UBS Group AG
Annual Report 2021
Our external reporting approach
Our external reporting approach
Our external reporting approach
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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
The scope and content of our external reports are determined
regulations promulgated by the Swiss Financial Market
by Swiss legal and regulatory requirements, accounting
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regulatory requirements, as well as by our financial reporting
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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 the Swiss Financial Market
Supervisory Authority (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.
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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
At the center of our external reporting approach is the
provide a combined annual report for UBS Group AG and
annual report of UBS Group AG, which consists of disclosures
UBS AG consolidated, which additionally
the
for UBS Group AG and its consolidated subsidiaries. We also
consolidated financial statements of UBS AG, as well as
provide a combined annual report for UBS Group AG and
supplemental disclosures required under SEC regulations, and
the
UBS AG consolidated, which additionally
is the basis for our SEC Form 20-F filing.
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.
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
the
UBS AG consolidated, which additionally
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.
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Sustainability Report 2021
Sustainability Report 2021
In accordance with GRI Standards
In accordance with GRI Standards
UBS AG
Standalone financial statements and regulatory information
for the year ended 31 December 2021
31 December 2021 Pillar 3 Report
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Sustainability Report
Standalone reports of
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Pillar 3 Report
Sustainability Report 2021
Sustainability Report 2021
In accordance with GRI Standards
In accordance with GRI Standards
UBS AG
Standalone financial statements and regulatory information
for the year ended 31 December 2021
31 December 2021 Pillar 3 Report
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UBS Group AG
Annual Report 2021
Annual Reports
UBS Group AG
Annual Report 2021
Annual Reports
Sustainability Report
Annual Reports
Standalone reports of
significant group entities
Sustainability Report
Pillar 3 Report
Annual Reports
Sustainability Report
Standalone reports of significant group entities
The Sustainability Report, which will be available from
Sustainability Report
11 March 2022, provides disclosures on environmental, social
and governance topics for UBS Group.
The Sustainability Report, which will be available from
11 March 2022, provides disclosures on environmental, social
Standalone reports of significant group entities
and governance topics for UBS Group.
The Sustainability Report, which will be available from
11 March 2022, provides disclosures on environmental, social
and governance topics for UBS Group.
We publish separate standalone reports of significant group
Standalone reports of significant group entities
entities for UBS AG and UBS Switzerland AG. Selected
financial and regulatory key figures for these entities, as well
We publish separate standalone reports of significant group
as for UBS Europe SE and UBS Americas Holding LLC, are also
entities for UBS AG and UBS Switzerland AG. Selected
included in our annual reports. The UBS Europe SE 2021
financial and regulatory key figures for these entities, as well
financial statements and complementary disclosures will be
as for UBS Europe SE and UBS Americas Holding LLC, are also
published on our website in the first half of 2022.
included in our annual reports. The UBS Europe SE 2021
financial statements and complementary disclosures will be
Pillar 3 Report
published on our website in the first half of 2022.
We publish separate standalone reports of significant group
entities for UBS AG and UBS Switzerland AG. Selected
financial and regulatory key figures for these entities, as well
as for UBS Europe SE and UBS Americas Holding LLC, are also
included in our annual reports. The UBS Europe SE 2021
financial statements and complementary disclosures will be
published on our website in the first half of 2022.
The 2021 Annual Reports (the UBS Group AG Annual
Annual Reports
Report 2021 and the combined UBS Group AG and UBS AG
Annual Report 2021) include the consolidated financial
The 2021 Annual Reports (the UBS Group AG Annual
statements of UBS Group AG and UBS AG, respectively, and
Report 2021 and the combined UBS Group AG and UBS AG
The 2021 Annual Reports (the UBS Group AG Annual
provide comprehensive information about our firm, including
Annual Report 2021) include the consolidated financial
Report 2021 and the combined UBS Group AG and UBS AG
our strategy, businesses, financial and operating performance,
statements of UBS Group AG and UBS AG, respectively, and
Annual Report 2021) include the consolidated financial
and other key information. The reports are presented in US
provide comprehensive information about our firm, including
statements of UBS Group AG and UBS AG, respectively, and
dollars. The UBS Group AG Annual Report 2021 is partly
our strategy, businesses, financial and operating performance,
provide comprehensive information about our firm, including
translated into German, with the German translation available
and other key information. The reports are presented in US
our strategy, businesses, financial and operating performance,
as of 11 March 2022 under “Annual reporting” at
dollars. The UBS Group AG Annual Report 2021 is partly
and other key information. The reports are presented in US
ubs.com/investors.
translated into German, with the German translation available
dollars. The UBS Group AG Annual Report 2021 is partly
The consolidated financial statements of UBS Group AG
as of 11 March 2022 under “Annual reporting” at
translated into German, with the German translation available
and UBS AG have been prepared in accordance with
ubs.com/investors.
as of 11 March 2022 under “Annual reporting” at
International Financial Reporting Standards
(IFRS). The
The consolidated financial statements of UBS Group AG
ubs.com/investors.
sections within “Risk, capital, liquidity and funding, and
and UBS AG have been prepared in accordance with
The consolidated financial statements of UBS Group AG
balance sheet“ include certain audited financial information,
(IFRS). The
International Financial Reporting Standards
and UBS AG have been prepared in accordance with
which forms part of the consolidated financial statements. The
sections within “Risk, capital, liquidity and funding, and
International Financial Reporting Standards
(IFRS). The
Annual Reports also include the statutory financial statements
balance sheet“ include certain audited financial information,
sections within “Risk, capital, liquidity and funding, and
of UBS Group AG, which are the basis for our appropriation
which forms part of the consolidated financial statements. The
balance sheet“ include certain audited financial information,
of retained earnings and a potential distribution of dividends,
Annual Reports also include the statutory financial statements
which forms part of the consolidated financial statements. The
subject to shareholder approval at the Annual General
of UBS Group AG, which are the basis for our appropriation
Annual Reports also include the statutory financial statements
Meeting.
of retained earnings and a potential distribution of dividends,
of UBS Group AG, which are the basis for our appropriation
subject to shareholder approval at the Annual General
of retained earnings and a potential distribution of dividends,
Meeting.
We provide our combined Annual Report, the Pillar 3 Report, standalone reports of significant group
subject to shareholder approval at the Annual General
entities and the Sustainability Report as web disclosures at ubs.com/investors. Alternatively, we provide
Meeting.
the QR code on the right for rapid access to the above-mentioned reports and further information on
We provide our combined Annual Report, the Pillar 3 Report, standalone reports of significant group
investor relations-related topics.
entities and the Sustainability Report as web disclosures at ubs.com/investors. Alternatively, we provide
the QR code on the right for rapid access to the above-mentioned reports and further information on
investor relations-related topics.
We provide our combined Annual Report, the Pillar 3 Report, standalone reports of significant group
entities and the Sustainability Report as web disclosures at ubs.com/investors. Alternatively, we provide
the QR code on the right for rapid access to the above-mentioned reports and further information on
investor relations-related topics.
The Pillar 3 Report provides detailed quantitative and
Pillar 3 Report
qualitative information about risk, capital, leverage and
liquidity for UBS Group and prudential key figures and
The Pillar 3 Report provides detailed quantitative and
regulatory
standalone,
qualitative information about risk, capital, leverage and
UBS Switzerland AG standalone, UBS Europe SE consolidated
liquidity for UBS Group and prudential key figures and
and UBS Americas Holding LLC consolidated.
standalone,
regulatory
UBS Switzerland AG standalone, UBS Europe SE consolidated
information
and UBS Americas Holding LLC consolidated.
The Pillar 3 Report provides detailed quantitative and
qualitative information about risk, capital, leverage and
liquidity for UBS Group and prudential key figures and
standalone,
regulatory
UBS Switzerland AG standalone, UBS Europe SE consolidated
and UBS Americas Holding LLC consolidated.
for UBS AG
for UBS AG
for UBS AG
Pillar 3 Report
information
information
Our external reporting approach
The scope and content of our external reports are determined
At the center of our external reporting approach is the
by Swiss legal and regulatory requirements, accounting
annual report of UBS Group AG, which consists of disclosures
standards, relevant stock and debt listing rules, including
for UBS Group AG and its consolidated subsidiaries. We also
regulations promulgated by the Swiss Financial Market
provide a combined annual report for UBS Group AG and
Supervisory Authority (FINMA), the SIX Swiss Exchange, the
UBS AG consolidated, which additionally
includes
the
US Securities and Exchange Commission (the SEC) and other
consolidated financial statements of UBS AG, as well as
regulatory requirements, as well as by our financial reporting
supplemental disclosures required under SEC regulations, and
policies.
is the basis for our SEC Form 20-F filing.
A firm driven by purpose
Our world is constantly changing. People are redefining the way they live, work and interact. Expec-
tations from our clients, investors, employees and society are also evolving, and so should we. In April
2021, after a wide-ranging review, including cross-firm brainstorming and debate, we launched our
unified purpose, which will guide our decisions going forward.
Reimagining
It is about proactively finding ways to
fundamentally change how the world
looks at finance and investing.
The power of investing
We know finance has a powerful influence
on the world. We believe it is something we
can leverage as a positive force – for individuals,
for society and for our planet.
Annual Reports
Sustainability Report
The 2021 Annual Reports (the UBS Group AG Annual
The Sustainability Report, which will be available from
Report 2021 and the combined UBS Group AG and UBS AG
11 March 2022, provides disclosures on environmental, social
Annual Report 2021) include the consolidated financial
and governance topics for UBS Group.
statements of UBS Group AG and UBS AG, respectively, and
provide comprehensive information about our firm, including
Standalone reports of significant group entities
our strategy, businesses, financial and operating performance,
and other key information. The reports are presented in US
We publish separate standalone reports of significant group
dollars. The UBS Group AG Annual Report 2021 is partly
entities for UBS AG and UBS Switzerland AG. Selected
translated into German, with the German translation available
financial and regulatory key figures for these entities, as well
as of 11 March 2022 under “Annual reporting” at
as for UBS Europe SE and UBS Americas Holding LLC, are also
ubs.com/investors.
included in our annual reports. The UBS Europe SE 2021
The consolidated financial statements of UBS Group AG
financial statements and complementary disclosures will be
and UBS AG have been prepared in accordance with
published on our website in the first half of 2022.
International Financial Reporting Standards
(IFRS). The
sections within “Risk, capital, liquidity and funding, and
Pillar 3 Report
balance sheet“ include certain audited financial information,
which forms part of the consolidated financial statements. The
The Pillar 3 Report provides detailed quantitative and
Annual Reports also include the statutory financial statements
qualitative information about risk, capital, leverage and
of UBS Group AG, which are the basis for our appropriation
liquidity for UBS Group and prudential key figures and
of retained earnings and a potential distribution of dividends,
regulatory
information
for UBS AG
standalone,
subject to shareholder approval at the Annual General
UBS Switzerland AG standalone, UBS Europe SE consolidated
Meeting.
and UBS Americas Holding LLC consolidated.
We provide our combined Annual Report, the Pillar 3 Report, standalone reports of significant group
entities and the Sustainability Report as web disclosures at ubs.com/investors. Alternatively, we provide
the QR code on the right for rapid access to the above-mentioned reports and further information on
investor relations-related topics.
Reimagining the power of investing.
Connecting people for a better world.
Connecting people
It is about more than just us. It is about convening
a global ecosystem that connects people and
businesses to ideas, partners and opportunities –
so they can achieve more together.
For a better world
It is about contributing, in both the
short and long term, to a fairer
society, a more prosperous economy
and a healthier environment.
What our purpose means for our stakeholders
For clients, both existing and
potential, it means that our
focus is clear. They know who
we are. They know what we
stand for. They know what is
important to us beyond
traditional financing. And they
know our promise: to deliver
products and services that are
personalized, relevant, on-time
and seamless.
For investors, it means there is
clarity behind our decisions.
All initiatives are aligned with
our purpose and executed
with discipline.
For employees, it means that
everyone – from those who
advise clients, to those who
research investments, to those
who manage technology
platforms – knows why we do
what we do, and how they can
contribute to our purpose and
use it to drive decision making.
For society, it means that our role
is broader than finance. We act
responsibly and are committed to
our communities, to sustainability
and to supporting the world
in tackling its biggest challenges.
ubs.com/purpose
Our approach to long-term value creation
As of or for the year ended 31 December 2021
What is put into the equation
Input
Financial capital
• 15.0% common equity tier 1 (CET1) capital ratio
• 4.24% CET1 leverage ratio
• 5.7% going concern leverage ratio
• USD 104.8 billion total loss-absorbing capacity
• USD 45.3 billion CET1 capital
Relationships and intellectual capital
• 160 years of experience in banking
• Presence in major financial centers worldwide
• ~10% of our revenue (USD 3.9 billion) spent on technology in 2021
• Automation, simplification and digitalization of processes
• Dedicated research, differentiated insight and content offerings, and
bespoke solutions
Human capital
• 71,385 employees (FTE) in 50 countries
• 9,363 new hires in 2021 (>1,700 in junior talent programs), and a
workforce with an average of 8 years of service
• 60% men, 40% women, with an aspiration for women to hold 30% of
Director level and above roles by 2025
• A high-performing workforce driven to create positive impact for clients,
colleagues, and their communities
• A collaborative culture and inclusive work environment
• Training and career development to help ensure employees are ready for a
more agile future
Social and natural capital
• Committed to net zero across all operations
(scope 1, 2 and 3 emissions) by 2050
• 221 employees (FTE) globally work in the field of sustainability and impact
• UBS Optimus Foundation: a foundation that makes it possible to engage
in impactful philanthropy, which is linked to a global wealth manager, the
UBS Global Philanthropy Services team and several donor-advised fund
entities
• Sustainability and climate risks standards governing client and vendor
relationships worldwide
• An ISO 14001-certified environmental management system
What we do
Business Activities
The results we deliver
How our stakeholders benefit
The impact we create
Purpose
Reimagining the power of investing.
Connecting people for a better world.
Investors
• USD 2.06 diluted earnings per share
• 17.5% return on CET1 capital
• USD 4,596 billion invested assets
• 73.6% cost / income ratio
Clients
Client promise
Personalized
Relevant
On-time
Seamless
Strategic imperatives
Clients, Connections,
Contributors
Focus
What we offer
Wealth and asset management services, along with personal,
corporate and investment banking capabilities
Society and environment
• USD 7.5 billion net profit attributable to shareholders
• USD 0.50 proposed dividend per share for the 2021 financial year
• Increased value for our investors through attractive risk-adjusted returns
and sustainable performance, targeting cost- and capital-efficient growth
• USD 2.6 billion of our shares were bought back in 2021
• We intend to buy back up to USD 5 billion of shares by the
end of 2022
• Streamlined and simplified interactions through digital tools and platforms,
• Long-term relationships built on mutual trust and integrity
such as UBS Neo, key4 and wealth management platforms
• Access to tailored financial advice, solutions and services from around
• A USD 4.6 trillion investment ecosystem, bringing thought leadership, products
the globe; striving for attractive and risk-adjusted investment
and investable solutions to individuals and businesses around the world
performance
• Partnership for a seamless client service accompanying clients all through their lives
• Improved satisfaction through the offering of personalized,
• 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
customized and relevant products and services, as well as highly
appreciated and well-perceived support during the pandemic
• Services accessible across various channels – traditionally through our
branches, and also increasingly through our constantly evolving
remote and digital offering
• An outstanding value proposition for our clients – understanding their needs
and expectations, focusing on convenience and personalization, and serving
their best interests 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
• 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
Employees
countries
survey scores
in the UK
• Numerous business and employer awards that highlight our innovative
• Strong talent management processes mean employees can grow and
• An inclusive culture where diversity in gender, race, ethnicity and other
solutions and expertise
develop, building satisfying careers
factors is valued and appreciated
• A commitment to equal pay, confirmed by equal salary certifications in multiple
• Employee flexibility, including hybrid work options, promotes engage-
• Employees are sought-after talent as a result of our multi-faceted approach
ment, increased productivity and commitment
to talent development and learning
• An engaged and committed workforce, as evidenced by regular feedback and
• First wave of the Agile@UBS program that will transform how we work
• Employees worldwide benefit from working for a high-quality, responsible
and increase our speed in finding solutions for clients
employer
• Women hold 26.7% of Director and above roles
• Health and well-being initiatives foster resilience and ensure we
• A workplace that offers flexibility, career growth and holistic support for
• Ethnic minorities hold 20.1% Director and above roles in the US and 21.3%
employees’ health and well-being
• >1 million learning activities build skills, digital and agile capabilities
• Commitments to fair pay and people management ensure employees
maintain a cohesive culture
• Wide recognition as an employer of choice
have equal opportunities to achieve success
• USD 251 billion in sustainability-focus and impact investments (5.5% of total
• 9.9% exposure to carbon-related assets of our total customer lending
• Impact of our net-zero commitment
• USD 11.6 billion private clients money in SDG-related impact investments
• 92% total reduction of our greenhouse gas footprint from the 2004
bar and inspiring others to join
invested assets)
foundations
are skills-based)
• USD 59 million donated to local programs by UBS, including affiliated
• 140,478 hours invested by UBS staff in community projects (54% of hours
• USD 161 million donations raised by UBS Optimus Foundation in 2021
(including USD 14.7 million of matching funds donated by UBS)
• 100% of electricity sourced from renewable energy
exposure
baseline year
selected programs
Foundation
• Almost 680,000 young people and adults across the regions in which
we operate benefited from strategic community investments
• USD 108 million in grants by UBS Optimus Foundation to carefully
• 4.6 million vulnerable people received support thanks to UBS Optimus
• Setting standards across the industry, challenging ourselves to raise the
• Contributing as a taxpayer and an employer
• Within Switzerland, our size, scale and reputation contribute to economic
stability and reliability
• Supporting the transition to a low-carbon world
• Helping clients and employees to maximize their philanthropic impact
Our approach to long-term value creation
As of or for the year ended 31 December 2021
What is put into the equation
What we do
The results we deliver
How our stakeholders benefit
The impact we create
Financial capital
• 15.0% common equity tier 1 (CET1) capital ratio
• 4.24% CET1 leverage ratio
• 5.7% going concern leverage ratio
• USD 104.8 billion total loss-absorbing capacity
• USD 45.3 billion CET1 capital
Relationships and intellectual capital
• 160 years of experience in banking
• Presence in major financial centers worldwide
• ~10% of our revenue (USD 3.9 billion) spent on technology in 2021
• Automation, simplification and digitalization of processes
• Dedicated research, differentiated insight and content offerings, and
bespoke solutions
Human capital
• 71,385 employees (FTE) in 50 countries
• 9,363 new hires in 2021 (>1,700 in junior talent programs), and a
workforce with an average of 8 years of service
• 60% men, 40% women, with an aspiration for women to hold 30% of
Director level and above roles by 2025
• A high-performing workforce driven to create positive impact for clients,
colleagues, and their communities
• A collaborative culture and inclusive work environment
• Training and career development to help ensure employees are ready for a
more agile future
Social and natural capital
• Committed to net zero across all operations
(scope 1, 2 and 3 emissions) by 2050
• 221 employees (FTE) globally work in the field of sustainability and impact
• UBS Optimus Foundation: a foundation that makes it possible to engage
in impactful philanthropy, which is linked to a global wealth manager, the
UBS Global Philanthropy Services team and several donor-advised fund
entities
relationships worldwide
• Sustainability and climate risks standards governing client and vendor
• An ISO 14001-certified environmental management system
Output
Investors
Purpose
Reimagining the power of investing.
Connecting people for a better world.
Vision
Convene THE global ecosystem
for investing where thought
leadership is impactful, people
and ideas are connected, and
opportunities are brought to life.
Technology
Simplification & Efficiency
Culture
• USD 7.5 billion net profit attributable to shareholders
• USD 0.50 proposed dividend per share for the 2021 financial year
• Increased value for our investors through attractive risk-adjusted returns
• USD 2.06 diluted earnings per share
• 17.5% return on CET1 capital
• USD 4,596 billion invested assets
• 73.6% cost / income ratio
Clients
• USD 2.6 billion of our shares were bought back in 2021
• We intend to buy back up to USD 5 billion of shares by the
end of 2022
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, key4 and wealth management platforms
• Access to tailored financial advice, solutions and services from around
• A USD 4.6 trillion investment ecosystem, bringing thought leadership, products
the globe; striving for attractive and risk-adjusted investment
and investable solutions to individuals and businesses around the world
performance
• Partnership for a seamless client service accompanying clients all through their lives
• Improved satisfaction through the offering of personalized,
• 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
customized and relevant products and services, as well as highly
appreciated and well-perceived support during the pandemic
• Services accessible across various channels – traditionally through our
branches, and also increasingly through our constantly evolving
remote and digital offering
• An outstanding value proposition for our clients – understanding their needs
and expectations, focusing on convenience and personalization, and serving
their best interests 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
• 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
Employees
• Numerous business and employer awards that highlight our innovative
• Strong talent management processes mean employees can grow and
• An inclusive culture where diversity in gender, race, ethnicity and other
solutions and expertise
develop, building satisfying careers
factors is valued and appreciated
• A commitment to equal pay, confirmed by equal salary certifications in multiple
• Employee flexibility, including hybrid work options, promotes engage-
• Employees are sought-after talent as a result of our multi-faceted approach
countries
ment, increased productivity and commitment
to talent development and learning
• An engaged and committed workforce, as evidenced by regular feedback and
• First wave of the Agile@UBS program that will transform how we work
• Employees worldwide benefit from working for a high-quality, responsible
survey scores
and increase our speed in finding solutions for clients
employer
• Women hold 26.7% of Director and above roles
• Health and well-being initiatives foster resilience and ensure we
• A workplace that offers flexibility, career growth and holistic support for
• Ethnic minorities hold 20.1% Director and above roles in the US and 21.3%
in the UK
maintain a cohesive culture
• Wide recognition as an employer of choice
employees’ health and well-being
• >1 million learning activities build skills, digital and agile capabilities
• Commitments to fair pay and people management ensure employees
have equal opportunities to achieve success
Wealth and asset management services, along with personal,
corporate and investment banking capabilities
Society and environment
• USD 251 billion in sustainability-focus and impact investments (5.5% of total
• 9.9% exposure to carbon-related assets of our total customer lending
• Impact of our net-zero commitment
invested assets)
• USD 11.6 billion private clients money in SDG-related impact investments
• 92% total reduction of our greenhouse gas footprint from the 2004
bar and inspiring others to join
• USD 59 million donated to local programs by UBS, including affiliated
foundations
• 140,478 hours invested by UBS staff in community projects (54% of hours
are skills-based)
• USD 161 million donations raised by UBS Optimus Foundation in 2021
(including USD 14.7 million of matching funds donated by UBS)
• 100% of electricity sourced from renewable energy
exposure
baseline year
selected programs
Foundation
• Almost 680,000 young people and adults across the regions in which
we operate benefited from strategic community investments
• USD 108 million in grants by UBS Optimus Foundation to carefully
• 4.6 million vulnerable people received support thanks to UBS Optimus
• Setting standards across the industry, challenging ourselves to raise the
• Contributing as a taxpayer and an employer
• Within Switzerland, our size, scale and reputation contribute to economic
stability and reliability
• Supporting the transition to a low-carbon world
• Helping clients and employees to maximize their philanthropic impact
Our approach to long-term value creation
As of or for the year ended 31 December 2021
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
• 15.0% common equity tier 1 (CET1) capital ratio
• 4.24% CET1 leverage ratio
• 5.7% going concern leverage ratio
• USD 104.8 billion total loss-absorbing capacity
• USD 45.3 billion CET1 capital
Relationships and intellectual capital
• 160 years of experience in banking
• Presence in major financial centers worldwide
• ~10% of our revenue (USD 3.9 billion) spent on technology in 2021
• Automation, simplification and digitalization of processes
• Dedicated research, differentiated insight and content offerings, and
bespoke solutions
Human capital
• 71,385 employees (FTE) in 50 countries
• 9,363 new hires in 2021 (>1,700 in junior talent programs), and a
workforce with an average of 8 years of service
• 60% men, 40% women, with an aspiration for women to hold 30% of
Director level and above roles by 2025
• A high-performing workforce driven to create positive impact for clients,
colleagues, and their communities
• A collaborative culture and inclusive work environment
• Training and career development to help ensure employees are ready for a
more agile future
Social and natural capital
• Committed to net zero across all operations
(scope 1, 2 and 3 emissions) by 2050
• 221 employees (FTE) globally work in the field of sustainability and impact
• UBS Optimus Foundation: a foundation that makes it possible to engage
in impactful philanthropy, which is linked to a global wealth manager, the
UBS Global Philanthropy Services team and several donor-advised fund
entities
relationships worldwide
• Sustainability and climate risks standards governing client and vendor
• An ISO 14001-certified environmental management system
Investors
• USD 2.06 diluted earnings per share
• 17.5% return on CET1 capital
• USD 4,596 billion invested assets
• 73.6% cost / income ratio
Clients
Employees
countries
survey scores
in the UK
invested assets)
foundations
are skills-based)
Society and environment
• USD 7.5 billion net profit attributable to shareholders
• USD 0.50 proposed dividend per share for the 2021 financial year
• USD 2.6 billion of our shares were bought back in 2021
• We intend to buy back up to USD 5 billion of shares by the
end of 2022
• 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
such as UBS Neo, key4 and wealth management platforms
• Access to tailored financial advice, solutions and services from around
• A USD 4.6 trillion investment ecosystem, bringing thought leadership, products
and investable solutions to individuals and businesses around the world
the globe; striving for attractive and risk-adjusted investment
performance
• Partnership for a seamless client service accompanying clients all through their lives
• Improved satisfaction through the offering of personalized,
• 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
customized and relevant products and services, as well as highly
appreciated and well-perceived support during the pandemic
• Services accessible across various channels – traditionally through our
branches, and also increasingly through our constantly evolving
remote and digital offering
• An outstanding value proposition for our clients – understanding their needs
and expectations, focusing on convenience and personalization, and serving
their best interests 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
• 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
• Numerous business and employer awards that highlight our innovative
• Strong talent management processes mean employees can grow and
• An inclusive culture where diversity in gender, race, ethnicity and other
solutions and expertise
develop, building satisfying careers
factors is valued and appreciated
• A commitment to equal pay, confirmed by equal salary certifications in multiple
• Employee flexibility, including hybrid work options, promotes engage-
• Employees are sought-after talent as a result of our multi-faceted approach
ment, increased productivity and commitment
to talent development and learning
• An engaged and committed workforce, as evidenced by regular feedback and
• First wave of the Agile@UBS program that will transform how we work
• Employees worldwide benefit from working for a high-quality, responsible
and increase our speed in finding solutions for clients
employer
• Women hold 26.7% of Director and above roles
• Health and well-being initiatives foster resilience and ensure we
• A workplace that offers flexibility, career growth and holistic support for
• Ethnic minorities hold 20.1% Director and above roles in the US and 21.3%
maintain a cohesive culture
• Wide recognition as an employer of choice
employees’ health and well-being
• >1 million learning activities build skills, digital and agile capabilities
• Commitments to fair pay and people management ensure employees
have equal opportunities to achieve success
• USD 251 billion in sustainability-focus and impact investments (5.5% of total
• 9.9% exposure to carbon-related assets of our total customer lending
• Impact of our net-zero commitment
exposure
• Setting standards across the industry, challenging ourselves to raise the
• USD 11.6 billion private clients money in SDG-related impact investments
• 92% total reduction of our greenhouse gas footprint from the 2004
bar and inspiring others to join
• USD 59 million donated to local programs by UBS, including affiliated
baseline year
• 140,478 hours invested by UBS staff in community projects (54% of hours
• USD 161 million donations raised by UBS Optimus Foundation in 2021
(including USD 14.7 million of matching funds donated by UBS)
• 100% of electricity sourced from renewable energy
• Almost 680,000 young people and adults across the regions in which
we operate benefited from strategic community investments
• USD 108 million in grants by UBS Optimus Foundation to carefully
selected programs
• 4.6 million vulnerable people received support thanks to UBS Optimus
Foundation
• Contributing as a taxpayer and an employer
• Within Switzerland, our size, scale and reputation contribute to economic
stability and reliability
• Supporting the transition to a low-carbon world
• Helping clients and employees to maximize their philanthropic impact
Contents
Letter to shareholders
2
7 Highlights of the 2021 financial year
8 Our key figures
10 Our Board of Directors
12 Our Group Executive Board
14 Our evolution
4 Corporate governance
and compensation
184 Corporate governance
222 Compensation
1 Our strategy, business model and
environment
5 Financial
statements
268 Consolidated financial statements
403
Standalone financial statements
6 Significant regulated subsidiary and sub-
group information
426
Financial and regulatory key figures for our significant
regulated subsidiaries and sub-groups
A Appendix
430 Alternative performance measures
433 Abbreviations frequently used in our financial reports
436
437 Cautionary statement
Information sources
Targets, aspirations and capital guidance
16 Our strategy
20
21 Our businesses
33 Our environment
38 How we create value for our stakeholders
56
Regulation and supervision
Regulatory and legal developments
Risk factors
59
63
2 Financial and
operating performance
Personal & Corporate Banking
76 Accounting and financial reporting
77 Group performance
84 Global Wealth Management
87
90 Asset Management
Investment Bank
92
94 Group Functions
95
Selected financial information of our business
divisions and Group Functions
3 Risk, capital, liquidity and funding,
and balance sheet
Risk management and control
98
150 Capital, liquidity and funding, and balance sheet
Annual Report 2021 | Letter to shareholders
Dear shareholders,
2021 was the second year shaped by the pandemic, which
challenged and affected every aspect of society – from healthcare
to economics, to politics, to human
interactions. UBS’s
performance in 2021 speaks to our resilience, our progress and
our future path. In 2022 we intend to continue making progress
on our strategic goals, and we remain dedicated to our clients,
shareholders, employees and society.
