed for under “UBS
News Alert” at ubs.com/global/en/investor-relations/contact/
investor-services.html. Messages are sent in English, German,
French or Italian, with an option to select theme preferences for
such alerts.
Form 20-F and other submissions to the US Securities and
Exchange Commission
We file periodic reports and submit other information about UBS
to the US Securities and Exchange Commission (the SEC).
Principal among these filings is the annual report on Form 20-F,
filed pursuant to the US Securities Exchange Act of 1934. The
filing of Form 20-F is structured as a wrap-around document.
Most sections of the filing can be satisfied by referring to the
combined UBS Group AG and UBS AG annual report. However,
there is a small amount of additional information in Form 20-F
that is not presented elsewhere and is particularly targeted at
readers in the US. Readers are encouraged to refer to this
additional disclosure. Any document that we file with the SEC
to
is available on
ubs.com/investors for more information.
the SEC’s website:
sec.gov. Refer
Annual publications
Annual Report (SAP No. 80531): Published in English, this single-
volume report provides descriptions of: our Group strategy and
performance; the strategy and performance of the business
divisions and Group Functions; risk, capital and funding, and
balance sheet management; corporate governance, corporate
including
responsibility and our compensation framework,
information about compensation for the Board of Directors and
the Group Executive Board members; and financial information,
including the financial statements.
Geschäftsbericht (SAP No. 80531): This publication provides a
translation into German of selected sections of our Annual
Report.
Annual Review (SAP No. 80530): This booklet contains key
information about our strategy and performance, with a focus
on corporate responsibility at UBS. It is published in English,
German, French and Italian.
Compensation Report (SAP No. 82307): This report discusses our
compensation framework and provides
information about
compensation for the Board of Directors and the Group
Executive Board members. It is available in English and German.
Quarterly publications
The quarterly financial report provides an update on our strategy
and performance for the respective quarter. It is available in
English.
How to order publications
The annual and quarterly publications are available in .pdf
format at ubs.com/investors, under “Financial information,” and
printed copies can be requested from UBS free of charge. For
annual publications, refer to the “Investor services” section at
ubs.com/investors. Alternatively, they can be ordered by quoting
the SAP number and the language preference, where applicable,
from UBS AG, F4UK–AUL, P.O. Box, CH-8098 Zurich,
Switzerland.
438
438
Appendix
Information sources
Reporting publications
Annual publications
Other information
Website
Annual Report (SAP No. 80531): Published in English, this single-
The “Investor Relations” website at ubs.com/investors provides
volume report provides descriptions of: our Group strategy and
the following information about UBS: news releases; financial
performance; the strategy and performance of the business
information,
including results-related filings with the US
divisions and Group Functions; risk, capital and funding, and
Securities and Exchange Commission (the SEC); information for
balance sheet management; corporate governance, corporate
shareholders, including UBS share price charts, as well as data
responsibility and our compensation framework,
including
and dividend information, and for bondholders; the UBS
information about compensation for the Board of Directors and
corporate calendar; and presentations by management for
the Group Executive Board members; and financial information,
investors and financial analysts. Information is available online in
including the financial statements.
English, with some information also available in German.
Geschäftsbericht (SAP No. 80531): This publication provides a
translation into German of selected sections of our Annual
Results presentations
Report.
Our quarterly results presentations are webcast live. Playbacks
Annual Review (SAP No. 80530): This booklet contains key
of most
presentations
can
be
downloaded
from
information about our strategy and performance, with a focus
ubs.com/presentations.
on corporate responsibility at UBS. It is published in English,
German, French and Italian.
Messaging service
Compensation Report (SAP No. 82307): This report discusses our
Email alerts to news about UBS can be subscribed for under “UBS
compensation framework and provides
information about
News Alert” at ubs.com/global/en/investor-relations/contact/
compensation for the Board of Directors and the Group
investor-services.html. Messages are sent in English, German,
Executive Board members. It is available in English and German.
French or Italian, with an option to select theme preferences for
such alerts.