We are working to
The current geopolitical situation has led to heightened
volatility across global markets. We are shocked by the violence
and tragedy caused by Russia’s invasion of Ukraine. Our hearts go
out to those affected and those who are suffering.
implement sanctions
imposed by
Switzerland, the US, the EU, the UK and others – all of which have
announced unprecedented levels of sanctions against Russia and
certain Russian entities and nationals. These events, together with
counter-sanctions and other measures taken by Russia, will have
ongoing effects on the markets and the global economy.
2021 backdrop and our financial performance
Despite the continuing pandemic, market conditions were
constructive in 2021, with positive investor sentiment throughout
the year. Growth rebounded, with the global economy expanding
6.1% after contracting 3.1% in 2020. Global equities delivered
total returns of 18.5%. Economic, social and geopolitical tensions
increased during the year, raising questions around the
sustainability and shape of the recovery. The pandemic adversely
impacted certain economic sectors, while supply chains and labor
markets remained challenging. A potential resurgence in global
inflation and tight labor markets in many countries could lead to
more restrictive monetary policy, and this has become an
additional concern for the market.
Within this environment, we delivered a strong financial
performance in 2021. We had the highest pre-tax and net profit
in 15 years, a 17.5% return on CET1 capital and a 14.1% return
on tangible equity. We maintained our cost / income ratio under
74%, which is in line with 2020 and more than six percentage
points better than the two years before that. For the second year
in a row, we exceeded all our targets, with all regions and
businesses contributing to our performance. We deepened our
relationships with clients, resulting in high levels of activity and
strong flows across all our segments. This business momentum
led to our highest revenues in over a decade.
Our results included two exceptional items. The first item is a
loss of USD 861 million that we incurred in the first half of 2021
on the default of a US-based client of our prime brokerage
business. We have conducted a thorough review, we have put in
place appropriate measures to strengthen our relevant risk
management processes, and we have reflected the matter in our
annual performance assessment and compensation processes.
The second item occurred in the fourth quarter of 2021, when we
took additional provisions of EUR 650 million, bringing the total
to EUR 1.1 billion for the French cross-border matter. As
announced in December 2021, we have filed an appeal with the
2
2
French Supreme Court regarding the decision of the Court of
Appeal. This enables us to thoroughly assess the verdict of the
Court of Appeal and to determine the next steps in the best
interests of our stakeholders.
Our purpose and strategic direction
In 2021, we reconfirmed and continued to implement our
strategy. Last April, we introduced our purpose “Reimagining the
power of investing. Connecting people for a better world,” which
unites all of UBS behind a common goal. It´s the starting point for
every strategic decision; it will shape our future, help us capture
opportunities and allow us to grow from our already strong
position.
Our vision is to convene THE global ecosystem for investing:
where thought leadership is impactful, people and ideas are
connected, and opportunities are brought to life. In order to
achieve this vision, we identified five strategic imperatives:
(i) supporting, growing and aligning our network of clients,
connections and contributors; (ii) increasing our focus by playing
where we are positioned to win; (iii) enabling technology and
making it our differentiator; (iv) becoming simpler and more
efficient so it is easier for our clients to bank with us; and
(v) mobilizing employees behind our vision and acting as one firm.
Supporting clients, society and employees
We retained our clients’ trust as they continued to turn to us for
our content, advice and solutions. This resulted in USD 107 billion
in net new fee-generating assets in wealth management and
USD 48 billion of net new money in Asset Management. We also
helped clients finance businesses, homes and other liquidity needs
by extending USD 28 billion of net new loans to clients across
wealth management and personal banking. We now manage
over USD 4.6 trillion in assets on behalf of our clients. And we
increased our philanthropic activities, both with and for clients
and as a firm.
At UBS, we are committed to supporting the communities in
which we work, to understand the issues they face, and develop
long-term partnerships to catalyze positive change in people’s
lives. We focus our efforts on social inequalities by supporting
education and skills development as areas where we can drive
sustainable change. We also enable our employees to support
their communities through volunteering by partnering with
organizations such as Powercoders in Switzerland, which trains
refugees in computer science and information technology skills.
The pandemic meant we continued to provide COVID-19 relief to
the most vulnerable in 2021, including recovery and rebuilding
efforts through our community partners. Currently, to help
victims of the war in Ukraine, UBS Optimus Foundation and our
Community Impact teams are providing emergency relief to
refugees through the International Rescue Committee and are
matching the first USD 5 million of donations from employees and
clients, creating a combined impact of USD 10 million.
Annual Report 2021 | Letter to shareholders
Dear shareholders,
2021 was the second year shaped by the pandemic, which
French Supreme Court regarding the decision of the Court of
challenged and affected every aspect of society – from healthcare
Appeal. This enables us to thoroughly assess the verdict of the
to economics, to politics, to human
interactions. UBS’s
Court of Appeal and to determine the next steps in the best
performance in 2021 speaks to our resilience, our progress and
interests of our stakeholders.
our future path. In 2022 we intend to continue making progress
on our strategic goals, and we remain dedicated to our clients,
Our purpose and strategic direction
shareholders, employees and society.
The current geopolitical situation has led to heightened
In 2021, we reconfirmed and continued to implement our
volatility across global markets. We are shocked by the violence
strategy. Last April, we introduced our purpose “Reimagining the
and tragedy caused by Russia’s invasion of Ukraine. Our hearts go
power of investing. Connecting people for a better world,” which
out to those affected and those who are suffering.
unites all of UBS behind a common goal. It´s the starting point for
We are working to
implement sanctions
imposed by
every strategic decision; it will shape our future, help us capture
Switzerland, the US, the EU, the UK and others – all of which have
opportunities and allow us to grow from our already strong
announced unprecedented levels of sanctions against Russia and
position.
certain Russian entities and nationals. These events, together with
Our vision is to convene THE global ecosystem for investing:
counter-sanctions and other measures taken by Russia, will have
where thought leadership is impactful, people and ideas are
ongoing effects on the markets and the global economy.
connected, and opportunities are brought to life. In order to
2021 backdrop and our financial performance
achieve this vision, we identified five strategic imperatives:
(i) supporting, growing and aligning our network of clients,
connections and contributors; (ii) increasing our focus by playing
Despite the continuing pandemic, market conditions were
where we are positioned to win; (iii) enabling technology and
constructive in 2021, with positive investor sentiment throughout
making it our differentiator; (iv) becoming simpler and more
the year. Growth rebounded, with the global economy expanding
efficient so it is easier for our clients to bank with us; and
6.1% after contracting 3.1% in 2020. Global equities delivered
(v) mobilizing employees behind our vision and acting as one firm.
total returns of 18.5%. Economic, social and geopolitical tensions
increased during the year, raising questions around the
Supporting clients, society and employees
sustainability and shape of the recovery. The pandemic adversely
impacted certain economic sectors, while supply chains and labor
We retained our clients’ trust as they continued to turn to us for
markets remained challenging. A potential resurgence in global
our content, advice and solutions. This resulted in USD 107 billion
inflation and tight labor markets in many countries could lead to
in net new fee-generating assets in wealth management and
more restrictive monetary policy, and this has become an
USD 48 billion of net new money in Asset Management. We also
additional concern for the market.
helped clients finance businesses, homes and other liquidity needs
Within this environment, we delivered a strong financial
by extending USD 28 billion of net new loans to clients across
performance in 2021. We had the highest pre-tax and net profit
wealth management and personal banking. We now manage
in 15 years, a 17.5% return on CET1 capital and a 14.1% return
over USD 4.6 trillion in assets on behalf of our clients. And we
on tangible equity. We maintained our cost / income ratio under
increased our philanthropic activities, both with and for clients
74%, which is in line with 2020 and more than six percentage
and as a firm.
points better than the two years before that. For the second year
At UBS, we are committed to supporting the communities in
in a row, we exceeded all our targets, with all regions and
which we work, to understand the issues they face, and develop
businesses contributing to our performance. We deepened our
long-term partnerships to catalyze positive change in people’s
relationships with clients, resulting in high levels of activity and
lives. We focus our efforts on social inequalities by supporting
strong flows across all our segments. This business momentum
education and skills development as areas where we can drive
led to our highest revenues in over a decade.
sustainable change. We also enable our employees to support
Our results included two exceptional items. The first item is a
their communities through volunteering by partnering with
loss of USD 861 million that we incurred in the first half of 2021
organizations such as Powercoders in Switzerland, which trains
on the default of a US-based client of our prime brokerage
refugees in computer science and information technology skills.
business. We have conducted a thorough review, we have put in
The pandemic meant we continued to provide COVID-19 relief to
place appropriate measures to strengthen our relevant risk
the most vulnerable in 2021, including recovery and rebuilding
management processes, and we have reflected the matter in our
efforts through our community partners. Currently, to help
annual performance assessment and compensation processes.
victims of the war in Ukraine, UBS Optimus Foundation and our
The second item occurred in the fourth quarter of 2021, when we
Community Impact teams are providing emergency relief to
took additional provisions of EUR 650 million, bringing the total
refugees through the International Rescue Committee and are
to EUR 1.1 billion for the French cross-border matter. As
matching the first USD 5 million of donations from employees and
announced in December 2021, we have filed an appeal with the
clients, creating a combined impact of USD 10 million.
Axel A. Weber
Chairman of the Board of Directors
Ralph A.J.G. Hamers
Group Chief Executive Officer
Due to the ongoing pressure placed on employees by closures,
restrictions and lockdowns, we implemented new ways to help
employees through these difficult times. We offered tools and
resources to support employees’ physical, mental and social well-
being, and provided extra flexibility for child and elderly care. As
a result of our experience during the pandemic, we are developing
more permanent ways of flexible working for our employees,
while supporting a safe return to our offices as economies reopen.
We believe a hybrid approach will support a better work / life
balance and make us a more attractive employer, appealing to a
more diverse pool of applicants, such as working parents,
caregivers and those in continuing education. Moreover, flexible
working, by the nature of its emphasis on technology and virtual
collaboration, encourages an innovative mindset across our firm
– which is a big part of our strategy. In addition, we are reshaping
our future real estate footprint, reducing the number of buildings
and square meters we occupy, while also investing in our locations
to reimagine our workplace and support our sustainability
ambitions.
Capturing growth opportunities
After introducing our purpose and strategy on a page, we took
steps to ensure UBS is well positioned to capture the areas we see
as having the greatest growth potential. For example, regionally,
we expect most wealth will be created in the US and Asia Pacific.
As a result, we have identified these as key growth markets and
we have prioritized investments in those regions. EMEA continues
to be a core region for us and important to our global footprint,
and a region where we can improve profitability and drive focused
growth. And in Switzerland, we are further building on our
position as a digital leader.
Affluent clients and entrepreneurs are expected to generate
high revenue growth. So we are also expanding into new
segments to reach a much broader set of clients. Our plans to
acquire Wealthfront, announced in January 2022, will help us
deliver a digital wealth management offering to Millennial and
Gen Z affluent investors in the US, allow us to expand our wallet
share, lower the cost to serve and drive long-term growth.
Technology plays a large part in how we grow and deliver the
personalized, relevant, on-time and seamless services that clients
expect. That is why we are further investing in digitalization,
including artificial intelligence, data and analytics – areas we have
already been building up for years. We will digitalize what can be
made digital and become more agile to deliver faster. While not
increasing our total expenditure on technology, we are increasing
the amount we spend on our strategic priorities. Our aim is to
deliver around USD 1 billion in-year gross cost saves by 2023 in
order to fund our growth initiatives.
Leading in sustainability – our path to Net Zero
Over the years, UBS has established itself as a recognized leader
for sustainability in the financial sector. Recent ratings such as the
Dow Jones Sustainability Index and CDP have reconfirmed this. To
maximize impact and direct capital to where it is needed most,
we focus on three areas: (i) Planet, where we are making climate
a clear priority as we shift toward a lower carbon future; (ii)
People, where we are taking action, both within our own
workplace and within wider society, to promote a diverse,
equitable and inclusive society; and (iii) Partnerships, where we
are uniting with others and bringing people together around
common goals to achieve greater impact. To meet our impact
goals, we started assigning all Group Executive Board members
environmental, social and governance (ESG)-related objectives in
2021.
Sustainability is not just something we focus on because we
think it is the right thing to do. We also have a duty: to help
private clients protect and grow their wealth, to help firms
transition to sustainable ways of doing business, to ensure clients’
long-term success and to support them in fulfilling their
responsibility to society. We strongly believe that this is the best
way to remain profitable and attractive to clients, investors and
talent in the long term. We are seeing an ever-increasing demand
in sustainable investing – invested assets in sustainability-focus
and impact strategies increased 78% in 2021 – and we will
continue to meet this need by growing our offering.
2
3
3
Our capital returns today and in the future
Reflecting the step-up in profitability, we are proposing to
increase the dividend to USD 0.50 per share for the 2021 financial
year, and to have a progressive cash dividend thereafter.
Additional excess capital will be used to buy back our shares, and
we repurchased USD 2.6 billion of shares in 2021. Given our
strong capital position, we are looking to repurchase up to USD 5
billion in 2022.
Proposed elections to the Board of Directors
Axel A. Weber is reaching the ten-year term limit set in our
Organization Regulations as the Chairman of the Board and will
therefore be stepping down in April 2022. On 20 November
2021, the Board of Directors of UBS Group AG announced that it
will nominate Colm Kelleher as the new Chairman and Lukas
Gähwiler as the new Vice Chairman for election to the Board at
the AGM on 6 April 2022.
Virtual AGM in 2022
To protect the health of shareholders and employees, in light of
the COVID-19 pandemic and continued uncertainty, the Board of
Directors has decided that the 2022 AGM will be held as a
webcast. As such, it will not 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 6 April.
Thank you for your ongoing support.
Yours sincerely,
Axel A. Weber
Chairman of the
Board of Directors
Ralph A.J.G. Hamers
Group Chief Executive Officer
Annual Report 2021 | Letter to shareholders
In 2021, we published our Net-Zero and Beyond statement,
which sets out our commitment to transition our firm to net zero
and help our clients meet their transition targets by 2050. We
have developed and are transparently disclosing a climate road
map with intermediate targets for 2025, 2030 and 2035. The
“Say-on-Climate” advisory vote at the upcoming Annual General
Meeting (the AGM) is a key milestone on our journey to net zero,
reflecting our commitment to our shareholders having their say
on our firm’s climate roadmap. Furthermore, we strongly believe
in cross-company and cross-industry collaboration when it comes
to achieving net zero. As such, we are a founding member of both
the Net Zero Asset Managers Initiative and the Net-Zero Banking
Alliance.
Updated targets and ambitions to create value across
stakeholders
We are aiming to create sustainable value through the cycle.
Reflecting our improved operating performance over the last two
years, we updated our financial targets and kept our capital
guidance unchanged, including deploying up to one-third of
Group
ratio
denominator (LRD) in the Investment Bank. In addition, we
outlined selected commercial and ESG aspirations to support the
achievement of these targets.
risk-weighted assets
(RWA) and
leverage
First, for society at large, we are committed to building a better
world through our sustainability focus and the numerous
commitments you can find in our 2021 Annual and Sustainability
Reports. For example, we aim to reach net-zero emissions across
our business by 2050 and net-zero emissions resulting from our
own operations by 2025. We will also help our clients do good,
as we aspire to raise USD 1 billion in philanthropy assets to reach
25 million beneficiaries and we are targeting USD 400 billion in
sustainability-focus and impact investments by 2025.
Second, for our clients, we will assess how we are doing
through our commercial aspirations. We are optimistic that we
can maintain growth rates from net new fee-generating assets of
5% and above over the cycle. As a result, we aspire to surpass
USD 5 trillion, and then USD 6 trillion, in invested assets as clients
entrust us with managing their investments.
And third, we are targeting a 15–18% return on CET1 capital.
This is significantly higher than our previous target range and
reflects the progress we have made over the last two years. To
consistently achieve this, we are targeting a cost / income ratio of
70–73%. We have ambitious growth plans across our franchise
and are retaining our target to grow profits in global wealth
management by 10–15% over the cycle.
4
4
Annual Report 2021 | Letter to shareholders
In 2021, we published our Net-Zero and Beyond statement,
Our capital returns today and in the future
which sets out our commitment to transition our firm to net zero
and help our clients meet their transition targets by 2050. We
Reflecting the step-up in profitability, we are proposing to
have developed and are transparently disclosing a climate road
increase the dividend to USD 0.50 per share for the 2021 financial
map with intermediate targets for 2025, 2030 and 2035. The
year, and to have a progressive cash dividend thereafter.
“Say-on-Climate” advisory vote at the upcoming Annual General
Additional excess capital will be used to buy back our shares, and
Meeting (the AGM) is a key milestone on our journey to net zero,
we repurchased USD 2.6 billion of shares in 2021. Given our
reflecting our commitment to our shareholders having their say
strong capital position, we are looking to repurchase up to USD 5
on our firm’s climate roadmap. Furthermore, we strongly believe
billion in 2022.
in cross-company and cross-industry collaboration when it comes
to achieving net zero. As such, we are a founding member of both
Proposed elections to the Board of Directors
the Net Zero Asset Managers Initiative and the Net-Zero Banking
Alliance.
stakeholders
Updated targets and ambitions to create value across
therefore be stepping down in April 2022. On 20 November
Axel A. Weber is reaching the ten-year term limit set in our
Organization Regulations as the Chairman of the Board and will
2021, the Board of Directors of UBS Group AG announced that it
will nominate Colm Kelleher as the new Chairman and Lukas
We are aiming to create sustainable value through the cycle.
Gähwiler as the new Vice Chairman for election to the Board at
Reflecting our improved operating performance over the last two
the AGM on 6 April 2022.
years, we updated our financial targets and kept our capital
guidance unchanged, including deploying up to one-third of
Virtual AGM in 2022
Group
risk-weighted assets
(RWA) and
leverage
ratio
denominator (LRD) in the Investment Bank. In addition, we
To protect the health of shareholders and employees, in light of
outlined selected commercial and ESG aspirations to support the
the COVID-19 pandemic and continued uncertainty, the Board of
achievement of these targets.
Directors has decided that the 2022 AGM will be held as a
First, for society at large, we are committed to building a better
webcast. As such, it will not be possible to physically attend the
world through our sustainability focus and the numerous
AGM. Nevertheless, we look forward to your feedback and to
commitments you can find in our 2021 Annual and Sustainability
welcoming you to this year’s virtual AGM on 6 April.
Reports. For example, we aim to reach net-zero emissions across
our business by 2050 and net-zero emissions resulting from our
Thank you for your ongoing support.
can maintain growth rates from net new fee-generating assets of
Yours sincerely,
own operations by 2025. We will also help our clients do good,
as we aspire to raise USD 1 billion in philanthropy assets to reach
25 million beneficiaries and we are targeting USD 400 billion in
sustainability-focus and impact investments by 2025.
Second, for our clients, we will assess how we are doing
through our commercial aspirations. We are optimistic that we
5% and above over the cycle. As a result, we aspire to surpass
USD 5 trillion, and then USD 6 trillion, in invested assets as clients
entrust us with managing their investments.
And third, we are targeting a 15–18% return on CET1 capital.
This is significantly higher than our previous target range and
reflects the progress we have made over the last two years. To
consistently achieve this, we are targeting a cost / income ratio of
70–73%. We have ambitious growth plans across our franchise
and are retaining our target to grow profits in global wealth
management by 10–15% over the cycle.
Axel A. Weber
Chairman of the
Board of Directors
Ralph A.J.G. Hamers
Group Chief Executive Officer
4
5
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
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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 SAR +852-2971 8888
Singapore +65-6495 8000
Investor Relations
UBS’s Investor Relations team manages
relationships with institutional investors,
research analysts and credit rating agencies.
ubs.com/investors
Zurich +41-44-234 4100
New York +1-212-882 5734
Media Relations
UBS’s Media Relations team manages
relationships with global media and
journalists.
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 SAR +852-2971 8200
sh-mediarelations-ap@ubs.com
Office of the Group Company Secretary
The Group Company Secretary handles
inquiries directed to the Chairman or to other
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,
manages relationships with shareholders
and 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 2021:
Friday, 11 March 2022
Publisher: UBS Group AG, Zurich, Switzerland | ubs.com
Annual General Meeting 2022 (webcast):
Wednesday, 6 April 2022
Language: English / German | SAP-No. 80531E
Publication of the first quarter 2022 report:
Tuesday, 26 April 2022
Publication of the second quarter 2022 report: Tuesday, 26 July 2022
Publication of the third quarter 2022 report:
Tuesday, 25 October 2022
© UBS 2022. 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
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 SAR +852-2971 8888
Singapore +65-6495 8000
Investor Relations
UBS’s Investor Relations team manages
relationships with institutional investors,
research analysts and credit rating agencies.
ubs.com/investors
Zurich +41-44-234 4100
New York +1-212-882 5734
Media Relations
UBS’s Media Relations team manages
relationships with global media and
journalists.
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 SAR +852-2971 8200
sh-mediarelations-ap@ubs.com
Office of the Group Company Secretary
The Group Company Secretary handles
inquiries directed to the Chairman or to other
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,
manages relationships with shareholders
and 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 2021:
Friday, 11 March 2022
Publisher: UBS Group AG, Zurich, Switzerland | ubs.com
Annual General Meeting 2022 (webcast):
Wednesday, 6 April 2022
Language: English / German | SAP-No. 80531E
Publication of the first quarter 2022 report:
Tuesday, 26 April 2022
Publication of the second quarter 2022 report: Tuesday, 26 July 2022
Publication of the third quarter 2022 report:
Tuesday, 25 October 2022
© UBS 2022. 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.
Highlights of the
2021 financial year
We demonstrated a strong performance across our business units
and geographical regions throughout the 2021 financial year.
Group results
Resources
Profitability
USD billion
7.5
Net profit attributable
to shareholders
USD trillion
1.1
Total assets
%
17.5
Return on common
equity tier 1 capital
(2020: USD 6.6 billion)
(2020: USD 1.1 trillion)
(2020: 17.4%)
USD
2.06
Diluted earnings
per share
USD billion
60.7
Equity attributable
to shareholders
%
14.1
Return on
tangible equity
(2020: USD 1.77)
(2020: USD 59.4 billion)
(2020: 12.8%)
6
7
Annual Report 2021
Our key figures
As of or for the year ended
31.12.191
3311..1122..2211
31.12.20
28,889
23,312
5,577
4,304
1.14
3355,,554422
2266,,005588
99,,448844
77,,445577
22..0066
32,390
24,235
8,155
6,557
1.77
11.3
12.8
17.4
11.7
3.4
73.3
19.4
52.3
1122..66
1144..11
1177..55
1122..00
33..44
7733..66
2211..11
1133..77
7.9
9.0
12.4
11.0
3.2
80.5
22.7
(4.7)
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 denominator4,5
Common equity tier 1 leverage ratio (%)4,5
Going concern leverage ratio (%)4,5
Total loss-absorbing capacity leverage ratio (%)5
Liquidity coverage ratio (%)6
Net stable funding ratio (%)6
OOtthheerr
Invested assets (USD billion)7
Personnel (full-time equivalents)
Market capitalization8
Total book value per share (USD)8
Total book value per share (CHF)8
Tangible book value per share (USD)8
Tangible book value per share (CHF)8
11 Refer to the “Accounting and financial reporting” and “Consolidated financial statements” sections of this report for information about 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 “Targets, aspirations and capital guidance” section of this report
for more information about our performance targets. 44 Leverage ratio denominators and leverage ratios for year 2020 do not reflect the effects of the temporary exemption that applied from 25 March 2020 until
1 January 2021 and was granted by FINMA in connection with COVID-19. Refer to the “Regulatory and legal developments” section of our Annual Report 2020 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 The final Swiss net stable funding ratio (NSFR) regulation
became effective on 1 July 2021. Prior to this date, the NSFR was based on estimated pro forma reporting. Refer to the “Capital, liquidity and funding, and balance sheet” section of this report for more information.
77 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. 88 Refer to “UBS shares” in the “Capital, liquidity and funding, and balance sheet” section of this report for more information.
11,,111177,,118822
6600,,666622
4455,,228811
330022,,220099
1155..00
2200..00
3344..77
11,,006688,,886622
44..2244
55..77
99..88
115555
111199
1,125,765
59,445
39,890
289,101
13.8
19.4
35.2
1,037,150
3.85
5.4
9.8
152
119
972,194
54,501
35,535
259,208
13.7
20.0
34.6
911,322
3.90
5.7
9.8
134
111
4,187
71,551
50,013
16.74
14.82
14.91
13.21
3,607
68,601
45,661
15.07
14.59
13.28
12.86
44,,559966
7711,,338855
6611,,223300
1177..8844
1166..2277
1155..9977
1144..5566
8
8
Annual Report 2021
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 denominator4,5
Common equity tier 1 leverage ratio (%)4,5
Going concern leverage ratio (%)4,5
Total loss-absorbing capacity leverage ratio (%)5
Liquidity coverage ratio (%)6
Net stable funding ratio (%)6
OOtthheerr
Invested assets (USD billion)7
Personnel (full-time equivalents)
Market capitalization8
Total book value per share (USD)8
Total book value per share (CHF)8
Tangible book value per share (USD)8
Tangible book value per share (CHF)8
As of or for the year ended
3311..1122..2211
31.12.20
31.12.191
3355,,554422
2266,,005588
99,,448844
77,,445577
22..0066
32,390
24,235
8,155
6,557
1.77
28,889
23,312
5,577
4,304
1.14
7.9
9.0
12.4
11.0
3.2
80.5
22.7
(4.7)
972,194
54,501
35,535
259,208
13.7
20.0
34.6
3.90
5.7
9.8
134
111
3,607
68,601
45,661
15.07
14.59
13.28
12.86
11,,111177,,118822
1,125,765
6600,,666622
4455,,228811
330022,,220099
59,445
39,890
289,101
11,,006688,,886622
1,037,150
911,322
1122..66
1144..11
1177..55
1122..00
33..44
7733..66
2211..11
1133..77
1155..00
2200..00
3344..77
44..2244
55..77
99..88
115555
111199
44,,559966
7711,,338855
6611,,223300
1177..8844
1166..2277
1155..9977
1144..5566
11.3
12.8
17.4
11.7
3.4
73.3
19.4
52.3
13.8
19.4
35.2
3.85
5.4
9.8
152
119
4,187
71,551
50,013
16.74
14.82
14.91
13.21
11 Refer to the “Accounting and financial reporting” and “Consolidated financial statements” sections of this report for information about 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 “Targets, aspirations and capital guidance” section of this report
for more information about our performance targets. 44 Leverage ratio denominators and leverage ratios for year 2020 do not reflect the effects of the temporary exemption that applied from 25 March 2020 until
1 January 2021 and was granted by FINMA in connection with COVID-19. Refer to the “Regulatory and legal developments” section of our Annual Report 2020 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 The final Swiss net stable funding ratio (NSFR) regulation
became effective on 1 July 2021. Prior to this date, the NSFR was based on estimated pro forma reporting. Refer to the “Capital, liquidity and funding, and balance sheet” section of this report for more information.
77 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. 88 Refer to “UBS shares” in the “Capital, liquidity and funding, and balance sheet” section of this report for more information.
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
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
Our Board of Directors
The Board of Directors (the BoD) of UBS Group AG, under the
leadership of the Chairman, consists of between 6 and 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 (the 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
to provide effective steering and
governance
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.
10
10
The Board of Directors (the BoD) of UBS Group AG, under the
governance
framework
to provide effective steering and
leadership of the Chairman, consists of between 6 and 12 members
supervision of the Group, taking into account the material risks to
as per our Articles of Association. The BoD decides on the strategy
which UBS Group AG and its subsidiaries are exposed. The BoD has
of the Group upon recommendation by the Group Chief Executive
ultimate responsibility for the success of the Group and for
Officer (the Group CEO) and is responsible for the overall direction,
delivering sustainable shareholder value within a framework of
supervision and control of the Group and its management, as well
prudent and effective controls, approves all financial statements for
as for supervising compliance with applicable laws, rules and
issue, and appoints and removes all Group Executive Board
regulations. The BoD exercises oversight over UBS Group AG and
(GEB) members.
its subsidiaries and is responsible for establishing a clear Group
10
Our Board of Directors
1 Axel A. Weber
Chairman of the Board of Directors / Chairperson of the
Corporate Culture and Responsibility Committee /
Chairperson of the Governance and Nominating Committee
2 Fred Hu
Member of the Governance and Nominating Committee /
member of the Risk Committee
3 Claudia Böckstiegel
Member of the Board of Directors
4 Patrick Firmenich
Member of the Audit Committee / member of the
Corporate Culture and Responsibility Committee
5 Reto Francioni
Member of the Compensation Committee /
member of the Risk Committee
6 Jeremy Anderson
Vice Chairman and Senior Independent Director /
Chairperson of the Audit Committee /
member of the Governance and Nominating Committee
7 Julie G. Richardson
Chairperson of the Compensation Committee /
member of the Governance and Nominating Committee /
member of the Risk Committee
8 Nathalie Rachou
Member of the Risk Committee
9 William C. Dudley
Member of the Corporate Culture and
Responsibility Committee / member of the Governance and
Nominating Committee / member of the Risk Committee
10 Jeanette Wong
Member of the Audit Committee / member of the
Compensation Committee / member of the Corporate Culture
and Responsibility Committee
11 Mark Hughes
Chairperson of the Risk Committee /
member of the Corporate Culture and Responsibility Committee
12 Dieter Wemmer
Member of the Audit Committee /
member of the Compensation Committee /
member of the Governance and Nominating Committee
The Board of Directors (the BoD) of UBS Group AG, under the
governance
framework
to provide effective steering and
leadership of the Chairman, consists of between 6 and 12 members
supervision of the Group, taking into account the material risks to
as per our Articles of Association. The BoD decides on the strategy
which UBS Group AG and its subsidiaries are exposed. The BoD has
of the Group upon recommendation by the Group Chief Executive
ultimate responsibility for the success of the Group and for
Officer (the Group CEO) and is responsible for the overall direction,
delivering sustainable shareholder value within a framework of
supervision and control of the Group and its management, as well
prudent and effective controls, approves all financial statements for
as for supervising compliance with applicable laws, rules and
issue, and appoints and removes all Group Executive Board
regulations. The BoD exercises oversight over UBS Group AG and
(GEB) members.
its subsidiaries and is responsible for establishing a clear Group
2
3
4
6
5
8
9
7
1
11
12
10
10
11
11
Our Group Executive Board
Our Group Executive Board
1 Ralph A.J.G. Hamers
Group Chief Executive Officer
1 Ralph A.J.G. Hamers
2 Mike Dargan
Group Chief Executive Officer
Group Chief Digital and Information Officer
2 Mike Dargan
Group Chief Digital and Information Officer
3 Tom Naratil
3 Tom Naratil
Co-President Global Wealth Management and
President UBS Americas
Co-President Global Wealth Management and
President UBS Americas
4 Christian Bluhm
4 Christian Bluhm
Group Chief Risk Officer
Group Chief Risk Officer
5 Sabine Keller-Busse
5 Sabine Keller-Busse
President Personal & Corporate Banking and
President Personal & Corporate Banking and
President UBS Switzerland
President UBS Switzerland
6 Edmund Koh
6 Edmund Koh
President UBS Asia Pacific
President UBS Asia Pacific
7 Markus Ronner
Group Chief Compliance and Governance Officer
7 Markus Ronner
8 Suni Harford
Group Chief Compliance and Governance Officer
President Asset Management
8 Suni Harford
9 Barbara Levi (since 1 November 2021)
President Asset Management
Group General Counsel
10 Robert Karofsky
9 Barbara Levi (since 1 November 2021)
President Investment Bank
Group General Counsel
11 Iqbal Khan
10 Robert Karofsky
Co-President Global Wealth Management and
President UBS Europe, Middle East and Africa
President Investment Bank
12 Kirt Gardner
Group Chief Financial Officer
11 Iqbal Khan
13 Markus U. Diethelm (until 31 October 2021)
Co-President Global Wealth Management and
President UBS Europe, Middle East and Africa
Group General Counsel
12 Kirt Gardner
Group Chief Financial Officer
13 Markus U. Diethelm (until 31 October 2021)
Group General Counsel
12
12
12
3
4
5
2
1
7
6
9
10
12
13
8
11
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 12 members as of
31 December 2021 and has executive management responsibility
for the steering of the Group and its business. It assumes overall
responsibility for developing the strategies of the Group, the
business divisions and Group Functions, and implements the BoD-
approved strategies.
› 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
13
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 private bank1, with access to asset management
and investment banking capabilities.
focused on our
After incurring significant losses in the 2008 financial crisis, we
started a strategic transformation in 2011 toward a business
traditional businesses: wealth
model
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 leading truly global wealth manager,2 with
over USD 3.3 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
11 Digital Wealth Management in Asia Pacific, KPMG 2021.
22 Statements of market position for Global Wealth Management are based on UBS’s internal estimates and publicly available information about competitors’ invested assets.
The legal structure of the UBS Group
(cid:55)(cid:36)(cid:53)(cid:2)(cid:41)(cid:84)(cid:81)(cid:87)(cid:82)(cid:2)(cid:35)(cid:41)(cid:2)(cid:69)(cid:81)(cid:80)(cid:85)(cid:81)(cid:78)(cid:75)(cid:70)(cid:67)(cid:86)(cid:71)(cid:70)
(cid:55)(cid:36)(cid:53)(cid:2)(cid:41)(cid:84)(cid:81)(cid:87)(cid:82)(cid:2)(cid:35)(cid:41)(cid:19)
(cid:19)(cid:18)(cid:18)(cid:7)
(cid:55)(cid:36)(cid:53)(cid:2)(cid:35)(cid:41)(cid:2)(cid:69)(cid:81)(cid:80)(cid:85)(cid:81)(cid:78)(cid:75)(cid:70)(cid:67)(cid:86)(cid:71)(cid:70)
(cid:55)(cid:36)(cid:53)(cid:2)(cid:35)(cid:41)
(cid:19)(cid:18)(cid:18)(cid:7)
(cid:55)(cid:36)(cid:53)(cid:2)(cid:36)(cid:87)(cid:85)(cid:75)(cid:80)(cid:71)(cid:85)(cid:85)
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Our strategy,
business
model and
environment
Management report
1
Our strategy, business model and environment | Our strategy
Our strategy
Our purpose
As the world’s leading wealth manager,1 we have an opportunity
to make a difference for our clients, our employees, and society at
large.
It all starts with our purpose: Reimagining the power of
investing. Connecting people for a better world. Our
purpose unites us behind a common goal, provides direction on
the way forward and helps us build on our strengths.
We will reimagine the power of investing by developing
solutions that change how people look at finance and investing.
The power of investing can support achieving one’s personal
aspirations, whether through buying a home, growing a
company, supporting future financial goals or having an impact.
We will connect people, both internally and externally, to
convene an ecosystem where ideas and opportunities come
together to be successful and to make a difference.
We will help build a better world by thinking sustainably and
creating opportunities that help reduce, rather than contribute to,
inequalities.
Sustainability is at the core of our purpose
We know finance has a powerful influence on the world. At UBS,
we are reimagining the power of people and investments, to help
create a better world for everyone: a fairer society, a more
prosperous economy and a healthier environment. We are
partnering with our clients to help them mobilize their capital
toward a more sustainable world. It is why we have put
sustainability at the heart of our own purpose. To help us
maximize our impact and direct capital to where it is needed most,
we are focusing on three key areas to drive the sustainability
transition: planet, people, partnerships.
Planet: We are making climate a clear priority as we shift
toward a lower-carbon future. We will provide transparency on
our milestones along the way to make sure our progress can be
tracked. We are not only focused on our own journey; we are also
supporting our clients in their own transitions.
People: Through our interactions, we are working to address
wealth inequality, sharpening the focus of our client and
corporate philanthropy, and our employee-led community affairs
activities centered on health and education.
Partnerships: By working in partnership with other thought
leaders and standard setters, our goal is to make an impact on a
truly global scale. To create change, we realize that all of us have
to unite around common goals. That is why we engage with
regulators, policymakers and others to create standards and
support research and development across the financial sector.
Our promise to our clients
Helping clients to achieve their financial goals is the essence of
what we do. We aim to differentiate our service by delivering a
client experience that is:
– Personalized: Our products and services are as personal as our
clients’ needs.
– Relevant: What we deliver to our clients is relevant and
matters to them.
– On-time: Clients set the pace and can act on opportunities
anytime and anywhere.
– Seamless: Interacting with us is simple, seamless, and
intuitive.
11 Based on Euromoney’s Award for Excellence, published on 10 September 2021: euromoney.com/article/28teruws4k57c6h8c83k3/awards/awards-for-excellence/worlds-best-bank-for-wealth-management-2021-ubs.
16
16
Our strategy, business model and environment | Our strategy
Our strategy
Our purpose
large.
we are focusing on three key areas to drive the sustainability
transition: planet, people, partnerships.
As the world’s leading wealth manager,1 we have an opportunity
Planet: We are making climate a clear priority as we shift
to make a difference for our clients, our employees, and society at
toward a lower-carbon future. We will provide transparency on
our milestones along the way to make sure our progress can be
It all starts with our purpose: Reimagining the power of
tracked. We are not only focused on our own journey; we are also
investing. Connecting people for a better world. Our
supporting our clients in their own transitions.
purpose unites us behind a common goal, provides direction on
People: Through our interactions, we are working to address
the way forward and helps us build on our strengths.
wealth inequality, sharpening the focus of our client and
We will reimagine the power of investing by developing
corporate philanthropy, and our employee-led community affairs
solutions that change how people look at finance and investing.
activities centered on health and education.
The power of investing can support achieving one’s personal
Partnerships: By working in partnership with other thought
aspirations, whether through buying a home, growing a
leaders and standard setters, our goal is to make an impact on a
company, supporting future financial goals or having an impact.
truly global scale. To create change, we realize that all of us have
We will connect people, both internally and externally, to
to unite around common goals. That is why we engage with
convene an ecosystem where ideas and opportunities come
regulators, policymakers and others to create standards and
together to be successful and to make a difference.
support research and development across the financial sector.
We will help build a better world by thinking sustainably and
creating opportunities that help reduce, rather than contribute to,
Our promise to our clients
inequalities.
Sustainability is at the core of our purpose
Helping clients to achieve their financial goals is the essence of
what we do. We aim to differentiate our service by delivering a
client experience that is:
We know finance has a powerful influence on the world. At UBS,
– Personalized: Our products and services are as personal as our
we are reimagining the power of people and investments, to help
clients’ needs.
create a better world for everyone: a fairer society, a more
– Relevant: What we deliver to our clients is relevant and
prosperous economy and a healthier environment. We are
matters to them.
partnering with our clients to help them mobilize their capital
– On-time: Clients set the pace and can act on opportunities
toward a more sustainable world. It is why we have put
anytime and anywhere.
sustainability at the heart of our own purpose. To help us
– Seamless: Interacting with us is simple, seamless, and
maximize our impact and direct capital to where it is needed most,
intuitive.
Convening THE global ecosystem for investing
We are at our best when our clients are able to access all of UBS
through a single relationship, to get a differentiated, personalized
experience, and when they are connected to other areas of the
firm, to providers, and to other clients with similar goals.
With our global footprint and USD 4.6 trillion in invested
assets, combined with our thought leadership, we not only attract
clients, but are also interesting to external contributors.
We are uniquely positioned to be the orchestrator of this
ecosystem. We are a gateway to a large and diverse client base,
we have strong relationships with contributors and we are a
thought leader in the industry. This positions us to curate offerings
and opportunities in the ecosystem, while leveraging our
networks, data, and analytics, to provide ultimate matchmaking
between clients and contributors.
That is why our vision is to convene THE global ecosystem for
investing – where thought leadership is impactful, people and
ideas are connected, and opportunities are brought to life.
Our global ecosystem delivers the power of investing to our clients
Contributors benefit from:
• Access to the world’s most valuable customers
• Shared value creation
• Scale of our global ecosystem
Clients benefit from:
• Holistic and curated one-stop offering
• Personalized, relevant, on-time and seamless solutions
• Liquidity and scale in execution
Illustrative value
flow through UBS’s
orchestration
Investment,
advice, execution,
and financing
Corporate
Advisory
Content and
thought
leadership
Gateway
as orchestrator
Wealth Planning,
custody, and
cash transactions
Intuitive
interface
11 Based on Euromoney’s Award for Excellence, published on 10 September 2021: euromoney.com/article/28teruws4k57c6h8c83k3/awards/awards-for-excellence/worlds-best-bank-for-wealth-management-2021-ubs.
16
0
17
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Our strategy, business model and environment Our strategy, business model and environment | Our strategy
Our strategic imperatives
Five strategic imperatives will help us deliver on our strategy, bring our purpose to life, fulfill our client promise and achieve our vision.
Behind these are a set of initiatives that will develop UBS along our strategic direction.
Clients, connections, contributors – delivering the power of investing
UBS is a firm that attracts clients, employees and thought leaders who have the power to enable change and
bring ideas to life, and who have capacity to do a lot of good. By bringing the best of UBS to our clients in a
seamless experience, growing our ecosystem and encouraging connections across it, we can deliver the full
power of investing to our clients. Client needs can be more broadly met. Our clients and the trust they place in us
will be put at the center of everything we do. Clients will benefit from having us as a trusted guide and thought
partner, having all our products and services available at their fingertips and getting a differentiated and
personalized experience.
Focus – play where we are positioned to win
We intend to maintain our position as a leading global wealth manager and to build on this strength. We will
prioritize our efforts where we can add the most value and make a difference. To achieve this we are working to
reduce duplication and reallocate resources as necessary, all while growing our position as the world’s leading
wealth manager.
Technology – make technology our differentiator
We will use our investments in technology to deliver a seamless client experience as part of our client promise.
We have been building our technology foundations over past years. We will move forward by focusing on how
clients experience UBS every day, becoming more agile and focusing on outcomes through a modular approach.
With this mind, we intend to transform the way we use and consider technology, thinking about it as a
differentiator for us.
Simplification and efficiency – increase ease of doing business and enable our journey
We can make it easier for our clients to do business with us, as well as for our employees to make decisions and
take responsibility. We intend to further streamline and standardize our functions, processes, entities and general
ways of doing business to increase efficiency and increase capacity to invest for future growth.
Culture – mobilize employees behind our future vision and act as one firm
We already have a strong, inclusive culture, grounded in our three keys to success: our Pillars, Principles and
Behaviors. We will further strengthen our culture so we can do more and do it better. Our purpose will unite us.
We will act as one firm, with common values and ambitions. In order to be successful on our journey, we will
further develop our cultural priorities.
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18
Our strategy, business model and environment | Our strategy
Our strategic imperatives
Leveling up technology
Five strategic imperatives will help us deliver on our strategy, bring our purpose to life, fulfill our client promise and achieve our vision.
Behind these are a set of initiatives that will develop UBS along our strategic direction.
Clients, connections, contributors – delivering the power of investing
UBS is a firm that attracts clients, employees and thought leaders who have the power to enable change and
bring ideas to life, and who have capacity to do a lot of good. By bringing the best of UBS to our clients in a
seamless experience, growing our ecosystem and encouraging connections across it, we can deliver the full
power of investing to our clients. Client needs can be more broadly met. Our clients and the trust they place in us
will be put at the center of everything we do. Clients will benefit from having us as a trusted guide and thought
partner, having all our products and services available at their fingertips and getting a differentiated and
personalized experience.
Focus – play where we are positioned to win
We intend to maintain our position as a leading global wealth manager and to build on this strength. We will
prioritize our efforts where we can add the most value and make a difference. To achieve this we are working to
reduce duplication and reallocate resources as necessary, all while growing our position as the world’s leading
wealth manager.
Technology – make technology our differentiator
We will use our investments in technology to deliver a seamless client experience as part of our client promise.
We have been building our technology foundations over past years. We will move forward by focusing on how
clients experience UBS every day, becoming more agile and focusing on outcomes through a modular approach.
With this mind, we intend to transform the way we use and consider technology, thinking about it as a
differentiator for us.
Simplification and efficiency – increase ease of doing business and enable our journey
We can make it easier for our clients to do business with us, as well as for our employees to make decisions and
take responsibility. We intend to further streamline and standardize our functions, processes, entities and general
ways of doing business to increase efficiency and increase capacity to invest for future growth.
Culture – mobilize employees behind our future vision and act as one firm
We already have a strong, inclusive culture, grounded in our three keys to success: our Pillars, Principles and
Behaviors. We will further strengthen our culture so we can do more and do it better. Our purpose will unite us.
We will act as one firm, with common values and ambitions. In order to be successful on our journey, we will
further develop our cultural priorities.
Introduction
Modern tech
The world is faster, more digital and more data-driven than ever
before, with clients increasingly demanding services that are
digital first, anytime and anywhere, and underpinned by first-class
technology. In addition, the financial industry ecosystem is
constantly evolving, becoming even more competitive, open,
connected and location-independent every day.
We believe the bank of the future will leverage a lean, modern
tech estate and Cloud-based applications. Modern tech makes a
shorter time to market possible, removes dependencies,
accelerates digitalization and facilitates connection with the
financial industry ecosystem to provide better and faster client
services.
This presents an opportunity for us to fully embrace technology
and make it a differentiator for our firm. Doing so is central to our
client promise to deliver a client experience that is personalized,
relevant, on-time and seamless.
In line with our modern tech ambitions, we migrated over
1,000 applications to the Cloud during 2021 and established a
governance framework to identify and decommission legacy
technologies.
To support our ambitions, we have appointed a Group Chief
Digital and Information Officer to the Group Executive Board. To
guide our digital transformation and to enhance the way we live
up to our client promise, we have also established a Leveling up
strategy based on five key pillars: Agile@UBS; quarterly business
reviews and digital roadmaps; modern tech; automation; and
engineering excellence (digital culture).
Agile@UBS
In order to deliver digital solutions faster and remain responsive
and adaptable, we are introducing a unified agile approach across
the whole firm.
To support this, we have developed a robust framework and
rollout plan, which includes clearly defined role profiles, a
bespoke playbook and a dedicated academy training suite.
Currently, we have 10,000 employees across the firm
transitioning to the new Agile@UBS ways of working and we
expect this to increase to more than 20,000 by the end of 2022.
Relevant resources and training will also be available to all staff,
enabling everyone to apply agile principles to their work, thereby
helping to deliver an even better client experience.
Quarterly business reviews and digital roadmaps
Quarterly business reviews (QBRs) and digital roadmaps help us to
manage our technology investment portfolio in a more strategic
and flexible way. The QBRs serve as a forum to agree on the most
important objectives that align with our strategy and are intended
to ensure we deliver more frequent and valuable outcomes for
our clients. The digital roadmaps help us to keep investment and
design decisions aligned to our client promise and our longer-
term vision.
Automation
To achieve our vision, we are building a best-on-street
development and technology operations experience, powered by
modern development tools and automation techniques.
We have also introduced a new Artificial Intelligence, Data and
Analytics (ADA) center of expertise. ADA will bring together data
scientists and analytics experts from across the firm to ensure a
consistent firm-wide approach to these topics. ADA will also help
empower our strategy and ecosystem, using AI and machine
learning for the benefit of our clients.
Engineering excellence (digital culture)
To succeed in making technology a differentiator for our firm, we
must attract and retain the best engineers, which is only possible
by creating and fostering an engineering and digital culture of
excellence. Best-in-class tech learning journeys and curricula for
our engineers, a respected Certified and Distinguished Engineers
framework, an effective hiring strategy, and targeted competency
assessments and development plans for our technical staff will be
implemented to support this ambition.
› Refer to the “Our businesses” section of this report for more
information about how we deploy our technology approach in
our businesses
18
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19
Our strategy, business model and environment
Our strategy, business model and environment | Targets, aspirations and capital guidance
Targets, aspirations and capital guidance
We aim to create sustainable value through the cycle. Reflecting
our improved operating performance over the last two years, in
February 2022 we updated our financial targets, which had
previously been set in January 2020.
In addition, we have outlined selected commercial and
environmental, social and governance (ESG) aspirations, which
support these targets.