The quarterly financial report provides an update on our strategy
Form 20-F and other submissions to the US Securities and
and performance for the respective quarter. It is available in
Exchange Commission
We file periodic reports and submit other information about UBS
to the US Securities and Exchange Commission (the SEC).
Principal among these filings is the annual report on Form 20-F,
The annual and quarterly publications are available in .pdf
filed pursuant to the US Securities Exchange Act of 1934. The
format at ubs.com/investors, under “Financial information,” and
filing of Form 20-F is structured as a wrap-around document.
printed copies can be requested from UBS free of charge. For
Most sections of the filing can be satisfied by referring to the
annual publications, refer to the “Investor services” section at
combined UBS Group AG and UBS AG annual report. However,
ubs.com/investors. Alternatively, they can be ordered by quoting
there is a small amount of additional information in Form 20-F
the SAP number and the language preference, where applicable,
that is not presented elsewhere and is particularly targeted at
from UBS AG, F4UK–AUL, P.O. Box, CH-8098 Zurich,
readers in the US. Readers are encouraged to refer to this
Switzerland.
additional disclosure. Any document that we file with the SEC
is available on
the SEC’s website:
sec.gov. Refer
to
ubs.com/investors for more information.
Quarterly publications
English.
How to order publications
Cautionary Statement Regarding Forward-Looking Statements | This report contains statements that constitute “forward-looking statements,” including
but not limited to management’s outlook for UBS’s financial performance and statements relating to the anticipated effect of transactions and strategic
initiatives on UBS’s business and future development. While these forward-looking statements represent UBS’s judgments and expectations concerning the
matters described, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from UBS’s
expectations. The outbreak of COVID-19 and the measures taken in response to the pandemic have had and may continue to have a significant adverse effect
on global economic activity, and an adverse effect on the credit profile of some of our clients and other market participants, which has resulted in and may
continue to increase credit loss expense and credit impairments. In addition, we face heightened operational risks due to remote working arrangements,
including risks to supervisory and surveillance controls, as well as increased fraud and data security risks. The unprecedented scale of the measures taken to
respond to the pandemic as well as the uncertainty surrounding vaccine supply, distribution, and efficacy against mutated virus strains create significantly
greater uncertainty about forward-looking statements in addition to the factors that generally affect our businesses, which include, but are not limited to: (i)
the degree to which UBS is successful in the ongoing execution of its strategic plans, including its cost reduction and efficiency initiatives and its ability to
manage its levels of risk-weighted assets (RWA) and leverage ratio denominator (LRD), liquidity coverage ratio and other financial resources, including changes
in RWA assets and liabilities arising from higher market volatility and other changes related to the COVID-19 pandemic; (ii) the degree to which UBS is
successful in implementing changes to its businesses to meet changing market, regulatory and other conditions; (iii) the continuing low or negative interest rate
environment in Switzerland and other jurisdictions; (iv) developments (including as a result of the COVID-19 pandemic) in the macroeconomic climate and in
the markets in which UBS operates or to which it is exposed, including movements in securities prices or liquidity, credit spreads, and currency exchange rates,
and the effects of economic conditions, market developments, and geopolitical tensions, and changes to national trade policies on the financial position or
creditworthiness of UBS’s clients and counterparties as well as on client sentiment and levels of activity; (v) changes in the availability of capital and funding,
including any changes in UBS’s credit spreads and ratings, as well as availability and cost of funding to meet requirements for debt eligible for total loss-
absorbing capacity (TLAC); (vi) changes in or the implementation of financial legislation and regulation in Switzerland, the US, the UK, the European Union and
other financial centers that have imposed, or resulted in, or may do so in the future, more stringent or entity-specific capital, TLAC, leverage ratio, net stable
funding ratio, liquidity and funding requirements, heightened operational resilience requirements, incremental tax requirements, additional levies, limitations
on permitted activities, constraints on remuneration, constraints on transfers of capital and liquidity and sharing of operational costs across the Group or other
measures, and the effect these will or would have on UBS’s business activities; (vii) the degree to which UBS is successful in implementing further changes to its
legal structure to improve its resolvability and meet related regulatory requirements and the potential need to make further changes to the legal structure or