Our capital guidance remains unchanged. We intend to
operate with a CET1 capital ratio of around 13% and a CET1
leverage ratio of greater than 3.7%. The Investment Bank is
expected to represent up to one-third of Group risk-weighted
assets (RWA) and liquidity ratio denominator (LRD).
Performance against targets, aspirations and capital guidance
is taken into account when determining variable compensation.
The table below shows our updated financial targets and
aspirations, based on reported results.
› Refer to “Society” and “Our focus on sustainability and climate”
in the “How we create value for our stakeholders” section and
to the “Corporate governance” section of this report for more
information about ESG
› Refer to the “Compensation” section of this report for more
information about variable compensation
› Refer to “Alternative performance measures” in the appendix to
this report for definitions of and further information about our
performance measures
Targets and aspirations
ESG
Selected aspirations
Commercial
Selected aspirations
Financial
Targets
More than USD 6 trillion
invested assets across Global Wealth
Management, Asset Management and
Personal & Corporate Banking
15–18%
return on CET1 capital
70–73%
cost / income ratio
More than 5% growth2
in net new fee-generating assets
of Global Wealth Management
10–15%2
growth in Global Wealth Management
profit before tax
Net-zero
own operations
(scopes 1 and 2) by 2025
USD 235 billion invested assets
aligned to net zero
by 2030, Asset Management
USD 1 billion philanthropy donations
to reach 25 million beneficiaries
raised by 2025
USD 400 billion invested assets
in sustainability-focus and impact
investing1 by 2025
11 Sustainability-focus and impact investing: sustainability focus is strategies where sustainability is an explicit part of the investment guidelines, universe, selection, and / or investment process; impact investing is
strategies that have an explicit intention to generate measurable, verifiable, positive sustainability outcomes. Impact generated is attributable to investor action and / or contribution. 22 Over the cycle.
20
20
Our strategy, business model and environment | Targets, aspirations and capital guidance
Targets, aspirations and capital guidance
Our businesses
We aim to create sustainable value through the cycle. Reflecting
Performance against targets, aspirations and capital guidance
our improved operating performance over the last two years, in
is taken into account when determining variable compensation.
February 2022 we updated our financial targets, which had
The table below shows our updated financial targets and
previously been set in January 2020.
aspirations, based on reported results.
In addition, we have outlined selected commercial and
environmental, social and governance (ESG) aspirations, which
› Refer to “Society” and “Our focus on sustainability and climate”
in the “How we create value for our stakeholders” section and
support these targets.
to the “Corporate governance” section of this report for more
Our capital guidance remains unchanged. We intend to
information about ESG
operate with a CET1 capital ratio of around 13% and a CET1
› Refer to the “Compensation” section of this report for more
leverage ratio of greater than 3.7%. The Investment Bank is
information about variable compensation
expected to represent up to one-third of Group risk-weighted
assets (RWA) and liquidity ratio denominator (LRD).
› Refer to “Alternative performance measures” in the appendix to
this report for definitions of and further information about our
performance measures
Delivering one ecosystem
We operate through four business divisions: Global Wealth
Management, Personal & Corporate Banking, Asset 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 aim to unlock the power of one
UBS through our innovative solutions and differentiated offerings.
We are at our best when we combine our strengths to provide
our clients more comprehensive and better solutions through, for
example, a Unified Global Markets team 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 connect across
teams and offer the whole firm to our clients.
How we deliver the whole firm to our clients – examples
Targets and aspirations
Wealth management platforms
ESG
Selected aspirations
Commercial
Selected aspirations
Financial
Targets
Net-zero
own operations
More than USD 6 trillion
15–18%
invested assets across Global Wealth
return on CET1 capital
(scopes 1 and 2) by 2025
Management, Asset Management and
Personal & Corporate Banking
More than 5% growth2
in net new fee-generating assets
of Global Wealth Management
70–73%
cost / income ratio
10–15%2
growth in Global Wealth Management
profit before tax
USD 235 billion invested assets
aligned to net zero
by 2030, Asset Management
USD 1 billion philanthropy donations
to reach 25 million beneficiaries
raised by 2025
USD 400 billion invested assets
in sustainability-focus and impact
investing1 by 2025
11 Sustainability-focus and impact investing: sustainability focus is strategies where sustainability is an explicit part of the investment guidelines, universe, selection, and / or investment process; impact investing is
strategies that have an explicit intention to generate measurable, verifiable, positive sustainability outcomes. Impact generated is attributable to investor action and / or contribution. 22 Over the cycle.
Separately managed accounts
Shifts and referrals
Global Family Office
Global Lending Unit
Unified Global Markets team
In all locations outside the Americas, we utilize the Wealth Management Platform, which is shared
between Global Wealth Management and Personal & Corporate Banking in Switzerland. This platform
can be navigated intuitively and supports strong advice capabilities across all channels, helping our clients
to benefit from a broader universe of products and services, simplified onboarding, and a better banking
experience. In the Americas, our clients benefit from the Wealth Management Americas Platform, as well
as our innovative partnership with Broadridge, which is aimed at improving productivity and the user
experience by revamping the technology used for our advisors’ workstations.
In the US, we combined portfolio management and execution resources within Asset Management
during 2020. Alongside this, we introduced a new approach where Global Wealth Management clients
can access selected separately managed account (SMA) strategies in the Americas with no additional
management fees. This transformative move allows our advisors to focus on delivering the best ideas,
solutions and capabilities to our clients, regardless of where they originate in the firm.
To ensure that our clients are best served according to their needs and foster growth by offering a
universal bank delivery model in Switzerland, we have introduced a holistic collaboration framework for
Personal & Corporate Banking. We systematically initiate client shifts from Personal Banking to Global
Wealth Management when the clients’ investing needs become sufficiently complex. In addition, we
encourage our client advisors to continuously generate leads for services provided by other business
divisions. Typical examples are corporate and institutional clients being introduced to Asset Management
for mandate solutions or to the Investment Bank for capital market transactions, thus providing access to
our global expertise, and entrepreneurs being introduced to Global Wealth Management, ensuring
holistic coverage of their corporate and private needs.
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
equity markets and advisory services, and assisting clients with raising capital from public and private
markets.
As a further step in serving the financing and lending needs of all UBS clients worldwide, we set up a
division-agnostic Global Lending Unit in 2020. Its key objective is delivering lending capabilities to clients
of both the Investment Bank and Global Wealth Management. The unit provides product expertise to
clients through collaboration with Investment Bank bankers and Global Wealth Management advisors. It
is organized with a regional focus by grouping existing regional resources and competencies to best serve
respective markets and clients.
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 a Unified Global Markets team, integrating risk management systems and simplifying
our regional operating processes.
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21
21
Our strategy, business model and environment
Our strategy, business model and environment | Our businesses
Global Wealth Management
As a leading truly global wealth manager,1 with over USD 3.3
trillion in invested assets, our goal is to provide tailored financial
services, advice and investable solutions to wealthy individuals
and families around the world. The spectrum of our services
ranges from investment management to estate planning and
in addition to specific wealth
corporate finance advice,
management products and services. The business is managed
globally across the regions.
Organizational changes
As part of the Group-wide creation of the Artificial Intelligence,
Data and Analytics center of expertise in October 2021, Global
Wealth Management established the Smart Technologies &
Advanced Analytics Team. Leveraging our Evidence Lab
Innovations
the Smart
team’s experience and expertise,
Technologies & Advanced Analytics Team focuses on developing
a smart ecosystem that applies artificial intelligence, advanced
analytics and data science to empower our advisors with insights
and tools that help them anticipate client needs and deepen client
relationships.
On 1 July 2021, the Global Wealth Management Operations
team was formally integrated into Global Wealth Management,
following the Group-wide decision to move each of the firm’s
business-aligned Operations teams into their respective divisions
in order to become even more client-centric, agile and digital,
while creating a seamless experience for our clients.
We continually review all our businesses for growth
opportunities, future potential and efficiency. As a result, in 2021,
we completed the sale of our domestic wealth management
business in Austria. We also announced our intention to sell our
domestic wealth management business in Spain. As part of the
latter sale, the parties aim to negotiate a cooperation agreement
to provide clients with access to selected UBS products and
services. We expect this deal to close in the third quarter of 2022.
In December 2021, we signed an agreement to sell UBS Swiss
Financial Advisers AG, a Switzerland-based SEC-registered
investment advisor and FINMA-licensed securities firm that offers
US clients tailored investment solutions. On 26 January 2022, we
entered into an agreement to acquire Wealthfront, an industry-
leading digital wealth management provider. This acquisition is
aligned with our growth strategy in the Americas, will broaden
our reach among affluent investors and add a new digital-first
offering, increasing our distribution capabilities.
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 Global Family Office unit works
with ultra high net worth individuals and their families to deliver
bespoke solutions using the best of our global capabilities from
the Investment Bank and Asset Management.
Already a market leader in the ultra high net worth segment
outside the US,1 we are also executing our strategy to be the firm
of choice for the wealthiest clients in the US, many of whom
already have relationships with UBS. Our global footprint enables
us to capture growth in the largest and fastest-growing wealth
markets (the US and Asia Pacific, respectively).
Our Chief Investment Office (CIO) celebrated its 10th
anniversary in the first quarter of 2021. Growing from just three
employees in 2011 to over 1,100 by year-end 2021, our CIO has
a presence in 18 locations and is responsible for investment advice
and management of more than USD 3.3 trillion in assets globally.
Our CIO’s insights provide the foundation for the global UBS
ecosystem, which connects clients with content and solutions.
Close
idea generation and product
development results in CIO-aligned solutions delivering real value
to clients and spurring innovations such as the investment
modules in UBS Manage Advanced [My Way]. In Asia the Direct
Investment Insights function in our online banking platform
enables clients to trade directly based on CIO insights via their
smartphones or devices.
integration between
By making operational processes more efficient, we also
enhance advisor productivity. Our investment in operating
platforms and tools that support our clients and advisors is aimed
at better serving our clients’ needs and improving efficiency. As
of 31 December 2021, more than 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 continue software delivery, with full
conversion targeted for 2023. 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 and to “Leveling up technology” in the
“Our strategy” 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. They also make broad access across
solutions and geographies in different market conditions possible.
The US is our largest market, accounting for around half of our
invested assets. We are the largest private bank in Asia Pacific2
and one of the largest in Latin America,1 in terms of invested
assets.
In Switzerland, we hold the leading market position1 and can
deploy the full range of UBS’s products and services. Our domestic
footprint in Western and Central Europe, the Middle East, and
Africa enables us to provide locally tailored offerings and ensures
we are close to our clients.
In April 2021, we opened a wealth management advisory
office in Doha, Qatar, as a further sign of our commitment to the
Middle East, an important and growing region for us.
11 Statements of market position for Global Wealth Management are based on UBS’s internal estimates and publicly available information about competitors’ invested assets.
22 Digital Wealth Management in Asia Pacific, KPMG 2021.
22
22
Our strategy, business model and environment | Our businesses
Global Wealth Management
As a leading truly global wealth manager,1 with over USD 3.3
of choice for the wealthiest clients in the US, many of whom
trillion in invested assets, our goal is to provide tailored financial
already have relationships with UBS. Our global footprint enables
services, advice and investable solutions to wealthy individuals
us to capture growth in the largest and fastest-growing wealth
and families around the world. The spectrum of our services
markets (the US and Asia Pacific, respectively).
ranges from investment management to estate planning and
Our Chief Investment Office (CIO) celebrated its 10th
corporate finance advice,
in addition to specific wealth
anniversary in the first quarter of 2021. Growing from just three
management products and services. The business is managed
employees in 2011 to over 1,100 by year-end 2021, our CIO has
globally across the regions.
Organizational changes
a presence in 18 locations and is responsible for investment advice
and management of more than USD 3.3 trillion in assets globally.
Our CIO’s insights provide the foundation for the global UBS
ecosystem, which connects clients with content and solutions.
As part of the Group-wide creation of the Artificial Intelligence,
Close
integration between
idea generation and product
Data and Analytics center of expertise in October 2021, Global
development results in CIO-aligned solutions delivering real value
Wealth Management established the Smart Technologies &
to clients and spurring innovations such as the investment
Advanced Analytics Team. Leveraging our Evidence Lab
modules in UBS Manage Advanced [My Way]. In Asia the Direct
Innovations
team’s experience and expertise,
the Smart
Investment Insights function in our online banking platform
Technologies & Advanced Analytics Team focuses on developing
enables clients to trade directly based on CIO insights via their
a smart ecosystem that applies artificial intelligence, advanced
smartphones or devices.
analytics and data science to empower our advisors with insights
By making operational processes more efficient, we also
and tools that help them anticipate client needs and deepen client
enhance advisor productivity. Our investment in operating
relationships.
platforms and tools that support our clients and advisors is aimed
On 1 July 2021, the Global Wealth Management Operations
at better serving our clients’ needs and improving efficiency. As
team was formally integrated into Global Wealth Management,
of 31 December 2021, more than 85% of invested assets outside
following the Group-wide decision to move each of the firm’s
the Americas were booked on our strategic Wealth Management
business-aligned Operations teams into their respective divisions
Platform. In the US, in collaboration with software provider
in order to become even more client-centric, agile and digital,
Broadridge, we are building the Wealth Management Americas
while creating a seamless experience for our clients.
Platform, for which we continue software delivery, with full
We continually review all our businesses for growth
conversion targeted for 2023. The development of our platforms
opportunities, future potential and efficiency. As a result, in 2021,
is happening alongside enhancements to our digital capabilities,
we completed the sale of our domestic wealth management
for the benefit of our clients and advisors.
business in Austria. We also announced our intention to sell our
domestic wealth management business in Spain. As part of the
latter sale, the parties aim to negotiate a cooperation agreement
to provide clients with access to selected UBS products and
services. We expect this deal to close in the third quarter of 2022.
› Refer to “Clients” in the “How we create value for our
stakeholders” section and to “Leveling up technology” in the
“Our strategy” section of this report for more information about
innovation and digitalization
In December 2021, we signed an agreement to sell UBS Swiss
How we operate
Financial Advisers AG, a Switzerland-based SEC-registered
investment advisor and FINMA-licensed securities firm that offers
Our global footprint and presence in the world’s largest and
US clients tailored investment solutions. On 26 January 2022, we
fastest-growing markets position us well to serve clients with
entered into an agreement to acquire Wealthfront, an industry-
global interests and demands. They also make broad access across
leading digital wealth management provider. This acquisition is
solutions and geographies in different market conditions possible.
aligned with our growth strategy in the Americas, will broaden
The US is our largest market, accounting for around half of our
our reach among affluent investors and add a new digital-first
invested assets. We are the largest private bank in Asia Pacific2
offering, increasing our distribution capabilities.
and one of the largest in Latin America,1 in terms of invested
assets.
In Switzerland, we hold the leading market position1 and can
deploy the full range of UBS’s products and services. Our domestic
We serve high net worth and ultra high net worth individuals,
footprint in Western and Central Europe, the Middle East, and
families and family offices worldwide, as well as affluent clients in
Africa enables us to provide locally tailored offerings and ensures
selected markets. Our dedicated Global Family Office unit works
we are close to our clients.
with ultra high net worth individuals and their families to deliver
In April 2021, we opened a wealth management advisory
bespoke solutions using the best of our global capabilities from
office in Doha, Qatar, as a further sign of our commitment to the
the Investment Bank and Asset Management.
Middle East, an important and growing region for us.
Already a market leader in the ultra high net worth segment
outside the US,1 we are also executing our strategy to be the firm
11 Statements of market position for Global Wealth Management are based on UBS’s internal estimates and publicly available information about competitors’ invested assets.
22 Digital Wealth Management in Asia Pacific, KPMG 2021.
Our focus
22
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 bespoke portfolio
solutions. For example, in the Americas, our Private Markets
OneBank Partnership has established one centralized function to
manage the origination and distribution of all private markets
transactions, side by side with the cross-divisional origination of
the Investment Bank’s Global Banking business. Additionally, to
ensure we are placing resources close to clients, dedicated
investment bankers are now embedded in Global Wealth
Management’s Private Wealth Services Hubs across the US. These
investment bankers work side by side with our financial advisors
to drive focused, proactive coverage of investment banking
business from our wealthiest clients.
› Refer to “Delivering one ecosystem” in this section for examples
of the joint efforts of the business divisions
Our competitors fall into two categories: peers with a strong
position in the Americas but more limited global footprints, such
as Morgan Stanley and JP Morgan; and peers with similar
international
footprints and operating models, but with
significantly smaller presences than UBS in the US, such as Credit
Suisse and Julius Baer. We have strategically built 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.
What we offer
Our distinctive approach to wealth management is designed to
help our clients pursue what matters most to them.
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 CIO provides our UBS House
View, identifying investment opportunities designed to protect
and increase our clients’ wealth over the longer term.
Regional client strategy teams use direct client feedback,
findings from periodic Investor Watch surveys and insights from
the Smart Technologies & Advanced Analytics Team to deepen
our understanding of clients’ needs. Our product specialists
deliver investment solutions, including our flagship investment
mandates, as well as innovative long-term themes and sustainable
investment offerings.
Clients benefit from our comprehensive expertise, including
wealth planning, investing, sustainability and impact investing,
philanthropy, corporate and banking services, as well as family
advisory services. We also offer extensive mortgage, securities-
based and structured lending expertise.
In 2020, we became the first major global financial institution
to make sustainable investments the preferred solution for private
clients investing globally. This focus led to high levels of client
activity in 2021 and reflected both our own belief in sustainable
and impact investing from a performance perspective and
increased client demand for relevant advice and solutions. Our
discretionary offerings aligned to our sustainable investing
strategic asset allocation exceeded USD 30 billion in invested
assets as of 31 December 2021.
Our clients accounted for 75% (USD 647 million) of MPM
Capital’s Oncology Impact Fund 2 (OIF 2), which closed in 2021,
following the record-setting success of the UBS Oncology Impact
Fund (OIF 1) in 2016. UBS clients invested more than USD 1 billion
across both Funds. OIF 2 is one of the largest dedicated impact
investment funds in biotech history.1
› Refer to the Sustainability Report 2021, available from 11 March
2022 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 access to differentiated
sustainable and impact investing opportunities.
We constantly work on responding swiftly to changing client
needs and further differentiating our leading discretionary and
advisory mandate offerings. As part of our long-term cooperation
with Partners Group, we have enhanced our 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.
In 2020, we launched UBS Manage Advanced [My Way], a
solution enabling clients to truly individualize their portfolios.
Based on strong momentum, client demand and inflows, we
intend to expand this solution into other markets.
› Refer to “Clients” in the “How we create value for our
stakeholders” section and “Leveling up technology” in the “Our
strategy” section of this report for more information about
innovation and digitalization
11 Based on a review of healthcare thematic funds using data from PitchBook as of August 2021; impact investing definitions may vary.
23
23
Our strategy, business model and environment Our strategy, business model and environment | Our businesses
As of or for the year ended 31 December 2021
CIO advises on and manages
USD 3.3 trillion
in invested assets
USD 27 billion
flows into our SMA¹
initiative (Americas)
USD 107 billion
of NNFGA,² 8% growth
Best Wealth
Manager
for the seventh time in a decade
(Euromoney 2021)
Private markets invested
assets reached
USD 58 billion,
with USD 25 billion in
new commitments
1 Separately managed accounts. 2 Net new fee-generating assets.
USD 5 billion
sales via My Way with the number
of mandates tripling to 4,300
(outside of the Americas)
USD 25.1 billion
of net new loans
USD 12 billion
flows into our discretionary
sustainable investment mandates
24
24
Our strategy, business model and environment | Our businesses
As of or for the year ended 31 December 2021
CIO advises on and manages
USD 3.3 trillion
in invested assets
USD 27 billion
flows into our SMA¹
initiative (Americas)
USD 107 billion
of NNFGA,² 8% growth
Best Wealth
Manager
for the seventh time in a decade
(Euromoney 2021)
Private markets invested
assets reached
USD 58 billion,
with USD 25 billion in
new commitments
1 Separately managed accounts. 2 Net new fee-generating assets.
USD 5 billion
sales via My Way with the number
of mandates tripling to 4,300
(outside of the Americas)
USD 25.1 billion
of net new loans
USD 12 billion
flows into our discretionary
sustainable investment mandates
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 in Switzerland.
Organizational changes
On 1 July 2021, the Personal & Corporate Banking Operations
team was formally integrated into Personal & Corporate Banking,
following the Group-wide decision to move each of the firm’s
business-aligned Operations teams into their respective divisions
in order to become even more client-centric, agile and digital,
while creating a seamless experience for our clients.
Our focus
Continued innovation and constant customer focus are the
factors that differentiate us, as a market leader across all business
areas we strive to grow at a rate higher than the market. We aim
to be digital at the core: our client promise is to bring the bank to
the app, enabling a user experience that is personalized, relevant,
on-time and seamless. Even before the COVID-19 pandemic,
digitalization had become a major part of our everyday lives. The
pandemic has increased its relevance and accelerated the pace of
technological change.
To drive this transformation, we need to better connect
business and technology, focus on the needs of our clients, and
empower our teams end to end; in other words, we need to be
agile. The agile transformation is essential for every part of our
organization. Agile is not new to us – we previously gained
experience with the Digital Factory and Lighthouses – but we are
now scaling it to the next level. In 2021, we set up a new virtual
Agile Delivery Organization.
› Refer to “Clients” in the “How we create value for our
stakeholders” section and “Leveling up technology” in the “Our
strategy” section of this report for more information about
innovation and digitalization
In 2021, we brought additional sustainable finance solutions
to the market. We introduced Green Mortgages brokered via
key4, the first Swiss real estate platform for investment properties
offering sustainable mortgages in Switzerland. In addition, we
now offer Swiss retail clients Renovation Mortgages that provide
preferential interest rates to support energy-efficient renovations
and construction. On the investment side, we complemented our
UBS Vitainvest product family with a passive solution, making it
possible to invest for retirement in a sustainable way through
Swiss third-pillar pension funds and vested benefits accounts. We
also launched the innovative UBS Sustainability Analytics offering,
helping institutional clients to achieve full transparency by
screening their portfolios with regard to sustainability aspects.
› Refer to the Sustainability Report 2021, available from 11 March
2022 under “Annual reporting” at ubs.com/investors, for more
information about sustainability-related topics
We collaborate with other companies to better satisfy our
clients’ diverse needs. For example, in 2021, we started a project
with Swiss fintech start-up Yokoy to provide extensive cash
management services to corporate clients, from automated
generation of expense reports to validation of supplier invoices.
How we operate
We operate primarily in our Swiss home market. With our Personal
Banking and Corporate & Institutional Clients business areas, we
are organized into 10 regions, covering distinct Swiss economic
areas. Due to increasing client demand for remote access and the
increased offering via our in-demand digital and remote channels,
in the first quarter of 2021 we reduced our branch network by 44
branches to 195 branches. This followed the closure of 28 branches
in 2020.
We also support the international business activities of our Swiss
corporate clients through local hubs in New York, Frankfurt,
Singapore and Hong Kong SAR. No other Swiss bank offers its
corporate clients local banking capabilities abroad.
In 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, Credit Suisse, cantonal
banks and globally active foreign banks are our main competitors.
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.
24
25
25
Our strategy, business model and environment
Our strategy, business model and environment | Our businesses
What we offer
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),
investments and retirement services. This 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 provide our clients with access to leading private
banking and wealth management services.
As of or for the year ended 31 December 2021
Our corporate and institutional clients benefit from our
financing and investment solutions, in particular access to equity
and debt capital markets, syndicated and structured credit, private
placements,
financing. We offer
transaction banking solutions for payment and cash management
services, trade and export finance, and global custody solutions
for institutional clients.
leasing, and
traditional
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 one ecosystem” in this section for examples
of the joint efforts of the business divisions
2.6 million
clients served in
Personal Banking
~¹⁄³
of Swiss households served
>100,000
corporate and
institutional clients
195
branches in
Switzerland
>90%
of large Swiss
corporations served
Best Bank
in Switzerland
(Euromoney 2021)
26
26
Our strategy, business model and environment | Our businesses
Our personal banking clients have access to a comprehensive, life-
and debt capital markets, syndicated and structured credit, private
cycle-based offering, a broad range of basic banking products,
placements,
leasing, and
traditional
financing. We offer
from payments to deposits, cards, and convenient online and
transaction banking solutions for payment and cash management
mobile banking, as well as lending (predominantly mortgages),
services, trade and export finance, and global custody solutions
investments and retirement services. This is complemented by our
for institutional clients.
UBS KeyClub reward program, which provides clients
in
We work closely with the Investment Bank to offer capital
Switzerland with exclusive and attractive offers (some from third-
market and foreign exchange products, hedging strategies, and
party partners). We work closely with Global Wealth
trading capabilities, as well as corporate finance advice. In
Management to provide our clients with access to leading private
cooperation with Asset Management, we also provide fund and
banking and wealth management services.
portfolio management solutions.
› Refer to “Delivering one ecosystem” in this section for examples
of the joint efforts of the business divisions
As of or for the year ended 31 December 2021
2.6 million
clients served in
Personal Banking
~¹⁄³
of Swiss households served
>100,000
corporate and
institutional clients
Best Bank
in Switzerland
(Euromoney 2021)
195
branches in
Switzerland
>90%
of large Swiss
corporations served
What we offer
Our corporate and institutional clients benefit from our
financing and investment solutions, in particular access to equity
Asset Management
Asset Management is a large-scale and diversified global asset
manager, with USD 1.2 trillion in invested assets. We offer
investment capabilities and styles across all major traditional and
alternative asset classes, as well as advisory support to institutions,
wholesale intermediaries and Global Wealth Management clients
around the world.
Organizational changes
Following the sale of our majority stake in 2020, in 2021 we sold
our remaining minority investment (48.8%) in Clearstream Fund
Centre AG (previously Fondcenter AG) to Deutsche Börse AG.
Long-term commercial cooperation arrangements remain in place
for the provision of services by Clearstream to UBS, including
collaboration on jointly servicing banks and insurance companies.
On 1 July 2021, the Asset Management Operations team was
formally integrated into Asset Management, following the Group-
wide decision to move each of the firm’s business-aligned
Operations teams into their respective divisions in order to
become even more client-centric, agile and digital, while creating
a seamless experience for our clients.
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.
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 through: product and service
innovation; dedicated research; integrating environmental, social
and governance (ESG) factors into our investment processes by
leveraging our proprietary analytics; and active corporate
engagement.
During 2021, we enhanced our ESG methodology and data
sets, deepened the integration of carbon data into our investment
processes, and worked to expand our ESG integration across
alternative asset classes. We also increased the entire range of
UBS sustainable exchange-traded funds (ETFs), which represented
USD 40 billion in invested assets as of 31 December 2021. These
ETFs provide exposure to various asset classes with significantly
lower carbon intensity compared with their respective market
cap-weighted parent indices and help investors to both reduce
their climate risks and benefit from opportunities arising from the
shift toward a lower-carbon economy.
In addition, we continued to expand our Climate Aware suite
of products and our Climate Aware invested assets grew to
USD 23 billion, a 53% increase year on year. Our sustainability
focus and impact invested assets totaled USD 172 billion, a 77%
increase year on year.
As a founding member of the Net Zero Asset Managers1
initiative, we published an interim target and have committed to
align USD 235 billion of invested assets by 2030. We are one of
the largest and most diversified firms to have set a 2030 target
and we continue to work with our clients, standard setters and
industry bodies to help develop the new methodologies, tools and
data needed by investors to effect further change.
› Refer to the Sustainability Report 2021, available from 11 March
2022 under “Annual reporting” at ubs.com/investors, for more
information about sustainability matters
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-winning2 indexed
businesses globally, including ETFs in Europe, Switzerland and
Asia. We focus on sustainable investing across our index product
range and provide customization while leveraging our highly
scalable platform.
› Refer to “Clients” in the “How we create value for our
stakeholders” section and to “Leveling up technology” in the
“Our strategy” section of this report for more information about
innovation and digitalization
Geographically, we are building on our extensive and long-
standing presence in the Asia Pacific region. In China, one of the
world’s fastest-growing asset management markets, we continue
to invest in our leading presence and products, both on- and
off-shore, and are ranked as the number one foreign manager of
inbound invested assets in Greater China.3
In the rapidly evolving and attractive wholesale segment, we
aim to significantly expand our market share through a
combination of measures: a continued increase in the share of
clients’ business; expansion of our strategic partnerships with
distributors; the build-out of our client service and product shelf
offerings; and
launch of new white-labeling and
implementation capabilities.
the
11 netzeroassetmanagers.org
22 Passive Manager of the Year in the Insurance Asset Risk EMEA Awards, January 2021 and ranked fourth largest ETF provider in Europe as of December 2021 (source: ETFGI).
33 Ranking compiled by Broadridge in October 2021.
26
27
27
Our strategy, business model and environment
Our strategy, business model and environment | Our businesses
We also continue our joint efforts with the other business
divisions, in particular with Global Wealth Management, enabling
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 27 billion in net new
money inflows in 2021 and USD 127 billion in invested assets. This
firmly 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 one ecosystem” in this section for examples
of the joint efforts of the business divisions
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 into five areas: Client Coverage,
Investments, Real Estate & Private Markets, Products and the COO
(Operations).
We cover the main asset management markets globally, and
have a local presence in 23 locations across four regions: the
As of or for the year ended 31 December 2021
USD 27 billion
net new money from the SMA1 initiative
Americas, Asia Pacific, EMEA and Switzerland. We have nine main
hubs: Chicago, New York, London, Zurich, Singapore, Hong Kong
SAR, Shanghai, Tokyo and Sydney.
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.
USD 90 billion
assets in Asia Pacific / China
investment strategies
USD 153 billion
assets invested in alternatives2
9 main hubs
Chicago, New York, London, Zurich, Singapore,
Hong Kong SAR, Shanghai, Tokyo, Sydney
USD 172 billion
in sustainability focus and impact
invested assets
1 Separately managed accounts. 2 Hedge fund businesses, private markets and real estate.
28
28
Our strategy, business model and environment | Our businesses
We also continue our joint efforts with the other business
Americas, Asia Pacific, EMEA and Switzerland. We have nine main
divisions, in particular with Global Wealth Management, enabling
hubs: Chicago, New York, London, Zurich, Singapore, Hong Kong
Investment Bank
our teams to draw on the best ideas, solutions and capabilities
SAR, Shanghai, Tokyo and Sydney.
from across the firm in order to deliver superior investment
Our main competitors are global firms with wide-ranging
performance and experiences for our clients. For example, the
capabilities and distribution channels, such as Amundi, BlackRock,
separately managed accounts initiative with Global Wealth
DWS, Goldman Sachs Asset Management, Invesco, JPMorgan
Management in the US generated USD 27 billion in net new
Asset Management, Morgan Stanley Investment Management
money inflows in 2021 and USD 127 billion in invested assets. This
and Schroders, as well as firms with a specific market or asset-
firmly positions us to capture attractive opportunities in other
class focus.
channels by leveraging our world-class expertise and capabilities
to meet growing client demand.
What we offer
› Refer to “Delivering one ecosystem” in this section for examples
of the joint efforts of the business divisions
We offer clients a wide range of investment products and services
in different asset classes, in the form of segregated, pooled or
To support our growth, we are focused on disciplined
advisory mandates, as well as registered investment funds in
execution of our operational excellence initiatives. This includes
various jurisdictions.
further automation, simplification, process optimization and
Our traditional and alternative capabilities include equities,
offshoring / nearshoring of selected activities, complemented by
fixed income, hedge funds, real estate and private markets, and
continued modernization of our platform and development of our
indexed and alternative beta strategies (including exchange-
analytics and data capabilities.
traded funds), as well as sustainable and impact investing
How we operate
products and solutions.
Our Investment Solutions business draws on the breadth of our
capabilities to offer: asset allocation and currency investment
Our business division is organized into five areas: Client Coverage,
strategies across the risk–return spectrum; customized multi-asset
Investments, Real Estate & Private Markets, Products and the COO
solutions, advisory and fiduciary services; and multi-manager
(Operations).
hedge fund solutions and advisory services.
We cover the main asset management markets globally, and
have a local presence in 23 locations across four regions: the
As of or for the year ended 31 December 2021
USD 27 billion
net new money from the SMA1 initiative
USD 90 billion
assets in Asia Pacific / China
investment strategies
USD 153 billion
assets invested in alternatives2
9 main hubs
Chicago, New York, London, Zurich, Singapore,
Hong Kong SAR, Shanghai, Tokyo, Sydney
USD 172 billion
in sustainability focus and impact
invested assets
1 Separately managed accounts. 2 Hedge fund businesses, private markets and real estate.
28
The Investment Bank provides services to institutional, corporate
and wealth management clients, helping them raise capital, invest
and manage risks, while targeting attractive and sustainable risk-
adjusted returns for shareholders. 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
help clients adapt 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 February 2021, we announced that Piero Novelli, Co-President
Investment Bank, would step down, and, effective 1 April 2021,
Robert Karofsky, Co-President Investment Bank, was appointed
sole President Investment Bank.
On 1 July 2021, the Investment Bank Operations team was
formally integrated into the Investment Bank, following the
Group-wide decision to move each of the firm’s business-aligned
Operations teams into their respective divisions in order to
become even more client-centric, agile and digital, while creating
a seamless experience for our clients.
In January 2022, Global Research and the Strategic Insights
team, formerly part of Evidence Lab Innovations, were integrated
into the Investment Bank as Investment Bank Research. This new
setup has better aligned our research coverage with the needs of
our clients, while continuing to provide research and analytical
services across the firm.
Our focus
Our priority is providing seamless client service and high-quality
execution, through disciplined growth in the capital-light advisory
and execution businesses, while accelerating our digital
transformation. We aspire to provide best-in-class services and
solutions to our corporate, institutional and wealth management
clients through an integrated, solutions-led approach. In Global
Banking, we position ourselves as trusted advisors via our deep
client coverage and ability to provide access to the full capabilities
of UBS.
Our global coverage model utilizes our vast international
industry expertise and product capabilities to meet the emerging
needs of clients. We provide clients with excellence in execution,
financing and structured solutions through our Global Markets
franchise. In Global Markets, our sharpest competitive edge
comes from coordinating our services across a wide range of asset
classes and products. We provide nimble, innovative and bespoke
access to solutions, from market and insight tools to trading
strategies and execution.
Investment Bank Research continues to publish research based
on primary data to concentrate on data-driven outcomes and
offer clients key insights on securities and themes in major
financial markets around the globe. In April 2021, Research
entered into a strategic partnership with Lynk Global, an artificial-
intelligence-driven knowledge-as-a-service platform, to help
clients make better, more informed investment and business
decisions. In September 2021, we announced a strategic research
redistribution agreement with Wind, the leading financial
information provider in China, to offer onshore content to clients
who invest through Wind. Investment Bank Research was also a
founding partner and investor in Visible Alpha, a model
aggregation platform that is now firmly embedded in many of the
workflows of our core clients.
Our digital strategy harnesses technology to provide access to
a wide range of sources of global liquidity and differentiated
content. The Investment Bank strives to be the digital investment
bank of the future, taking our best ideas and turning them into
reality, with innovation-led businesses driving efficiencies and
solutions. We aim to develop new products and solutions
consistent with our capital-efficient business model, which are
most often related to new technologies or changing market
standards.
In February 2021, we announced the creation of a single
Digital Platforms function within the Investment Bank across
Global Markets and Global Banking, utilizing digital competencies
to benefit all products and maximizing the return on our
technology spend in close partnership with Group Technology.
Digital Platforms combines product expertise with deep technical
know-how, aiming to reduce the number of systems and increase
automation, maximizing client impact, revenue and digital
adoption. The Digital Platforms function was an early adopter of
Agile@UBS, an evolution of the historically close collaboration
with our Chief Data and Information Office, creating long-lived
teams that learn and continuously improve, which in turn attracts
the best talent.
Our Investment Bank Accelerated Digital Agile Platform
Transformation initiatives form the basis of our digital roadmap,
with the ambition of having a simplified and ultra-modern
technology landscape that is secure and stable, where we re-use
more of everything and where the platforms work together to
drive progress toward our overall strategic imperatives.
› Refer to “Clients” in the “How we create value for our
stakeholders” section and to “Leveling up technology” in the
“Our strategy” section of this report for more information about
innovation and digitalization
29
29
Our strategy, business model and environment
Our strategy, business model and environment | Our businesses
Our 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, where 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 (for example, our work with Global Wealth
Management on the Unified Global Markets team and the Global
Lending Unit) and, externally, strategic partnerships (for example,
UBS BB jointly with Banco do Brasil, focused on Latin America)
continue to be key strategic priorities. We expect these initiatives
to continue to lead to growth by delivering global products to
each region, leveraging our global connectivity across borders and
sharing and strengthening our best client relationships.
› Refer to “Delivering one ecosystem” 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, supported by
Investment Bank Research.
Governed by the Executive, Operating, Risk, and Asset and
Liability forums, 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
ten 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 one ecosystem” in this section for examples
of the joint efforts of the business divisions
What we offer
Our Global Banking business advises clients on strategic business
opportunities, such as mergers, acquisitions and related strategic
matters, and helps them raise capital, both on public and private
markets, to fund their activities.
Our Global Markets business enables clients to buy, sell and
finance securities on capital markets worldwide, and to manage
their risks and liquidity. We distribute, trade, finance and clear
cash equity and equity-linked products, as well as structuring,
originating and distributing new equity and equity-linked issues.
From origination and distribution to managing risk and providing
liquidity in foreign exchange, rates, credit and precious metals, we
help clients to realize their financial goals.
Our
Investment Bank Research business offers clients
differentiated content about major financial markets and
securities around the globe, with coverage of over 3,000 stocks
in 24 countries. The Strategic Insights team provides timely and
relevant information and insights to help clients quickly make
decisions regarding their most important questions.
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 and to “Leveling up technology” in the
“Our strategy” section of this report for more information about
innovation and digitalization
30
30
As of or for the year ended 31 December 2021
USD 8 billion
investments facilitated
by Private Markets
Inaugural launch of green
bonds issued under our
Green Funding Framework
Presence in
>30
countries
Ranked
2nd
in foreign exchange
(Euromoney 2021)
Ranked
4th
in cash equities1
6.5 million
reads across ~45,000
Research documents
10 financial hubs
Chicago, New York, London, Zurich, Frankfurt, Singapore,
Hong Kong SAR, Shanghai, Tokyo, Sydney
1 Coalition Greenwich Competitor Analytics (third quarter, year-to-date, 2021), based on UBS’s product taxonomy.
Our strategy, business model and environment | Our businesses
Our global reach gives attractive options for growth. In the
with boutique investment banks and fintech firms in certain
Americas, the largest investment banking fee pool globally, we
regions and products.
focus on increasing market share in our core Global Banking and
Joint efforts with Global Wealth Management and Asset
Global Markets businesses. In Asia Pacific, opportunities arise
Management enable us to provide clients with broad access to
mainly from expected market internationalization and growth in
financing, global capital markets and portfolio solutions.
China, where we plan to grow by strengthening our presence,
both onshore and offshore. In EMEA, we plan to leverage our
› Refer to “Delivering one ecosystem” in this section for examples
of the joint efforts of the business divisions
strong base and brand recognition even further.
Joint efforts between the Investment Bank and the other
What we offer
business divisions (for example, our work with Global Wealth
Management on the Unified Global Markets team and the Global
Our Global Banking business advises clients on strategic business
Lending Unit) and, externally, strategic partnerships (for example,
opportunities, such as mergers, acquisitions and related strategic
UBS BB jointly with Banco do Brasil, focused on Latin America)
matters, and helps them raise capital, both on public and private
continue to be key strategic priorities. We expect these initiatives
markets, to fund their activities.
to continue to lead to growth by delivering global products to
Our Global Markets business enables clients to buy, sell and
each region, leveraging our global connectivity across borders and
finance securities on capital markets worldwide, and to manage
sharing and strengthening our best client relationships.
› Refer to “Delivering one ecosystem” in this section for examples
of the joint efforts of the business divisions
How we operate
their risks and liquidity. We distribute, trade, finance and clear
cash equity and equity-linked products, as well as structuring,
originating and distributing new equity and equity-linked issues.
From origination and distribution to managing risk and providing
liquidity in foreign exchange, rates, credit and precious metals, we
help clients to realize their financial goals.
Our business division consists of two areas: Global Banking and
Our
Investment Bank Research business offers clients
Global Markets, supported by
Investment Bank Research.
differentiated content about major financial markets and
Governed by the Executive, Operating, Risk, and Asset and
securities around the globe, with coverage of over 3,000 stocks
Liability forums, each business area is organized globally by
in 24 countries. The Strategic Insights team provides timely and
product. Our geographically balanced business has a global
relevant information and insights to help clients quickly make
reach, with a presence in more than 30 countries and offices in
decisions regarding their most important questions.
ten major financial hubs.
We seek to develop new products and solutions consistent
Competing firms operate in many of our markets, but our
with our capital-efficient business model, typically related to new
strategy differentiates us, with its focus on leadership in the areas
technologies or changing market standards.
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.,
› Refer to “Clients” in the “How we create value for our
stakeholders” section and to “Leveling up technology” in the
“Our strategy” section of this report for more information about
Morgan Stanley, Credit Suisse and Goldman Sachs) and corporate
innovation and digitalization
investment banks (e.g., Bank of America, Barclays, Citigroup, BNP
Paribas, Deutsche Bank and JPMorgan Chase). We also compete
The Investment Bank is focused on meeting the needs of clients
with regard to environmental, social and governance (ESG)
considerations and sustainable finance, helping to reshape
business models and investment opportunities and to develop
sustainable finance products and solutions across the Investment
Bank. Since 2005, we have addressed increasing client demand
for sustainable investing by providing thematic and sector
research and investment solutions through socially responsible
and impact exchange-traded funds and index-linked notes. In
addition, we offer capital-raising and strategic advisory services
globally to companies that make positive contributions to climate
change mitigation and adaptation. We provide advice on
innovative financing strategies, guiding clients through inaugural
green issuances and positioning them in multi-currency markets.
In September 2021, we announced the formation of our ESG
Advisory team in Global Banking, aiming to support our clients’
sustainability strategies. As part of the Group’s net-zero
commitments, the Investment Bank has developed science-based
intermediate emission targets for 2030 for its lending business in
priority sectors (fossil fuels and power generation). In June 2021,
we announced the inaugural launch of two senior unsecured
green bonds under our Green Funding Framework.
› Refer to the “Taking action on a net-zero future – our climate
report” section of the Sustainability Report 2021, available from
11 March 2022 under “Annual reporting” at ubs.com/investors,
for more information about the Investment Bank’s targets for its
lending business
As of or for the year ended 31 December 2021
USD 8 billion
investments facilitated
by Private Markets
Inaugural launch of green
bonds issued under our
Green Funding Framework
Ranked
4th
in cash equities1
Presence in
>30
countries
Ranked
2nd
in foreign exchange
(Euromoney 2021)
6.5 million
reads across ~45,000
Research documents
10 financial hubs
Chicago, New York, London, Zurich, Frankfurt, Singapore,
Hong Kong SAR, Shanghai, Tokyo, Sydney
1 Coalition Greenwich Competitor Analytics (third quarter, year-to-date, 2021), based on UBS’s product taxonomy.
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Our strategy, business model and environment Our strategy, business model and environment | Our businesses
Group Functions
Group Functions 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, Finance, Legal, Risk Control, Compliance, Regulatory
& Governance, Communications & Branding, and Group
Sustainability and Impact), Group Treasury, and Non-core and
Legacy Portfolio.
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.
On 1 July 2021, following the Group-wide decision to move
each of the firm’s business-aligned Operations teams into their
respective divisions in order to become even more client-centric,
agile and digital, while creating a seamless experience for our
clients, each of the Operations teams were formally moved out of
Group Functions and integrated into the respective business
divisions.
Non-core and Legacy Portfolio, a small residual set of activities
in Group Treasury and certain other costs that are mainly related
to deferred tax assets and costs relating to our legal entity
transformation program are all 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 Financial 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
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Our strategy, business model and environment | Our businesses
Group Functions
Group Functions provides services to the Group, focusing on
Group Treasury
effectiveness, risk mitigation and efficiency. Group Functions also
Group Treasury manages balance sheet structural risk (e.g.,
includes the Non-core and Legacy Portfolio unit.
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.
How we are organized
Group Functions
The major areas within Group Functions are Group Services
(which consists of Technology, Corporate Services, Human
Non-core and Legacy Portfolio
Resources, Finance, Legal, Risk Control, Compliance, Regulatory
Non-core and Legacy Portfolio manages legacy positions from
& Governance, Communications & Branding, and Group
businesses exited by the Investment Bank, following a largely
Sustainability and Impact), Group Treasury, and Non-core and
passive wind-down strategy. Overseen by a committee chaired by
Legacy Portfolio.
the Group Chief Financial Officer, its portfolio also includes
In recent years, we have aligned support functions and
positions relating to legal matters arising from businesses
business divisions. The vast majority of such functions are fully
transferred to it at the time of its formation.
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
› 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
create a working environment built on accountability and
matters
collaboration.
On 1 July 2021, following the Group-wide decision to move
each of the firm’s business-aligned Operations teams into their
respective divisions in order to become even more client-centric,
agile and digital, while creating a seamless experience for our
clients, each of the Operations teams were formally moved out of
Group Functions and integrated into the respective business
divisions.
Non-core and Legacy Portfolio, a small residual set of activities
in Group Treasury and certain other costs that are mainly related
to deferred tax assets and costs relating to our legal entity
transformation program are all retained centrally.
Our environment
Market climate
Global economic developments in 2021
2021 was a positive year for the global economy and most
markets. Growth rebounded, with the global economy expanding
6.1%, after contracting 3.0% in 2020. The recovery was also
broad based, with all major nations experiencing a revival in
demand as pandemic restrictions were gradually relaxed and the
policies of major central banks remained supportive.
Swiss GDP increased 3.5% in 2021, after decreasing 2.5% in
2020. US GDP grew 5.7%, after decreasing 3.4%. The Eurozone
economy expanded 5.2%, after contracting 6.5% in the prior
year. UK GDP increased 7.2% in 2021, after a decrease of 9.4%
in 2020.
China’s economy grew 8.1%, up from 2.2% in 2020, although
momentum slowed toward the end of 2021 and into 2022. Other
leading Asian economies recovered strongly in 2021, with India’s
GDP growing 8.7%, Singapore’s GDP increasing 7.6% and South
Korea’s GDP expanding 3.9%. Japan experienced less growth,
with GDP increasing 1.7% after a 4.5% contraction in 2020.
Growth in the top emerging markets was mixed, with a
moderate 1.7% growth rate in Thailand and 3.7% in Indonesia,
compared with a more robust 5.3% in Mexico and 4.5% in Brazil.
Elevated inflation emerged as a concern through 2021 in much
of the world, as the pandemic continued to disrupt supply chains
and shift patterns of demand. By the end of the year, US inflation
was running at the fastest pace since 1982 on a year-on-year
basis. This caused the US Federal Reserve to move toward
monetary tightening, announcing a scaling back of asset
purchases and pointing toward rate rises. Inflation was contained
in Switzerland, at 0.6% for the year, but climbed swiftly in the
Eurozone, from 0.3% in 2020 to 2.6% in 2021. Meanwhile,
prices in Japan declined 0.2% in 2021, having been flat in 2020.
Financial markets, both equities and fixed income, were
resilient in the face of continuing waves of COVID-19 infections.
Global equities delivered total returns of 18.5% in 2021. The US
outperformed: MSCI USA delivered total returns of 27%,
outperforming the MSCI All Country World index by 8 percentage
points and taking its share of the global index’s market
capitalization to a record level of 48%. The Eurozone, Japanese,
Swiss and UK equity markets all gained ground. China, however,
was an underperformer: after reaching a record high in February
2021, MSCI China declined over the rest of the year, driven by
increased regulation on the technology and property sectors,
energy shortages, and a slowing economy. The index delivered
negative returns of 22.4% in 2021, negatively impacting the
performance of the MSCI Emerging Markets index overall, which
decreased 2.5% in 2021.
Government bond markets were also resilient, especially
against a backdrop of historically high inflation. The yield on 10-
year US Treasuries ended the year at 1.5%, only a modest increase
from 0.9% at the start of the year. With inflation rising, but
nominal yields staying low, US real yields traded as low as minus
1.2%, the lowest level since the inception of the Treasury
inflation-protected securities (TIPS) market in 1997. The yield on
10-year German Bunds remained negative through 2021, ending
the year at minus 0.18%.
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Our strategy, business model and environment
Our strategy, business model and environment | Our environment
Industry trends
Although our industry has been heavily affected by various
regulatory developments over the past decade, technological
transformation and changing client expectations are further
emerging as key drivers of change today, increasingly affecting
the competitive landscape, as well as our products, service models
and operations. In parallel, our industry continues to be materially
driven by changes in financial market and macroeconomic
conditions.
Client expectations
As technology progresses, clients more rapidly redefine the way
they live, work and interact with others. This is reshaping clients’
expectations toward financial services firms, as their reference
points are increasingly influenced by experiences with companies
outside our sector, where technology-supported and data-driven
solutions are progressively enabling a more seamless and
improved client experience. These services often focus on
convenience and personalization, and drive toward holistically
addressing clients’ needs and facilitating community building.
Therefore our franchise needs to evolve, as clients measure us
against new standards.
Sustainability
Markets around the world are undergoing a profound
transformation as company business models evolve and investors
factor in the transition to a low-carbon economy and other
sustainable themes with regard to investment risk and return.
Investors are adding sustainable
Shifting societal values and greater regulation are supporting
investing
client demand.
strategies to their portfolios, with the fastest growth around
funds focused on climate. Industry inflows into sustainable funds
have accelerated during the COVID-19 pandemic and the
sustainable investing market share remains above pre-pandemic
levels.
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 2021, available from 11 March
2022 under “Annual reporting” at ubs.com/investors, for more
information about sustainability matters
Digitalization
Digitalization in the financial services industry is accelerating and
has been given further momentum by the ongoing COVID-19
pandemic. Banks have demonstrated their ability to take on a vast
increase in the number of clients switching to digital channels
while ensuring operational resilience. As a result, clients
increasingly trust digital solutions and are now demanding even
more seamless, personalized digital products and services tailored
to their needs. Regional and demographic differences in the
acceptance and use of digital technologies are narrowing across
all client segments, thus increasing the number of digital users.
This trend requires financial institutions to focus even more on
fully digital and digitally enhanced service models and digitally
enabled ecosystems.
restrictions on physical
As governments reacted to the outbreak of the pandemic by
imposing
interactions, digital
communication, with clients and employees alike, established
new remote ways of working, which are expected to also be used
by some companies in post-pandemic scenarios, enabling them to
attract an even wider array of talent than before. The
digitalization of the financial services industry has led to a
structural shift in the workforce: more and better engineers are
required to keep banks at the forefront of technology, thus
setting them into direct competition with technology companies
beyond the borders of the financial sector.
Continuous investment in technology is driving automation
and simplification of labor-intensive processes, improving banks’
operational efficiency and freeing up resources to focus on client
needs. Decision making is becoming increasingly data-driven,
with advanced analytics and artificial intelligence enabling banks
to address client needs in an even more targeted manner.
Nascent technologies, such as distributed ledger technology,
are expected to mature over the coming years and are likely to
reshape our industry. They provide opportunities to overcome
existing financial system frictions, broaden access to underbanked
communities and make previously unviable products or services
available to the financial services industry.
Consolidation
Many regions and businesses in the financial services sector 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 requirements. Many
banks currently seek increasing exposure and access to regions
with attractive growth profiles, such as Asia and other emerging
markets, through local acquisitions or partnerships. The increased
focus on core capabilities and geographical footprint, as well as
the ongoing simplification of business models to reduce
operational and compliance risks, is likely to drive further disposals
of non-core businesses and assets. The impact of the COVID-19
pandemic may further accelerate consolidation, as banks face
increasing threats from digitalization, low interest rates and
intensified competition.