booking model of UBS Group in response to legal and regulatory requirements, proposals in Switzerland and other jurisdictions for mandatory structural reform
of banks or systemically important institutions or to other external developments, and the extent to which such changes will have the intended effects; (viii)
UBS’s ability to maintain and improve its systems and controls for the detection and prevention of money laundering and compliance with sanctions to meet
evolving regulatory requirements and expectations, in particular in the US; (ix) the uncertainty arising from the UK’s exit from the EU; (x) changes in UBS’s
competitive position, including whether differences in regulatory capital and other requirements among the major financial centers will adversely affect UBS’s
ability to compete in certain lines of business; (xi) changes in the standards of conduct applicable to our businesses that may result from new regulations or
new enforcement of existing standards, including measures to impose new and enhanced duties when interacting with customers and in the execution and
handling of customer transactions; (xii) the liability to which UBS may be exposed, or possible constraints or sanctions that regulatory authorities might impose
on UBS, due to litigation, contractual claims and regulatory investigations, including the potential for disqualification from certain businesses, potentially large
fines or monetary penalties, or the loss of licenses or privileges as a result of regulatory or other governmental sanctions, as well as the effect that litigation,
regulatory and similar matters have on the operational risk component of our RWA as well as the amount of capital available for return to shareholders; (xiii)
the effects on UBS’s cross-border banking business of tax or regulatory developments and of possible changes in UBS’s policies and practices relating to this
business; (xiv) UBS’s ability to retain and attract the employees necessary to generate revenues and to manage, support and control its businesses, which may
be affected by competitive factors; (xv) changes in accounting or tax standards or policies, and determinations or interpretations affecting the recognition of
gain or loss, the valuation of goodwill, the recognition of deferred tax assets and other matters; (xvi) UBS’s ability to implement new technologies and business
methods, including digital services and technologies, and ability to successfully compete with both existing and new financial service providers, some of which
may not be regulated to the same extent; (xvii) limitations on the effectiveness of UBS’s internal processes for risk management, risk control, measurement and
modeling, and of financial models generally; (xviii) the occurrence of operational failures, such as fraud, misconduct, unauthorized trading, financial crime,
cyberattacks and systems failures, the risk of which is increased while COVID-19 control measures require large portions of the staff of both UBS and its service
providers to work remotely; (xix) restrictions on the ability of UBS Group AG to make payments or distributions, including due to restrictions on the ability of its
subsidiaries to make loans or distributions, directly or indirectly, or, in the case of financial difficulties, due to the exercise by FINMA or the regulators of UBS’s
operations in other countries of their broad statutory powers in relation to protective measures, restructuring and liquidation proceedings; (xx) the degree to
which changes in regulation, capital or legal structure, financial results or other factors may affect UBS’s ability to maintain its stated capital return objective;
and (xxi) the effect that these or other factors or unanticipated events may have on our reputation and the additional consequences that this may have on our
business and performance. The sequence in which the factors above are presented is not indicative of their likelihood of occurrence or the potential magnitude
of their consequences. Our business and financial performance could be affected by other factors identified in our past and future filings and reports, including
those filed with the SEC. More detailed information about those factors is set forth in documents furnished by UBS and filings made by UBS with the SEC,
including UBS’s Annual Report on Form 20-F for the year ended 31 December 2020. UBS is not under any obligation to (and expressly disclaims any obligation
to) update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise.
Rounding | Numbers presented throughout this report may not add up precisely to the totals provided in the tables and text. Percentages and percent changes
are calculated on the basis of unrounded figures. Information about absolute changes between reporting periods, which is provided in text and which can be
derived from figures displayed in the tables, is calculated on a rounded basis.
Tables | Within tables, blank fields generally indicate that the field is not applicable or not meaningful, or that information is not available as of the relevant
date or for the relevant period. Zero values generally indicate that the respective figure is zero on an actual or rounded basis. Percentage changes are presented
as a mathematical calculation of the change between periods.
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439
UBS Group AG
P.O. Box
CH-8098 Zurich
ubs.com