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34
Our strategy, business model and environment | Our environment
Industry trends
Although our industry has been heavily affected by various
while ensuring operational resilience. As a result, clients
regulatory developments over the past decade, technological
increasingly trust digital solutions and are now demanding even
transformation and changing client expectations are further
more seamless, personalized digital products and services tailored
emerging as key drivers of change today, increasingly affecting
to their needs. Regional and demographic differences in the
the competitive landscape, as well as our products, service models
acceptance and use of digital technologies are narrowing across
and operations. In parallel, our industry continues to be materially
all client segments, thus increasing the number of digital users.
driven by changes in financial market and macroeconomic
This trend requires financial institutions to focus even more on
conditions.
Client expectations
fully digital and digitally enhanced service models and digitally
enabled ecosystems.
As governments reacted to the outbreak of the pandemic by
imposing
restrictions on physical
interactions, digital
As technology progresses, clients more rapidly redefine the way
communication, with clients and employees alike, established
they live, work and interact with others. This is reshaping clients’
new remote ways of working, which are expected to also be used
expectations toward financial services firms, as their reference
by some companies in post-pandemic scenarios, enabling them to
points are increasingly influenced by experiences with companies
attract an even wider array of talent than before. The
outside our sector, where technology-supported and data-driven
digitalization of the financial services industry has led to a
solutions are progressively enabling a more seamless and
structural shift in the workforce: more and better engineers are
improved client experience. These services often focus on
required to keep banks at the forefront of technology, thus
convenience and personalization, and drive toward holistically
setting them into direct competition with technology companies
addressing clients’ needs and facilitating community building.
beyond the borders of the financial sector.
Therefore our franchise needs to evolve, as clients measure us
Continuous investment in technology is driving automation
against new standards.
Sustainability
and simplification of labor-intensive processes, improving banks’
operational efficiency and freeing up resources to focus on client
needs. Decision making is becoming increasingly data-driven,
with advanced analytics and artificial intelligence enabling banks
Markets around the world are undergoing a profound
to address client needs in an even more targeted manner.
transformation as company business models evolve and investors
Nascent technologies, such as distributed ledger technology,
factor in the transition to a low-carbon economy and other
are expected to mature over the coming years and are likely to
sustainable themes with regard to investment risk and return.
reshape our industry. They provide opportunities to overcome
Shifting societal values and greater regulation are supporting
existing financial system frictions, broaden access to underbanked
client demand.
Investors are adding sustainable
investing
communities and make previously unviable products or services
strategies to their portfolios, with the fastest growth around
available to the financial services industry.
funds focused on climate. Industry inflows into sustainable funds
have accelerated during the COVID-19 pandemic and the
Consolidation
sustainable investing market share remains above pre-pandemic
levels.
Many regions and businesses in the financial services sector are
Our view is that this trend plays to UBS’s strengths, as we have
still highly fragmented. We expect further consolidation, with the
been at the forefront of sustainable finance for over two decades,
key drivers being ongoing margin pressure, a push for cost
making us well placed to continue developing the innovative
efficiencies and increasing scale advantages resulting from the
products and solutions our institutional and private clients need.
fixed costs of technology, and regulatory requirements. Many
› Refer to the Sustainability Report 2021, available from 11 March
banks currently seek increasing exposure and access to regions
2022 under “Annual reporting” at ubs.com/investors, for more
with attractive growth profiles, such as Asia and other emerging
information about sustainability matters
Digitalization
markets, through local acquisitions or partnerships. The increased
focus on core capabilities and geographical footprint, as well as
the ongoing simplification of business models to reduce
operational and compliance risks, is likely to drive further disposals
Digitalization in the financial services industry is accelerating and
of non-core businesses and assets. The impact of the COVID-19
has been given further momentum by the ongoing COVID-19
pandemic may further accelerate consolidation, as banks face
pandemic. Banks have demonstrated their ability to take on a vast
increasing threats from digitalization, low interest rates and
increase in the number of clients switching to digital channels
intensified competition.
New competitors
Our competitive environment is evolving. 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 further
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, if they
decide to broaden the scope of their services. Fintech firms are
gaining momentum, which has been accelerated by the
COVID-19 pandemic, causing increased use of remote solutions.
However, such firms have not to date materially disrupted our
asset-gathering businesses. The trend for forging partnerships
between new entrants and incumbent banks is continuing, as
technology and innovation help banks overcome new challenges.
outsourcing arrangements, and putting an emerging policy focus
on diversity and inclusion.
Finally, central banks and regulators continue to learn the
lessons from the COVID-19 pandemic. An important area of
concern is understanding the effects of contagion in financial
markets, particularly financial stability risks emanating from non-
bank financial institutions.
Many of these developments are taking place
in an
environment characterized by significant political uncertainties,
including geopolitical tensions that could pose additional
challenges to the provision of cross-border financial services and
rapidly evolving societal expectations toward financial institutions.
We believe the adaptations made to our business model and
our proactive management of regulatory change put us in a
strong position to absorb upcoming changes to the regulatory
environment.
› Refer to the “Regulatory and legal developments” and “Capital,
liquidity and funding, and balance sheet” sections of this report
Regulation
Although the impact of the COVID-19 pandemic is still evident,
regulators are re-focusing their attention toward policy areas that
were already in motion before the pandemic started, including
prudential regulation and anti-money laundering (AML), and to
emerging policy topics, particularly in the areas of digital
innovation and environmental, social and governance (ESG).
Sustainable finance and climate risk were a key focus of
policymakers in 2021, with the United Nations Climate Change
Conference (COP26) acting as a catalyst for action. We expect
further policy developments, including in the areas of climate-
related disclosures, climate-related financial risks and ESG.
The acceleration of the digital finance agenda, which in part
resulted from the COVID-19 pandemic, continues to trigger
action from regulators and this will likely further intensify. Among
such action, we expect further progress on the regulation of
cryptoassets and stablecoins, as well as on the ongoing work on
central bank digital currencies and digital engagement practices.
The national implementation of the Basel framework remains
another important focus area, but there is a significant risk of
divergence in the timing of implementation, as well as the content
of the provisions. EU authorities have proposed a package of
measures aimed at implementing the remaining Basel III elements
by 2025, i.e., two years after the timeline envisaged by the Basel
Committee on Banking Supervision, while the authorities in
Switzerland and the UK are expected to consult on their approach
in 2022. Implementation in Switzerland is expected in 2024 and
in the UK no earlier than March 2023. Implementation in the US
is still uncertain.
In addition, regulatory authorities continue to refine existing
regulations, including the finalization of the Swiss too-big-to-fail
framework, with a current focus on additional
liquidity
requirements for systemically important banks. The regulators are
also advancing the regulatory framework in key policy areas,
including anti-money laundering, operational resilience and
for more information
Wealth creation1
Despite the economic tumult related to the pandemic, the global
high net worth individual population and financial wealth
increased in 2020 6.3% and 7.6%, respectively.
The United States continued to lead, with high net worth
individual wealth growth of 12.3%; in Asia Pacific, such wealth
expanded 8.4% and in Europe 4.5%. In line with previous trends,
the ultra high net worth individual segment led wealth growth,
with an average of 9.1%. Today, 44% of global financial wealth
is concentrated in North America, followed by Asia (26%) and
Europe (21%).2
By segment, approximately a third of global high net worth
individual wealth is held by individuals with wealth in excess of
USD 30 million, 23% by individuals with wealth ranging from
USD 5 million to USD 30 million and the remaining approximately
43% is within the wealth segment between USD 1 million and
USD 5 million.
Wealth is being created at a faster rate for a number of key
client groups, including female clients and entrepreneurs. We also
see significant wealth transition to the next generation over the
coming decade.
The outlook for wealth remains positive, with North America,
Asia (excluding Japan) and Western Europe expected to account
for 87% of new financial wealth growth worldwide between now
and 2025.2
Wealth transfer
Demographic and socioeconomic developments continue to
generate shifts in wealth. Over the next 10 to 15 years, the “next
gen,” composed of individuals currently between the ages of 20
and 50, will be an influential driver of future growth, as those
people accumulate significant financial wealth from inheritance
or liquidity events.2
11 All the figures are from the Capgemini World Wealth Report 2021 unless otherwise stated and refer to the 2020 financial year. The Capgemini World Wealth Report 2021 defines wealth segmentation as follows:
those with wealth of greater than USD 30 million are classified as ultra high net worth individuals; USD 1–30 million for high net worth individuals.
22 Based on BCG Global Wealth Report 2021. Wealth concentration is based on financial assets by regions and excludes real assets and liabilities.
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Our strategy, business model and environment Our strategy, business model and environment | Our environment
As a group, next gens have a longer investment horizon, a
greater appetite for risk and often a desire to use wealth to create
a positive societal impact alongside investment returns. As shown
in the Wealth-X report “World Ultra Wealth Report 2021,” the
proportion of ultra-wealthy women has also been on a gradual
upward trend in recent years, reflecting changing cultural
attitudes and growth in female entrepreneurship, as well as
wealth transfers between generations.
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.
Search for yield
Since the beginning of the COVID-19 pandemic, investors have
faced a very different investment landscape when compared with
the last decade, with higher rates of economic growth in
developed markets and most notably higher inflation.
Nevertheless, we expect changes in monetary policies of the
central banks of Switzerland and Europe, which have kept interest
rates at historically low levels, to be gradual. The US Federal
Reserve has quickly adjusted to a higher-rate path, but the overall
expected rates remain low in a historical context. Therefore, while
this will create new opportunities for investors in the bond and
equity markets, the overall low-yield environment will continue.
As a result, investors searching for sustainable high returns for
the longer term continue to diversify into illiquid alternatives (e.g.,
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 believe the breadth of Asset
Management’s investment expertise enables us to find the right
solutions for clients across asset classes and regions.
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Our strategy, business model and environment | Our environment
As a group, next gens have a longer investment horizon, a
Search for yield
greater appetite for risk and often a desire to use wealth to create
a positive societal impact alongside investment returns. As shown
Since the beginning of the COVID-19 pandemic, investors have
in the Wealth-X report “World Ultra Wealth Report 2021,” the
faced a very different investment landscape when compared with
proportion of ultra-wealthy women has also been on a gradual
the last decade, with higher rates of economic growth in
upward trend in recent years, reflecting changing cultural
developed markets and most notably higher inflation.
attitudes and growth in female entrepreneurship, as well as
Nevertheless, we expect changes in monetary policies of the
wealth transfers between generations.
central banks of Switzerland and Europe, which have kept interest
We are responding to the evolving wealth landscape with a
rates at historically low levels, to be gradual. The US Federal
framework that addresses all aspects of our clients’ financial lives,
Reserve has quickly adjusted to a higher-rate path, but the overall
called UBS Wealth Way. It begins with discovery questions and a
expected rates remain low in a historical context. Therefore, while
conversation with clients about what is most important to them.
this will create new opportunities for investors in the bond and
We help clients organize their financial life along three key
equity markets, the overall low-yield environment will continue.
strategies: Liquidity to help provide cash flow for short-term
As a result, investors searching for sustainable high returns for
expenses; Longevity for long-term needs; and Legacy for needs
the longer term continue to diversify into illiquid alternatives (e.g.,
that go beyond their own and help improve the lives of others, a
private equity, property, hedge funds and infrastructure) that can
key part of wealth transfer planning.
deliver compelling risk-adjusted returns. At the same time,
investors continue to look for low-cost, efficient passive strategies
across liquid equity markets. We believe the breadth of Asset
Management’s investment expertise enables us to find the right
solutions for clients across asset classes and regions.
Our response to COVID-19
In 2021, the COVID-19 pandemic, which had caused a globally
unprecedented situation in 2020, continued to affect UBS and its
employees and required our ongoing focus on safeguarding the
well-being of our employees and their families, on serving our
clients and ensuring operational continuity.
The rebound in economic activity in 2021 and expectations of
further economic recovery was accompanied by the spread of
new variants that resulted in all-time high numbers of COVID-19
infections and associated disruption.
Our support for clients and the economies in which we
operate
We continued to support our clients with advice needed to
manage their assets and liabilities, along with actively developing
investment solutions and global insights.
The program established by the Swiss Federal Council in March
2020 to support small and medium-sized entities (SMEs) by
guaranteeing loans granted by banks closed on 31 July 2020.
Outstanding commitments of loans granted by UBS under the
program amounted to CHF 2.2 billion on 31 December 2021,
with a total amount drawn of CHF 1.6 billion, compared with the
peak commitments of CHF 3.3 billion and the corresponding total
amount drawn of CHF 1.7 billion as of 31 July 2020. No net
economic profits have been made since the launch of the program
in 2020.
In the US, we continued to support the lending programs
created under the CARES Act for small businesses. Working with
a partner, we provided loans of USD 1.1 billion under the
Paycheck Protection Program until the program expired in May
2021. We donated around USD 1 million of fees earned on such
loans in 2021 to COVID-19 relief efforts and around USD 2 million
in 2020.
Our support for communities
Following earlier donations to various COVID-19-related aid
projects that support communities across regions in which we
operate, and recognizing the critical importance of ensuring
access to COVID-19 vaccines globally, in 2021 UBS partnered with
Gavi, the global vaccine alliance, to raise funds for its COVID-19
Vaccines Global Access
facility. UBS Optimus
(COVAX)
Foundation raised USD 2 million from clients for the Gavi COVAX
facility, which, with matching funds from UBS and the Bill &
Melinda Gates Foundation, will support COVID-19 vaccinations
for more than 800,000 people in low- and middle-income
countries.
More recently, we have committed to a range of relief
programs in India through the UBS Optimus Foundation COVID-
19 Response Fund. Following the first tranche in the second
quarter of 2021, which focused on the delivery of oxygen and
other medical supplies to those most in need, the current tranche
centers around building healthcare worker capacity across
underserved and remote locations, as well as supporting the
mental health of children and young people to help them cope
with the effects of the COVID-19 pandemic.
Our support for employees
Throughout 2021, we continued to prioritize the health and
safety of our employees and clients and to adapt our processes
related to office work and in-person meetings in line with country-
and location-specific developments.
Due to the ongoing pressure placed on employees by closed
workplaces and schools, restricted activities and varying degrees
of lockdown, we continued with a range of supportive measures
throughout 2021. The offer to our employees included a variety
of tools and resources to support employees’ physical, mental,
financial and social well-being, as well as continuing flexibility to
manage various work / life demands.
Effects of the COVID-19 pandemic on our financial and
capital position
The negative effects of the COVID-19 crisis on our financial and
in 2021, despite the
limited
capital positions remained
uncertainties caused by the pandemic.
We maintained a strong capital and liquidity position in the
face of the COVID-19 pandemic.
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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 create value for our stakeholders
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Advice on a broad range of products
and services from trusted advisors
A mix of personal interaction with our
advisors in combination with digital
service anywhere and anytime
(convenient, seamless digital banking is
the expectation)
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, risk management, and liquidity
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 bespoke financing
solutions
Meeting increasing sustainable
investment and private markets
demand from clients
Investment performance in light of the
continued low-interest-rate
environment coupled with the threat of
rising inflation
Holistic goal-based financial planning
Sustainable finance and investing
opportunities
Individualized client meetings
Requests for regular client feedback,
feedback monitoring and complaint
handling
Primarily virtual client events and
conferences, including information on
key developments and opportunities
Data privacy and security
Client satisfaction surveys
Products and services, including those
around digital banking
Increasing levels of digital interaction
with clients
The need for even more personal advice
following the start of the COVID-19
pandemic
IInnvveessttoorrss
Disciplined execution of our strategy
leading to attractive capital returns
through dividends and share
repurchases
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
Comprehensive and clear disclosures on
quantitative and qualitative data
necessary to make informed investment
decisions
Recognizing and proactively addressing
strategic opportunities and challenges
EEmmppllooyyeeeess
A global, world-class employer, with
the expertise and breadth of
opportunity to empower people to
develop successful careers
A collaborative, engaging, supportive
and inclusive workplace culture
An environment that provides a sense
of belonging and the opportunities to
positively impact clients, shareholders
and society
Skill and career development
opportunities, including future-skills
development, and rewards for
performance and impact
Hiring great talent and investing in
development, now and for the future
Effective, fair people management and
compensation policies and practices
A strong workplace culture that aligns
with our purpose and values, enabling
employees to develop their careers and
unlock their full potential
Holistic support, including health and
well-being initiatives, that empowers
employees and fosters resilience
Comprehensive workforce data
analytics enable making better and
faster decisions to meet business needs
Strategic plans and updated targets
following the change of CEO in late
2020
Structural growth in and return
potential of 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
Incorporation of ESG factors into the
business model, compensation and risk
management
Our corporate culture, aligned to
purpose and enabled by our three keys
to success
A clear commitment to fair pay
A performance management process
that supports our strategic priorities
Hybrid working options for employees
Strategic focus on diversity, equity and
inclusion
A more agile future; accelerating new
ways of working
Financial reports, investor and analyst
conference calls, and webcasts, as well
as media updates on our performance
or other disclosures
General meetings of shareholders
Investor and analyst meetings
Digital interactions with investors as a
result of COVID-19 pandemic
restrictions, with limited impact on pre-
pandemic meeting schedules and
participation, given reliable virtual
solutions; the 2021 Annual General
Meeting was held virtually
Regular CEO and GEB communications
and events, along with senior
leadership, regional and functional
sessions with employees
Employee surveys and other virtual
employee engagement activities
Group Franchise Awards and the Kudos
peer-to-peer recognition program
Health and well-being offerings,
employee volunteering and network
opportunities, flexible and hybrid-
working arrangements
SSoocciieettyy
Facilitation of economic development
that is sustainable for the planet and
humankind
Promoting significant and lasting
improvements to 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
Taking an active role in the transition of
our economy toward environmentally
and socially sustainable solutions
Proactive management of the
environmental and societal impacts of
our businesses
Advising clients to align their business
models with ESG parameters and the
UN Sustainable Development Goals
Our client and corporate philanthropy
efforts
Reducing inequalities in our local
communities
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
Dialogues with regulators and
governments
Support of COVID-19-related aid
projects across our communities
38
38
Our strategy, business model and environment | How we create value for our stakeholders
How we create value for our stakeholders
Clients
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CClliieennttss
Advice on a broad range of products
Delivering tailored advice and
Investment performance in light of the
Individualized client meetings
and services from trusted advisors
customized solutions, using our
continued low-interest-rate
A mix of personal interaction with our
advisors in combination with digital
Building long-term personalized
rising inflation
intellectual capital and digital platforms
environment coupled with the threat of
service anywhere and anytime
relationships with our clients
Holistic goal-based financial planning
Requests for regular client feedback,
feedback monitoring and complaint
handling
Primarily virtual client events and
(convenient, seamless digital banking is
the expectation)
Developing new products, solutions
Sustainable finance and investing
conferences, including information on
and strategic partnerships in response
opportunities
key developments and opportunities
Top-quality solutions and the highest
to clients’ evolving needs, including in
standards in terms of asset safety, data
the digital age
Data privacy and security
Client satisfaction surveys
and information security,
confidentiality, and privacy
Providing access to global capital
markets and bespoke financing
Products and services, including those
Increasing levels of digital interaction
around digital banking
with clients
A combination of global reach and local
solutions
capabilities targeting positive
investment outcomes
Competitively priced products and
demand from clients
services, risk management, and liquidity
Meeting increasing sustainable
investment and private markets
pandemic
The need for even more personal advice
following the start of the COVID-19
IInnvveessttoorrss
Disciplined execution of our strategy
Executing our strategy with discipline
Strategic plans and updated targets
Financial reports, investor and analyst
leading to attractive capital returns
and agility as the external environment
following the change of CEO in late
conference calls, and webcasts, as well
through dividends and share
evolves, while aiming to deliver cost-
2020
repurchases
and capital-efficient growth
as media updates on our performance
or other disclosures
Structural growth in and return
Comprehensive and clear disclosures on
Providing transparent, timely and
potential of our businesses
General meetings of shareholders
quantitative and qualitative data
reliable public disclosures
necessary to make informed investment
decisions
Recognizing and proactively addressing
strategic opportunities and challenges
Cost efficiency and ability to generate
Investor and analyst meetings
positive operating leverage
Ability to protect or even grow
revenues in a low-for-longer interest
rate environment
Incorporation of ESG factors into the
Digital interactions with investors as a
result of COVID-19 pandemic
restrictions, with limited impact on pre-
pandemic meeting schedules and
participation, given reliable virtual
solutions; the 2021 Annual General
business model, compensation and risk
Meeting was held virtually
management
EEmmppllooyyeeeess
A global, world-class employer, with
Hiring great talent and investing in
Our corporate culture, aligned to
Regular CEO and GEB communications
development, now and for the future
purpose and enabled by our three keys
and events, along with senior
the expertise and breadth of
opportunity to empower people to
develop successful careers
A collaborative, engaging, supportive
and inclusive workplace culture
Effective, fair people management and
to success
compensation policies and practices
A clear commitment to fair pay
A strong workplace culture that aligns
A performance management process
with our purpose and values, enabling
that supports our strategic priorities
An environment that provides a sense
employees to develop their careers and
of belonging and the opportunities to
unlock their full potential
positively impact clients, shareholders
and society
Skill and career development
opportunities, including future-skills
development, and rewards for
performance and impact
Holistic support, including health and
well-being initiatives, that empowers
employees and fosters resilience
Comprehensive workforce data
analytics enable making better and
faster decisions to meet business needs
Hybrid working options for employees
Strategic focus on diversity, equity and
inclusion
A more agile future; accelerating new
ways of working
SSoocciieettyy
Facilitation of economic development
Promoting significant and lasting
Sustainable finance
that is sustainable for the planet and
improvements to the well-being of
humankind
communities in which we operate
Our climate strategy
Maximization of our positive effects
Taking an active role in the transition of
and minimization of any negative
our economy toward environmentally
efforts
effects on society and the environment
and socially sustainable solutions
Proactive management of the
Advising clients to align their business
environmental and societal impacts of
models with ESG parameters and the
our businesses
UN Sustainable Development Goals
Our client and corporate philanthropy
Reducing inequalities in our local
communities
leadership, regional and functional
sessions with employees
Employee surveys and other virtual
employee engagement activities
Group Franchise Awards and the Kudos
peer-to-peer recognition program
Health and well-being offerings,
employee volunteering and network
opportunities, flexible and hybrid-
working arrangements
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
Dialogues with regulators and
governments
Support of COVID-19-related aid
projects across our communities
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 typical 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 and based
on the expertise and insights of our Chief Investment Office (the
CIO). 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 grow, protect and transfer 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 includes investing
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 lasting and positive impact for
their communities and the causes they care about most. We are
the leading global wealth manager for clients interested in
investing,1 with a commitment to developing
sustainable
solutions that enable clients to align their financial goals and their
personal values.
› 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. Our clients include
more than 30% of Swiss households, more than 90% of the
largest 250 Swiss corporations and more than 50% of midsize to
large pension funds in Switzerland. They look for financial advice
based on their needs at each stage of their individual or corporate
journey. We aim to deliver outstanding advice to all via a multi-
channel approach. Clients have access to digital banking, a wide
network of branches and remote advice. 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.
institutions. By building
In Asset Management, we deliver investment products and
services directly to approximately 2,800 clients around the world,
including sovereign institutions, central banks, supranational
corporations, pension funds and insurers, as well as to Global
Wealth Management and its clients, wholesale intermediaries and
long-term, personalized
financial
relationships with our clients and partners, underpinned by
disciplined execution, we aim to achieve a deep understanding of
their needs and to earn their trust. We combine our global scale
with the independent thinking of our distinct investment teams to
utilize innovative ideas, drawing on the breadth and depth of our
investment capabilities, across traditional and alternative, active and
indexed, to deliver the solutions that clients need.
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. Our equities and differentiated content offering is
underpinned by Investment Bank Research. The differentiated
nature of our research provides access to insight-ready data sets
for thousands of companies, and aims to give clients an
informational edge. In 2021, approximately 45,000 research
reports were produced, with more than six million reads.
11 Euromoney Private Banking and Wealth Management Survey 2021: Overall Global Results.
38
39
39
Our strategy, business model and environment Our strategy, business model and environment | How we create value for our stakeholders
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 and the 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 that enhance the value of human relationships, a factor that
differentiates UBS. Clients expect the convenience and speed that
technology offers but, simultaneously, they feel that 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 research
that is tailored to their needs. They also want multiple ways in
which to interact with their advisors. The COVID-19 pandemic,
and the associated need for physical distancing, has led clients to
embrace the use of digital and mobile tools more than ever
before. 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 more than 60 professionally managed investment
modules (building blocks), it is underpinned by continuous
portfolio monitoring and risk management. The app is interactive;
clients can work with their advisors on a tablet to design their own
portfolio, easily including elements such as sustainable investing
and themes to reflect their individual preferences and priorities.
Based on the strong momentum, client demand and inflows, we
intend to scale up and further develop UBS Manage Advanced
[My Way]. In 2021, the Direct Investment Insights digital
investment service was introduced in Asia and rolled out in Europe
and Switzerland. This service provides timely, relevant and
actionable investment insights and ideas from the CIO directly to
clients’ mobile and desktop devices, linking insights with
execution in our e-banking and mobile app. In the US, we
announced the development of a digital-led, scalable advice
model for affluent clients. As a trusted brand with premium
content, we see opportunities to deliver our expertise to a broader
set of clients, combining digital experience with human advice. In
Switzerland, our UBS Mobile Banking app has been enhanced so
clients can now see relevant investment views and access our real-
time quote capabilities before logging in. At a broader level,
progress continues on our multi-year strategy to serve clients from
two platforms: the Wealth Management Americas Platform in the
US and the Wealth Management Platform outside the US.
40
40
Personal & Corporate Banking continued to develop simple,
smart, secure and sustainable solutions in 2021, reflecting our
digital transformation progress. In May 2021, we launched a new
Remote Sales & Advice (RSA) unit to offer Personal Banking clients
more flexibility in the way they bank through extended service
times and the option to receive professional advice remotely. The
new RSA approach was also successfully piloted for Corporate &
Institutional clients. Following the excellent results of the 2020
pilot, we initiated a Switzerland-wide rollout of UBS Multibanking
for corporate clients, an offering that integrates third-party banks
for full transparency across accounts and convenient payment
execution via a single platform. To assist clients throughout the
onboarding phase, we established a virtual support team for the
multi-banking solution. Moreover, in response to the growing
number of client-support requests via UBS channels, email and
telephone, we introduced the UBS Conversational Platform, an
end-to-end platform enabling clients to get the right answers for
their issues quickly without a lot of interaction with call agents or
client advisors. To accelerate innovation in the payment business,
we announced our UBS Virtual Credit Cards, a new generation of
purely digitally available cards that can be used in online shops
and receive deposits from TWINT, Apple Pay, Samsung Pay and
Google Pay. Since its introduction, more than 30,000 virtual cards
have been issued. For banking packages, we have launched
UBS me to replace the previous pre-defined banking bundles.
Clients can now put together their individual package based on
their own needs and preferences, and are only charged for
solutions they actually need. Our UBS Atrium mortgage platform
for investment properties has been integrated into the key4
brand, creating a true multi-channel and multi-product offering.
As a result of the integration, clients can benefit from digital
offering capabilities of the innovative mortgage platform for
owner-occupied residential property. In addition, the Green
Mortgage for income-producing properties is available via key4
and offers a financial advantage on financing to borrowers who
hold recognized sustainability certificates. To give clients access to
market-leading solutions beyond banking, we have expanded our
network of partnerships. We have joined forces with a Swiss
fintech start-up to provide corporate clients with extensive cash
management functionalities, from automated generation of
expense reports to validation of supplier invoices. To make
progress in our journey toward being more agile, we set up a new
virtual organization as a collaboration between Personal &
Corporate Banking, Global Wealth Management and the Chief
Digital and Information Office: the Agile Delivery Organization.
With more than 26 agile end-to-end delivery crews focused on
our clients’ needs, we are empowering teams, removing silos and
evolving toward an integrated setup to deliver responsive,
adaptable and innovative products. With sustainability being a top
strategic priority for our business and our client proposition, we
have continuously expanded our sustainability agenda. Our
platform for volunteer work, UBS Helpetica, has so far received
286 project ideas and published more than 180 projects with over
70 non-profit partners across its focus topics: the environment,
social issues, education and entrepreneurship. An example of
further progress in our sustainability journey came when the
UBS Strategy Funds were repositioned toward UBS Strategy Funds
Sustainable in 2021, which led to the transfer of a significant
amount of existing custody assets to sustainable solutions.
Our strategy, business model and environment | How we create value for our stakeholders
We know the security and confidentiality of our clients’ data is
Personal & Corporate Banking continued to develop simple,
of utmost importance to them, as it is for UBS. That is why we put
smart, secure and sustainable solutions in 2021, reflecting our
the highest priority on having comprehensive measures in place
digital transformation progress. In May 2021, we launched a new
that are designed to ensure that client data confidentiality and
Remote Sales & Advice (RSA) unit to offer Personal Banking clients
integrity are maintained. We continually assess and improve our
more flexibility in the way they bank through extended service
control environment to mitigate emerging cyber threats and meet
times and the option to receive professional advice remotely. The
expanding legal and regulatory expectations. Investments in our
new RSA approach was also successfully piloted for Corporate &
IT platforms preserve and improve our IT security standards, with
Institutional clients. Following the excellent results of the 2020
a focus on giving clients secure access to their data via our digital
pilot, we initiated a Switzerland-wide rollout of UBS Multibanking
channels and protecting that data from unauthorized access.
for corporate clients, an offering that integrates third-party banks
Although the level of sophistication and the impact and volume
for full transparency across accounts and convenient payment
of cyberattacks continue to grow worldwide, we are ever vigilant,
execution via a single platform. To assist clients throughout the
maintaining a strong and agile cybersecurity and information
onboarding phase, we established a virtual support team for the
security program to mitigate and manage cyber risk by providing
multi-banking solution. Moreover, in response to the growing
robust, consistent, secure and resilient business processes.
number of client-support requests via UBS channels, email and
Enhancing the client experience through innovation and
end-to-end platform enabling clients to get the right answers for
telephone, we introduced the UBS Conversational Platform, an
digitalization
their issues quickly without a lot of interaction with call agents or
client advisors. To accelerate innovation in the payment business,
We streamline and simplify interactions with clients through
we announced our UBS Virtual Credit Cards, a new generation of
front-to-back digitalization and innovations.
purely digitally available cards that can be used in online shops
In Global Wealth Management, we develop and deploy digital
and receive deposits from TWINT, Apple Pay, Samsung Pay and
tools that enhance the value of human relationships, a factor that
Google Pay. Since its introduction, more than 30,000 virtual cards
differentiates UBS. Clients expect the convenience and speed that
have been issued. For banking packages, we have launched
technology offers but, simultaneously, they feel that a personal
UBS me to replace the previous pre-defined banking bundles.
experience with advisors is more important than ever. Our
Clients can now put together their individual package based on
advisors use state-of-the-art digital tools to spend more time with
their own needs and preferences, and are only charged for
clients and better evaluate the full scope of their financial lives.
solutions they actually need. Our UBS Atrium mortgage platform
Our clients appreciate digital tools that improve their experience,
for investment properties has been integrated into the key4
for example, easy ways to view their portfolios or access research
brand, creating a true multi-channel and multi-product offering.
that is tailored to their needs. They also want multiple ways in
As a result of the integration, clients can benefit from digital
which to interact with their advisors. The COVID-19 pandemic,
offering capabilities of the innovative mortgage platform for
and the associated need for physical distancing, has led clients to
owner-occupied residential property. In addition, the Green
embrace the use of digital and mobile tools more than ever
Mortgage for income-producing properties is available via key4
before. We continue to introduce new and better tools to meet
and offers a financial advantage on financing to borrowers who
and exceed clients’ expectations. For example, our UBS Manage
hold recognized sustainability certificates. To give clients access to
Advanced [My Way] app offers clients in selected markets an at-
market-leading solutions beyond banking, we have expanded our
a-glance comprehensive view of their investment portfolio. With
network of partnerships. We have joined forces with a Swiss
access to more than 60 professionally managed investment
fintech start-up to provide corporate clients with extensive cash
modules (building blocks), it is underpinned by continuous
management functionalities, from automated generation of
portfolio monitoring and risk management. The app is interactive;
expense reports to validation of supplier invoices. To make
clients can work with their advisors on a tablet to design their own
progress in our journey toward being more agile, we set up a new
portfolio, easily including elements such as sustainable investing
virtual organization as a collaboration between Personal &
and themes to reflect their individual preferences and priorities.
Corporate Banking, Global Wealth Management and the Chief
Based on the strong momentum, client demand and inflows, we
Digital and Information Office: the Agile Delivery Organization.
intend to scale up and further develop UBS Manage Advanced
With more than 26 agile end-to-end delivery crews focused on
[My Way]. In 2021, the Direct Investment Insights digital
our clients’ needs, we are empowering teams, removing silos and
investment service was introduced in Asia and rolled out in Europe
evolving toward an integrated setup to deliver responsive,
and Switzerland. This service provides timely, relevant and
adaptable and innovative products. With sustainability being a top
actionable investment insights and ideas from the CIO directly to
strategic priority for our business and our client proposition, we
clients’ mobile and desktop devices, linking insights with
have continuously expanded our sustainability agenda. Our
execution in our e-banking and mobile app. In the US, we
platform for volunteer work, UBS Helpetica, has so far received
announced the development of a digital-led, scalable advice
286 project ideas and published more than 180 projects with over
model for affluent clients. As a trusted brand with premium
70 non-profit partners across its focus topics: the environment,
content, we see opportunities to deliver our expertise to a broader
social issues, education and entrepreneurship. An example of
set of clients, combining digital experience with human advice. In
further progress in our sustainability journey came when the
Switzerland, our UBS Mobile Banking app has been enhanced so
UBS Strategy Funds were repositioned toward UBS Strategy Funds
clients can now see relevant investment views and access our real-
Sustainable in 2021, which led to the transfer of a significant
time quote capabilities before logging in. At a broader level,
amount of existing custody assets to sustainable solutions.
progress continues on our multi-year strategy to serve clients from
two platforms: the Wealth Management Americas Platform in the
US and the Wealth Management Platform outside the US.
40
In Asset Management, we are accelerating our investment in
digitalization. We have extended our digital client relationship
management pilot tools, technologies and data capabilities to
enhance the experience of, and service for, our clients, to foster
innovation and to support alpha generation. For example, we will
soon launch a scalable platform to enable more efficient
development and management of theme-based investment
products to meet growing client demand. We continue to expand
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. To simplify
and enhance our client servicing, we are
introducing
improvements in client and data analytics.
through experimentation,
The Investment Bank strives to be the digital investment bank
of the future, with innovation-led businesses driving efficiencies
and solutions. In February 2021, we announced the creation of a
Digital Platforms function within the Investment Bank across
Global Markets and Global Banking, to work on exponential
transformation
innovation, and
external partnerships. The Digital Platforms function is critical to
delivering on our client promise. In Global Markets, our
Technology-Enhanced Sales (TES) teams work in close partnership
with our Data Intelligence, Group Technology, and Client
Coverage teams to embed our data and technology capabilities
across all client teams and enhance our client service. TES allows
clients to choose where and how we deliver content and uses data
modeling to customize the content they receive. UBS Neo, our
award-winning multi-channel platform and enterprise ecosystem
for digital clients, lets our professional and institutional clients
access a comprehensive suite of products and services covering
the full investment life cycle. Historically, most clients used only
one or two of the capabilities available to them via UBS Neo. We
have now transformed the client experience through a new
personalized version of the platform, including the launch of an
app store. Investment Bank DigiOps, our Operations team
working in collaboration with Group Technology on digital
innovation projects, is enhancing the client experience through a
digital platform that continues to make progress on simplifying
Operation’s technology infrastructure, increasing front-to-back
efficiency and enhancing our decision making and relevance to
clients. New non-bank competitors have secured a foothold in our
markets, while fintech firms have carved out and dominated
entirely new segments. In response, we created a team focused
on strategic
investments and fundamentally new market
infrastructure. By utilizing distributed ledger technology, Global
Markets is transforming the business models of products where
the Investment Bank has been strong historically. One example is
UBS Gold, our global physical gold transaction network of retail
investors, gold merchants, institutional investors and vault
providers that enables clients to buy and sell at interbank prices.
A tokenized representation of underlying physical gold provides
fractional ownership with low-friction transactional capability.
Our vision is to accelerate the tokenization of financial products
traded by UBS clients. In November 2021, the Investment Bank
helped SIX Group to launch the first ever Swiss franc-
denominated digital bond offering, which is listed, traded and
settled on the newly established SIX Digital Exchange. Global
Banking has also prioritized the client experience. Global Banking
Data & Analytics Lab uses data science, predictive analytics and
quantitative models to develop solutions for our businesses. UBS-
GUARD applies data science and predictive analytics to Global
Banking business users, predicting the risk of companies
becoming the targets of activists, identifying deal opportunities
and helping navigate client pitches. Our SPAC database is a fully
automated database of in-market special purpose acquisition
companies (SPACs) created to match SPACs with potential
acquisition targets and help increase efficiency and collaboration
across sectors and regions.
Engaging with our clients
We use a variety of channels to engage with clients, including
regular client relationship and service meetings, as well as various
corporate roadshows and dedicated events. Digital interaction
with clients increased as the pandemic continued.
Global Wealth Management interacted with clients via various
settings in 2021, from personalized private briefings with subject
matter experts to segment-specific virtual events and large-scale
initiatives. We utilize marketing campaigns, events, advertising,
publications and digital-only solutions to help drive greater
awareness of UBS among prospective clients and reinforce trust-
based relationships between advisors and clients.
Personal & Corporate Banking holds regular client events
(mostly webcasts and virtual or hybrid events since the onset of
the COVID-19 pandemic), covering a wide range of topics. In
2021, we increasingly engaged with clients via online channels,
such as social media, online displays and search engines, and
further 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, and we held our inaugural Alternatives
Conference in 2021. Alongside this, our teams continued the high
level of interaction with clients globally in 2021, facilitated by new
digital tools, and our publication of macro insights and thought
leadership to provide timely insights into rapidly evolving markets.
We also hosted a broad range of virtual events, including our
Nobel Perspectives webinar series, to help our clients better
understand market challenges and investment opportunities, and
we continued to engage with clients through our social media
and online channels.
41
41
Our strategy, business model and environment Our strategy, business model and environment | How we create value for our stakeholders
The Investment Bank hosted over 170 investor conferences and
educational seminars globally in 2021, covering a broad range of
macro, sector, regional and regulatory topics. Almost all of those
conferences were held virtually. More than 40,000 clients took
part in such events in 2021, 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. UBS Neo Question Bank is
the largest global database of market-related questions asked by
professional investors, while UBS Live Desk, built within the
UBS Neo platform, provides clients with a stream of fast-paced
commentary from UBS traders.
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, via
mobile and the web, input about overall satisfaction with advisors
and UBS, and share key topics they wish to discuss with their
advisors. Advisors and their teams have seamless, real-time access
to client feedback, enabling them to be highly responsive. The
tool is available in the US and Asia Pacific, as well as most EMEA
countries.
Personal & Corporate Banking has conducted annual surveys
of clients in Switzerland since 2008, 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 2021, we had an all-time high
client satisfaction and net promoter score (NPS), and achieved a
77% follow-up rate with survey participants.
The 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 and through
different channels, including in writing, electronically, orally to
client advisors and staff in our branches and other client touch
points, via social media channels, and via the Swiss Banking
Ombudsman. Client
including complaints and
suggestions, is vitally important, as it shows direct and unfiltered
client needs, supports the development and introduction of new
products and services and hence fosters the optimization of our
offering in a client-focused manner. By addressing client
feedback, we aim to strengthen client relationships, improve
feedback,
client satisfaction and make tangible improvements to our
services. By sharing their views, clients contribute to quality
improvements at all levels. We aim to respond to each individual
who provides feedback. In 2021, key topics and enhancements
centered mostly around digital banking functionalities, digital
client onboarding and the reorganization of UBS’s branches and
services.
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
actively captured and tracked in our systems. Internal regional
forums serve as a platform for senior management to discuss
client relationships, possibilities for improvement, potential
opportunities and specific client issues. 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. We continue to make progress in simplifying our
technology infrastructure, focusing on increasing front-to-back
efficiency and enhancing our decision making and relevance to
clients. In November 2021, we launched the first Annual Global
Markets Client Survey to gauge our clients’ experience of UBS and
the products and services that are important to them, measuring
client satisfaction and loyalty. In 2021, over 49% of Global
Markets clients surveyed expected to increase their market share
with UBS in the next six months. When ranking the most
important factor in choosing a market partner, relationship
management coverage and connectivity were a priority, further
underlining the importance of our people. When asked about
future capabilities, our clients ranked highly the need for profiled
personalization of products and services, underlining the
importance of our Digital Platforms and our TES initiative.
We thoroughly evaluate the feedback we receive, including
complaints from clients, and take measures to address key themes
identified. For example, in 2021, Personal & Corporate Banking
clients expressed an increasing need for security and trust. The
ongoing optimization and digitalization of products has been well
received by clients across all segments. However, in light of
ongoing branch closures, clients would like further digitalization.
Furthermore, feedback indicated that clients developed high
levels of acceptance for telephone or video advice and were
increasingly satisfied with the service received via Global Banking.
42
42
Our strategy, business model and environment | How we create value for our stakeholders
The Investment Bank hosted over 170 investor conferences and
client satisfaction and make tangible improvements to our
educational seminars globally in 2021, covering a broad range of
services. By sharing their views, clients contribute to quality
macro, sector, regional and regulatory topics. Almost all of those
improvements at all levels. We aim to respond to each individual
conferences were held virtually. More than 40,000 clients took
who provides feedback. In 2021, key topics and enhancements
part in such events in 2021, providing insight and access to our
centered mostly around digital banking functionalities, digital
own opinion leaders, policymakers and leading industry experts.
client onboarding and the reorganization of UBS’s branches and
We leverage our intellectual capital and relationships and use our
services.
execution capabilities, differentiated research content, bespoke
In Asset Management, we have an integrated process to record
solutions, client franchise model and global platform to expand
and manage client feedback through our client relationship
coverage across a broad set of clients. UBS Neo Question Bank is
management tool. We also conduct regular surveys, covering our
the largest global database of market-related questions asked by
wholesale and institutional clients globally, inviting them to assess
professional investors, while UBS Live Desk, built within the
their satisfaction with our client service, products and solutions,
UBS Neo platform, provides clients with a stream of fast-paced
as well as other factors relevant to their investments. The results
commentary from UBS traders.
are analyzed to identify focus areas for improvement and our
client relationship managers follow up with respondents to
How we measure client satisfaction
address specific feedback where required.
We use multiple techniques to regularly assess our achievements
individual product coverage points. Direct client feedback is
and the satisfaction of our clients.
actively captured and tracked in our systems. Internal regional
Global Wealth Management is increasingly using technology
forums serve as a platform for senior management to discuss
and analytics capabilities to collect and respond to client
client relationships, possibilities for improvement, potential
feedback. Our digital client feedback tool lets clients submit, via
opportunities and specific client issues. Other processes are in
mobile and the web, input about overall satisfaction with advisors
place to enable consolidated findings to be shared within UBS as
and UBS, and share key topics they wish to discuss with their
appropriate. The Investment Bank also closely monitors external
advisors. Advisors and their teams have seamless, real-time access
surveys, which provide feedback across a range of investment
to client feedback, enabling them to be highly responsive. The
banking services. We continue to make progress in simplifying our
tool is available in the US and Asia Pacific, as well as most EMEA
technology infrastructure, focusing on increasing front-to-back
countries.
efficiency and enhancing our decision making and relevance to
Personal & Corporate Banking has conducted annual surveys
clients. In November 2021, we launched the first Annual Global
of clients in Switzerland since 2008, consistently covering all
Markets Client Survey to gauge our clients’ experience of UBS and
private and corporate client segments annually since 2015. Clients
the products and services that are important to them, measuring
provide feedback on their satisfaction with regard to various
client satisfaction and loyalty. In 2021, over 49% of Global
topics (e.g., UBS overall, branches, client advisors, products and
Markets clients surveyed expected to increase their market share
services) and indicate further product or advisory needs. Survey
with UBS in the next six months. When ranking the most
responses are distributed to client advisors, who follow up with
important factor in choosing a market partner, relationship
each respondent individually. In 2021, we had an all-time high
management coverage and connectivity were a priority, further
client satisfaction and net promoter score (NPS), and achieved a
underlining the importance of our people. When asked about
77% follow-up rate with survey participants.
future capabilities, our clients ranked highly the need for profiled
The Quality Feedback system in Global Wealth Management
personalization of products and services, underlining the
and Personal & Corporate Banking provides a comprehensive and
importance of our Digital Platforms and our TES initiative.
systematic platform to receive and process client feedback and
We thoroughly evaluate the feedback we receive, including
suggestions. We receive feedback in various forms and through
complaints from clients, and take measures to address key themes
different channels, including in writing, electronically, orally to
identified. For example, in 2021, Personal & Corporate Banking
client advisors and staff in our branches and other client touch
clients expressed an increasing need for security and trust. The
points, via social media channels, and via the Swiss Banking
ongoing optimization and digitalization of products has been well
Ombudsman. Client
feedback,
including complaints and
received by clients across all segments. However, in light of
suggestions, is vitally important, as it shows direct and unfiltered
ongoing branch closures, clients would like further digitalization.
client needs, supports the development and introduction of new
Furthermore, feedback indicated that clients developed high
products and services and hence fosters the optimization of our
levels of acceptance for telephone or video advice and were
offering in a client-focused manner. By addressing client
increasingly satisfied with the service received via Global Banking.
feedback, we aim to strengthen client relationships, improve
Investors
We aim to create sustainable, long-term value for our investors by
executing our strategy with discipline, maintain risk and cost
discipline, and deliver attractive shareholder returns.
Active capital management to enable growth and deliver
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
The Investment Bank closely monitors client satisfaction via
Alignment of interests
We aim to align the interests of our employees with those of our
equity and debt investors, and this approach is reflected in our
compensation philosophy and practices.
› Refer to “Our compensation philosophy” in the “Compensation”
section of this report for more information
Driving growth while maintaining risk and cost discipline
We are focusing on growth, as we expand into new client
segments and accelerate our strategic technology investments.
Across the firm, we intend to maintain our risk and cost discipline
to support our growth plans, with continual enhancement of day-
to-day efforts.
We are aiming to create sustainable value through the cycle.
To accomplish this, we have outlined selected commercial and
environmental, social and governance (ESG) aspirations, which
should support our financial targets.
Our primary measurement of performance for the Group is
return on common equity tier 1 (CET1), as regulatory capital is our
binding constraint and drives our ability to return capital to
shareholders.
› Refer to the “Targets, aspirations and capital guidance” section
of this report for more information
Our first priority is ensuring that we can maintain a strong balance
sheet. This includes our strong capitalization, in line with our
capital guidance of maintaining a CET1 capital ratio of around
13% and a CET1 capital leverage ratio of greater than 3.7%.
As a second priority, we consider opportunities for investment
in growth.
Our third priority is returning capital to shareholders in the
form of dividends, and we intend to pay progressive cash
dividends. For 2021, the Board of Directors intends to propose a
dividend to UBS Group AG shareholders of USD 0.50 per share.
After these three priorities have been met, we intend to
distribute excess capital to shareholders via share buybacks. In
2021, we bought back USD 2.6 billion of our shares. Looking
ahead, we intend to buy back up to USD 5 billion of shares by the
end of 2022.
› Refer to “UBS shares” in the “Capital, liquidity and funding, and
balance sheet” section of this report for more information
Communications
Our Investor Relations (IR) function is the primary point of contact
between UBS and our shareholders. Our senior management and
IR regularly interact with institutional 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 our Corporate Responsibility function 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 2021, available from 11 March
2022 under “Annual reporting” at ubs.com/investors, for more
information
42
43
43
Our strategy, business model and environment
Our strategy, business model and environment | How we create value for our stakeholders
Employees
At UBS, we know the meaning of long-term commitment; to our
clients, investors, employees, communities and society. With our
employees, this commitment is personal. We are dedicated to
being a world-class employer where our employees can leverage
and continually enhance their skills, partnering with clients and
colleagues on solutions that make a real difference.
Our people leadership approach aligns with our strategy and
our purpose, as both rely on engaged and empowered individuals
to drive them forward. Our employees are the key to realizing our
ambitions. Reimagining the power of people and making
connections are at the heart of what we do. Every day, our global
team connects people with innovative ideas and opportunities
that lead to better results for UBS and for our clients, as well as to
progress in society.
Our purpose drives our strategy and culture
Our purpose articulates why we do what we do and why it
matters. Our culture affects how we do things and is firmly
grounded in our three keys to success: our Pillars, Principles and
Behaviors. To help ensure that our culture advances our strategic
goals, we updated our three keys to success in 2021 to reflect our
purpose, client promise and strategic imperatives. For the past
decade, these keys have defined how we work together and what
we stand for, as a firm and as individuals. They continue to drive
daily business decisions and are integrated into our people
management processes.
› Refer to the Sustainability Report 2021, available from 11 March
2022 under “Annual reporting” at ubs.com/investors, for more
information about our Pillars, Principles and Behaviors
We promote culture-building behavior through a number of
global, regional and divisional initiatives. Notably, since 2016, our
Group Franchise Awards (GFA) program has rewarded employees
for promoting cross-divisional collaboration and innovation. A
related idea-sharing site enables employees to cooperate on
solutions for operational, client service, sustainability and
technology challenges. Nearly 6,000 ideas have been submitted
since its launch, with approximately 450 ideas implemented or
supported for future implementation.
A peer-to-peer recognition program instituted in late 2020
encourages employees to recognize colleagues’ exemplary
behavior. Called Kudos, this initiative serves to bring teams
together and increase motivation, engagement and employee
satisfaction, with a total of around 420,000 messages of
recognition given since the program was launched.
Our workforce at a glance¹
71,385
employees (FTE)
72,779 employees (headcount)
Women
Men
40%
28,888
60%
43,891
50
countries
145
nationalities
162
languages
spoken
8
years of service,
on average
Age
age < 30
age 30–50
age > 50
Region
29% 30% 21% 20%
18%
60%
22%
Switzerland
Americas
Asia Pacific
EMEA
1 Calculated as of 31 December 2021 on a headcount basis of 72,779 internal employees only.
44
44
Our strategy, business model and environment | How we create value for our stakeholders
Employees
At UBS, we know the meaning of long-term commitment; to our
decade, these keys have defined how we work together and what
clients, investors, employees, communities and society. With our
we stand for, as a firm and as individuals. They continue to drive
employees, this commitment is personal. We are dedicated to
daily business decisions and are integrated into our people
being a world-class employer where our employees can leverage
management processes.
and continually enhance their skills, partnering with clients and
colleagues on solutions that make a real difference.
› Refer to the Sustainability Report 2021, available from 11 March
2022 under “Annual reporting” at ubs.com/investors, for more
Our people leadership approach aligns with our strategy and
information about our Pillars, Principles and Behaviors
our purpose, as both rely on engaged and empowered individuals
to drive them forward. Our employees are the key to realizing our
We promote culture-building behavior through a number of
ambitions. Reimagining the power of people and making
global, regional and divisional initiatives. Notably, since 2016, our
connections are at the heart of what we do. Every day, our global
Group Franchise Awards (GFA) program has rewarded employees
team connects people with innovative ideas and opportunities
for promoting cross-divisional collaboration and innovation. A
that lead to better results for UBS and for our clients, as well as to
related idea-sharing site enables employees to cooperate on
progress in society.
Our purpose drives our strategy and culture
solutions for operational, client service, sustainability and
technology challenges. Nearly 6,000 ideas have been submitted
since its launch, with approximately 450 ideas implemented or
supported for future implementation.
Our purpose articulates why we do what we do and why it
A peer-to-peer recognition program instituted in late 2020
matters. Our culture affects how we do things and is firmly
encourages employees to recognize colleagues’ exemplary
grounded in our three keys to success: our Pillars, Principles and
behavior. Called Kudos, this initiative serves to bring teams
Behaviors. To help ensure that our culture advances our strategic
together and increase motivation, engagement and employee
goals, we updated our three keys to success in 2021 to reflect our
satisfaction, with a total of around 420,000 messages of
purpose, client promise and strategic imperatives. For the past
recognition given since the program was launched.
Our workforce at a glance¹
71,385
employees (FTE)
72,779 employees (headcount)
Women
Men
40%
28,888
60%
43,891
50
145
162
8
countries
nationalities
languages
years of service,
spoken
on average
Age
age < 30
age 30–50
age > 50
Region
29% 30% 21% 20%
18%
60%
22%
Switzerland
Americas
Asia Pacific
EMEA
1 Calculated as of 31 December 2021 on a headcount basis of 72,779 internal employees only.
44
Leadership, engagement and culture
Connecting people with transformative ideas and becoming a
more agile organization starts with our leaders. In 2021, we
updated our House View on Leadership to reflect the behavior
that we expect every leader to demonstrate toward employees,
clients and business activities. Leaders at all levels are also
expected
and
simplification,
to
empowerment
accountability
to support our ongoing
transformation.
foster
in
teams
their
Key to maintaining a strong culture are listening to employees
and acting on their feedback. Launched in mid-2021, our new
employee-listening strategy uses Group-wide surveys conducted
by an external provider to measure indicators such as line
manager effectiveness, and in-depth research to solve specific
business issues. As an example, an Organizational Health Index
assesses firm-wide alignment with strategic goals, working
practices and adaptability. Employee responses in 2021 directly
the development of our purpose, our new
influenced
performance management approach and our increased focus on
innovation, sustainability and impact.
› Refer to the Sustainability Report 2021, available from 11 March
2022 under “Annual reporting” at ubs.com/investors, for more
information about our management practices, and to the
foldout page of this report for more information about our
purpose
Toward a more agile future
Driven by our strategic imperatives and in response to evolving
client needs, we are accelerating the adoption of new ways of
working together. In particular, agile working practices, and agile
teams where they make sense, will enable us to be more
responsive, adaptive and innovative in everything we do. Multi-
disciplinary teams working across the firm will create better
outcomes for clients and
improve our employees’ work
experience. In 2021, we launched a first wave of the Agile@UBS
program ahead of a broader implementation in 2022. Currently,
we have 10,000 employees transitioning to the new Agile@UBS
ways of working by the end of the first quarter of 2022 and we
are on track to have over 20,000 employees working in
Agile@UBS by the end of 2022. Participants’ experiences, along
with coaching and specialized training delivered through the Agile
Academy within our UBS University, will enable us to
systematically roll out Agile@UBS to more business areas going
forward.
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
Our commitment to diversity, equity and inclusion (DE&I)
In our experience, diverse teams better understand and relate to
our equally diverse clients and their needs. Furthermore,
employees with different backgrounds and experiences drive
innovation and better decision making. Our aim, therefore, is to
shape a diverse and inclusive organization that is innovative,
provides outstanding service to our clients and offers equitable
opportunities so that all employees may thrive.
Our broad approach encompasses a range of aspects,
including inclusive leadership, gender, ethnicity, LGBTQ+ and
disability. Along with a concerted focus on building inclusive
leadership skills, increasing gender and ethnic diversity, and
ensuring equitable policies and practices were priorities in 2021.
Regarding gender, we aspire to have 30% of Director and above
roles held by women by 2025. At the end of 2021, that figure
stood at 26.7%, up from 26.0% in 2020. Similarly, our 2025
aspiration is to achieve a 26% representation of ethnic minorities
at Director level and above in the UK and the US. As of the end
of 2021, this figure was 20.1% in the US and 21.3% in the UK.
Initially launched in Switzerland in 2016, our global UBS Career
Comeback program continues to help us increase our pipeline of
female leaders. To date, the program has helped 196 women and
19 men relaunch their careers.
In addition to strategic initiatives, each year we sponsor
numerous activities to promote inclusivity and a culture of
belonging. Chief among them are activities provided by our 48
employee networks across the firm. Employee volunteers regularly
host educational events and initiatives focused on gender, culture,
ethnicity, LGBTQ+ / Pride, disability, veterans, parenting, elder
care and other topics. Our employee networks also raise the
visibility of employees’ needs and help shape our DE&I program,
local benefits offerings, and more. Disability is a key focus area:
as such, the firm became a member of The Valuable 500 in 2021,
committing to make disability inclusion part of the firm’s business
leadership agenda.
› Refer to ubs.com/diversity for more information about our DE&I
priorities, commitments and progress
As of
% change from
3311..1122..2211
31.12.20
31.12.19
31.12.20
2211,,331177
2200,,553377
1155,,661188
1144,,009911
66,,005511
77,,882266
221155
2200,,335599
7711,,338855
21,394
20,528
15,353
13,899
6,069
7,652
178
20,904
71,551
21,036
20,232
13,956
12,918
5,704
7,048
166
20,691
68,601
0
0
2
1
0
2
21
(3)
0
45
45
Our strategy, business model and environment Our strategy, business model and environment | How we create value for our stakeholders
Practices that help us remain an employer of choice
Compensating employees fairly and consistently is key to ensuring
equal opportunities. We pay for performance, and we take pay
equity seriously. A strong commitment to both is embedded in
our compensation policies, and we conduct both internal reviews
and independent external audits as quality checks. If we uncover
gaps that cannot be explained by business factors or appropriate
personal factors – such as experience, role, responsibility,
performance or location – we explore the root causes of those
gaps and address them. Additionally, our regular monitoring and
review processes also allow us to maintain our certification status
with the EQUALSALARY Foundation for our equal pay practices in
Switzerland, the US, the UK, Hong Kong SAR and Singapore. The
firm also successfully completed an equal pay analysis in
Switzerland in 2020, as required by the Swiss Federal Act on
Gender Equality. The results of the analysis confirmed that we are
fully compliant with Swiss equal pay standards. These holistic
certifications are a testament to our well-established equal
opportunity environment and the strength of our human
resources practices, including performance and reward. In 2021,
we continued to monitor pay fairness and addressed any
unexplained gaps to ensure that all employees are paid fairly. All
employees have access to competitive benefits,
including
insurance, retirement and personal leave.
› Refer to the “Compensation” section of this report for more
information about compensation-related topics
Meeting employees’ needs while improving services for clients
Working both from home and from the office became the norm
for many employees in 2021, with surveys indicating strong
support for continued flexibility. Following a global analysis that
considered factors such as regulation, risk and productivity, we
determined that approximately 75% of our employees could be
eligible to work in a hybrid setup. In addition to fostering better
work / life balance, a hybrid model makes us a more attractive
employer to a wider pool of applicants, such as early-career talent,
working parents and those in continuing education. The emphasis
on technology and virtual collaboration also sparks innovative
thinking that will make us more agile and further improve client
service. We are implementing hybrid working on a country-by-
country basis, along with wide-ranging support to ensure that
employees, teams and our culture all continue to thrive.
Health and well-being
Supporting employee health and well-being remained a priority in
2021. We are committed to helping employees thrive in their
current roles and deliver sustainable performance over time.
Regular “pulse” surveys gauged employees’ views on remote
work, stress, communication and other aspects. Resources to help
employees support holistic well-being featured a bespoke
eLearning curriculum, physical and mental health initiatives,
volunteering opportunities, increased benefits offerings in certain
locations, and financial education.
Employee representation
We maintain an open dialogue with our formal employee
representation groups, all of which are in Europe, as part of our
commitment to being a responsible employer. These groups
represent 17 countries and consider issues that may affect our
performance, operations and prospects. Collectively, these groups
represent approximately 49% of our global workforce.
Attracting, developing and retaining the best talent
Fostering an agile and connected workforce is a priority for the
near term. We therefore need to have processes in place that are
designed to ensure that we have the best people, in the right
roles, at the right time, to achieve our strategic goals.
Comprehensive workforce data dashboards help us analyze all
aspects of the employee life cycle, including recruitment,
performance management, training,
internal mobility and
attrition, along with demographic and diversity aspects, such as
gender and ethnicity. This helps us identify trends quickly and
make fact-based decisions grounded in human resources data.
Throughout 2021, we hired new talent where necessary to
launch or expand businesses and to fill gaps in our workforce. We
recruit for potential and cultural fit, hiring beyond immediately
relevant skills to include the person’s experience, competencies
and digital aptitude. We hired a total of 9,363 external candidates
in 2021, adding more than 1,700 graduates and other trainees,
apprentices and interns through our various junior talent
programs. We invest in young talent in every region, supporting
national apprenticeship programs in Switzerland and the UK and
summer internship programs in many locations. In Singapore, UBS
worked with the government to set up a program to support
ongoing employability during the pandemic and to increase the
resilience of regional banking infrastructure. Our approach has
garnered numerous external accolades in 2021, including a top-
50 ranking in the World’s Most Attractive Employers from
employer-branding experts Universum, for the 13th consecutive
year.
› Refer to ubs.com/employerawards for more information about
our most recent employer rewards
Focusing on performance and development
Resetting the firm’s strategic course sparked a comprehensive
review of our performance management practices in 2021. As a
result, we introduced a new approach called MyImpact that aims
to better support our strategic priorities and reinforce our culture,
as well as making our year-end review, objective setting and
employee feedback processes simpler and more transparent.
Key to our talent management strategy is offering employees
opportunities to build interesting careers. Our innovative digital
Career Navigator platform, which now features short-term
rotation opportunities, promotes internal mobility across teams,
functions and business divisions. Employees can explore career
paths, search for jobs and connect with colleagues while allowing
our recruiters to more easily source internal talent. The tool also
identifies potential competency gaps and automatically
recommends appropriate training. Since
inception, Career
Navigator has helped 47,600 employees search for short-term job
opportunities or find internal experts, discover possible career
paths and match themselves to open roles. More than 160,000
skills were added to our employee skills-sharing platform in 2021.
Our in-house UBS University plays a central role in fostering
diversity of thought within the firm, and in building employees’
skills for use now along with capabilities for the future. Our
offering includes line manager and leadership development,
advisory and sales training, and industry-leading certification for
client advisors, as well as data literacy, agile working and health
and well-being topics. Altogether in 2021, our permanent
employees completed more than 1,425,000 learning activities,
including mandatory training on compliance, business and other
topics, resulting in an average of more than two training days per
employee.
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Our strategy, business model and environment | How we create value for our stakeholders
Practices that help us remain an employer of choice
Attracting, developing and retaining the best talent
Fostering an agile and connected workforce is a priority for the
Compensating employees fairly and consistently is key to ensuring
near term. We therefore need to have processes in place that are
equal opportunities. We pay for performance, and we take pay
designed to ensure that we have the best people, in the right
equity seriously. A strong commitment to both is embedded in
roles, at the right time, to achieve our strategic goals.
our compensation policies, and we conduct both internal reviews
Comprehensive workforce data dashboards help us analyze all
and independent external audits as quality checks. If we uncover
aspects of the employee life cycle, including recruitment,
gaps that cannot be explained by business factors or appropriate
performance management, training,
internal mobility and
personal factors – such as experience, role, responsibility,
attrition, along with demographic and diversity aspects, such as
performance or location – we explore the root causes of those
gender and ethnicity. This helps us identify trends quickly and
gaps and address them. Additionally, our regular monitoring and
make fact-based decisions grounded in human resources data.
review processes also allow us to maintain our certification status
Throughout 2021, we hired new talent where necessary to
with the EQUALSALARY Foundation for our equal pay practices in
launch or expand businesses and to fill gaps in our workforce. We
Switzerland, the US, the UK, Hong Kong SAR and Singapore. The
recruit for potential and cultural fit, hiring beyond immediately
firm also successfully completed an equal pay analysis in
relevant skills to include the person’s experience, competencies
Switzerland in 2020, as required by the Swiss Federal Act on
and digital aptitude. We hired a total of 9,363 external candidates
Gender Equality. The results of the analysis confirmed that we are
in 2021, adding more than 1,700 graduates and other trainees,
fully compliant with Swiss equal pay standards. These holistic
apprentices and interns through our various junior talent
certifications are a testament to our well-established equal
programs. We invest in young talent in every region, supporting
opportunity environment and the strength of our human
national apprenticeship programs in Switzerland and the UK and
resources practices, including performance and reward. In 2021,
summer internship programs in many locations. In Singapore, UBS
we continued to monitor pay fairness and addressed any
worked with the government to set up a program to support
unexplained gaps to ensure that all employees are paid fairly. All
ongoing employability during the pandemic and to increase the
employees have access to competitive benefits,
including
resilience of regional banking infrastructure. Our approach has
insurance, retirement and personal leave.
› Refer to the “Compensation” section of this report for more
information about compensation-related topics
garnered numerous external accolades in 2021, including a top-
50 ranking in the World’s Most Attractive Employers from
employer-branding experts Universum, for the 13th consecutive
Meeting employees’ needs while improving services for clients
Working both from home and from the office became the norm
for many employees in 2021, with surveys indicating strong
year.
› Refer to ubs.com/employerawards for more information about
our most recent employer rewards
support for continued flexibility. Following a global analysis that
Focusing on performance and development
considered factors such as regulation, risk and productivity, we
Resetting the firm’s strategic course sparked a comprehensive
determined that approximately 75% of our employees could be
review of our performance management practices in 2021. As a
eligible to work in a hybrid setup. In addition to fostering better
result, we introduced a new approach called MyImpact that aims
work / life balance, a hybrid model makes us a more attractive
to better support our strategic priorities and reinforce our culture,
employer to a wider pool of applicants, such as early-career talent,
as well as making our year-end review, objective setting and
working parents and those in continuing education. The emphasis
employee feedback processes simpler and more transparent.
on technology and virtual collaboration also sparks innovative
Key to our talent management strategy is offering employees
thinking that will make us more agile and further improve client
opportunities to build interesting careers. Our innovative digital
service. We are implementing hybrid working on a country-by-
Career Navigator platform, which now features short-term
country basis, along with wide-ranging support to ensure that
rotation opportunities, promotes internal mobility across teams,
employees, teams and our culture all continue to thrive.
functions and business divisions. Employees can explore career
Health and well-being
paths, search for jobs and connect with colleagues while allowing
our recruiters to more easily source internal talent. The tool also
Supporting employee health and well-being remained a priority in
identifies potential competency gaps and automatically
2021. We are committed to helping employees thrive in their
recommends appropriate training. Since
inception, Career
current roles and deliver sustainable performance over time.
Navigator has helped 47,600 employees search for short-term job
Regular “pulse” surveys gauged employees’ views on remote
opportunities or find internal experts, discover possible career
work, stress, communication and other aspects. Resources to help
paths and match themselves to open roles. More than 160,000
employees support holistic well-being featured a bespoke
skills were added to our employee skills-sharing platform in 2021.
eLearning curriculum, physical and mental health initiatives,
Our in-house UBS University plays a central role in fostering
volunteering opportunities, increased benefits offerings in certain
diversity of thought within the firm, and in building employees’
locations, and financial education.
Employee representation
skills for use now along with capabilities for the future. Our
offering includes line manager and leadership development,
advisory and sales training, and industry-leading certification for
We maintain an open dialogue with our formal employee
client advisors, as well as data literacy, agile working and health
representation groups, all of which are in Europe, as part of our
and well-being topics. Altogether in 2021, our permanent
commitment to being a responsible employer. These groups
employees completed more than 1,425,000 learning activities,
represent 17 countries and consider issues that may affect our
including mandatory training on compliance, business and other
performance, operations and prospects. Collectively, these groups
topics, resulting in an average of more than two training days per
represent approximately 49% of our global workforce.
employee.
Society
The world’s social and environmental problems are too big and
complex to tackle alone. Lasting change can only be achieved
when philanthropists and public and private organizations work
collectively to maximize positive impact for people and the planet.
Our clients can maximize the positive effect of their giving
through our diverse social impact offering: UBS Philanthropy
Services and the grant-making UBS Optimus Foundation, as well
as UBS Global Visionaries and UBS Community Impact.
Reimagining client philanthropy
With nearly 70 philanthropy experts around the globe, we help
clients to maximize their impact locally, nationally and globally.
We have partnered for more than two decades with clients and
their families by using an investment-based approach and
connecting them to an international network of expertise and
support.
To best serve our clients, we base our approach on three pillars:
Advice, Insights and Execution. Advice – consulting with clients
who are considering setting up their first charitable fund and
guiding them on tax-efficient giving, thus maximizing the value of
charitable giving. Insights – connecting our clients to a global
network of experts, both within and outside UBS (e.g., through
insight trips, publications, events with fellow philanthropists,
thought leaders and social entrepreneurs, such as UBS Global
Visionaries). Execution – providing clients with flexible options for
managing their philanthropic giving, including structures such as
our donor-advised funds (DAFs) and our new UBS Collectives, and
supporting curated programs via UBS Optimus Foundation.
Donor-advised funds
A DAF offers clients an easy, flexible and efficient alternative to
setting up their own foundation. UBS has offered DAF services in
the US for some time, and in 2014 we established a DAF in the
UK, which has since had over GBP 450 million in donations. The
UBS Philanthropy Foundation was launched in Switzerland in
2020: it has raised more than USD 10 million in donations and in
its first year of operations launched its first thematic fund, which
is dedicated to the environment.
UBS Optimus Foundation
With a track record of over two decades, UBS Optimus
Foundation is recognized globally as both a philanthropic thought
leader and a pioneer in the social finance space, through which
we leverage solutions to mobilize private capital in new and more
efficient ways. The foundation uses an evidence-based approach
and focuses on programs that have the potential to be
transformative, scalable and sustainable. It conducts extensive
due diligence and only recommends what it considers to be the
most innovative programs that have the capacity to achieve long-
term, measurable impact. UBS also makes matching contributions
to the foundation, to help our clients’ donations go even further.
The UBS Collectives also utilize an evidence-based approach
and bring together philanthropists to pool their funds, share their
expertise and achieve a longer-term impact. The Collectives are a
three-year learning journey during which philanthropists follow a
curriculum, network with peers and engage in programs with the
goals of preventing family separation, mitigating climate change
and funding programs linked to measurable results. In 2021,
USD 21 million in funding was raised for this long-term systems-
level change approach.
UBS Global Visionaries
The private sector has a crucial role to play in supporting
innovative, sustainable solutions to some of the world’s most
pressing problems. This is why we launched the UBS Global
Visionaries program in 2016 with two main goals: (i) to create
opportunities for our clients and prospective clients to connect in
person (or virtually) with leading social entrepreneurs; and (ii) to
help our UBS Global Visionaries scale their positive change by
expanding their global network, building capacity and raising
awareness about their work. Since the program started, we have
supported 63 entrepreneurs across the globe, who all work
toward achieving a variety of the UN Sustainable Development
Goals. At the end of 2021, 20 of those entrepreneurs were
engaged in the program as active Global Visionaries, more than
60 prospective clients and clients had been directly connected
with them, and 80 events hosted by UBS at which they were
featured speakers. Over 29,000 stakeholders (such as prospective
clients, clients and employees) participated in these events.
Feedback from our clients shows this gives them new ways to
engage in their passions and learn about new topics or
technologies. In return, our UBS Global Visionaries benefit from
clients sharing their skills, experience and contacts.
UBS Community Impact
We are committed to supporting the communities in which we
work. Our employees, clients and shareholders expect us to play
our part in addressing social issues – and we believe it is the right
thing to do. Direct cash contributions, including support through
our Community Impact program, UBS’s affiliated foundations in
Switzerland, the UBS Foundation of Economics in Society at the
University of Zurich and contributions
to UBS Optimus
Foundation, amounted to a total of USD 59 million in 2021.
During 2021, we focused on addressing social and wealth
inequality in our local communities through education and skill
building. Given the ongoing impact of the pandemic in 2021, we
continued to provide some COVID-19 relief to support the most
vulnerable, as well as supporting recovery and rebuilding efforts
through our community partners.
Following the announcement of UBS’s purpose in April 2021,
we undertook a review of our global Community Impact strategy
in light of UBS’s new sustainability commitment. We will increase
our focus on education and skills with the implementation of our
revised strategy in 2022.
UBS’s overall charitable contributions are measured using the
industry-leading Business
Impact
Investment
framework (B4SI). This includes cash, employee time, and in-kind
support.
for Societal
› Refer to “UBS’s charitable contributions” in the “What” section
of the Sustainability Report 2021, available from 11 March 2022
under “Annual reporting” at ubs.com/investors, for more
information
46
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Our strategy, business model and environment Our strategy, business model and environment | How we create value for our stakeholders
Our focus on sustainability and climate
Our commitment to sustainability starts with our purpose. We
know finance has a powerful influence on the world. At UBS, we
reimagine the power of people and investment, to help create a
better world for everyone: a fairer society, a more prosperous
economy and a healthier environment. That is why we partner
with our clients to help them mobilize their capital toward a more
sustainable world and why we have put sustainability at the heart
of our own business.
We are guided by the goal of being the financial provider of
choice for clients that want to mobilize capital toward the
achievement of the 17 Sustainable Development Goals (the SDGs)
of the United Nations (the UN) and the orderly transition to a low-
carbon economy. We are advancing toward 2030, the designated
deadline to achieve the SDGs. The SDGs focus on issues such as
climate change, equality and healthcare – major challenges for
our world now and over the coming years.
To help us maximize our impact and direct capital to where it
is needed most, we are focusing on three key areas to drive the
sustainability transition: planet, people, partnerships.
– Planet: Climate is a clear focus for us as we shift toward a
lower-carbon future. We have committed to achieving net-
zero greenhouse gas emissions resulting from all aspects of our
business by 2050.
– People: We believe in a diverse, equitable and inclusive society.
We are taking action to get there, within our own workplace
and beyond.
– Partnerships: By working in partnership with other thought
leaders and standard setters, our goal is to achieve impact on
a truly global scale.
› Refer to the Sustainability Report 2021, available from 11 March
2022 under “Annual reporting” at ubs.com/investors, for more
information about how UBS is advancing sustainability in the
financial sector and beyond
fairer, more prosperous society, championing a healthier
environment and addressing inequalities at their root. This ethos
underpins our purpose and is in line with our external
commitments, such as our pledge to help making progress
toward the SDGs.
In 2021, we revised the Code in line with our focus on
simplification, making it shorter, sharper and better aligned to our
strategic imperatives.
› 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 of our stakeholders.
The BoD’s Corporate Culture and Responsibility Committee
(the CCRC) is the UBS body primarily responsible for corporate
culture, responsibility and sustainability. The CCRC oversees our
sustainability and impact strategy and activities and approves
Group-wide sustainability and impact objectives. The Group CEO
has delegated to the GEB lead for sustainability and impact, Suni
Harford, the responsibility for setting the firm’s sustainability and
impact strategy, in agreement with fellow GEB members.
The GEB sets the overall risk appetite for the firm and resolves
overarching matters relating to sustainability and climate risks,
including risk management framework, policies, and disclosure.
Group Risk Control is responsible for the development and
implementation of principles and an appropriate independent
control framework for sustainability and climate risks within UBS,
and the integration of the principles and the framework into the
firm’s overall risk management and risk appetite frameworks.
Our sustainability and impact governance
including sustainable
Sustainability activities,
finance, are
overseen at the highest level of UBS, by 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 of Conduct and Ethics, the BoD and the GEB set out
the principles and practices that define our ethical standards and
the way we do business, which apply to all aspects of our
business. All employees must affirm 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
acting with the long term in mind and creating value for clients,
employees and shareholders. We aspire to do our part to create a
Group Sustainability and Impact
The Group Sustainability and Impact (GSI) organization was
created in 2021 to support the GEB lead for sustainability and
impact with carrying out her responsibilities. GSI comprises the
Chief Sustainability and Social Impact offices, headed by the Chief
Sustainability Officer (the CSO) and the Head Social Impact. The
CSO is responsible for driving the implementation of the Group-
wide sustainability and impact strategy, including reporting on
our progress toward net zero, and the execution thereof by the
business divisions and Group Functions. The Head Social Impact is
responsible for driving and implementing our social impact
strategy, including UBS Community Impact, UBS Philanthropy
Services and UBS Global Visionaries. Progress toward the firm’s
sustainability and impact strategy, including climate strategy, and
associated targets is reviewed at least annually by the GEB and
the CCRC.
48
48
Our strategy, business model and environment | How we create value for our stakeholders
Our focus on sustainability and climate
Our commitment to sustainability starts with our purpose. We
fairer, more prosperous society, championing a healthier
know finance has a powerful influence on the world. At UBS, we
environment and addressing inequalities at their root. This ethos
reimagine the power of people and investment, to help create a
underpins our purpose and is in line with our external
better world for everyone: a fairer society, a more prosperous
commitments, such as our pledge to help making progress
economy and a healthier environment. That is why we partner
toward the SDGs.
with our clients to help them mobilize their capital toward a more
In 2021, we revised the Code in line with our focus on
sustainable world and why we have put sustainability at the heart
simplification, making it shorter, sharper and better aligned to our
of our own business.
strategic imperatives.
We are guided by the goal of being the financial provider of
› Refer to the Code of Conduct and Ethics of UBS, available at
choice for clients that want to mobilize capital toward the
ubs.com/code, for more information
achievement of the 17 Sustainable Development Goals (the SDGs)
of the United Nations (the UN) and the orderly transition to a low-
Board of Directors and Group Executive Board
carbon economy. We are advancing toward 2030, the designated
The BoD is responsible for setting UBS’s values and standards to
deadline to achieve the SDGs. The SDGs focus on issues such as
ensure the Group’s obligations to stakeholders are met. Both the
climate change, equality and healthcare – major challenges for
Chairman of the BoD and the Group CEO play a key role in
our world now and over the coming years.
safeguarding our reputation and ensuring we communicate
To help us maximize our impact and direct capital to where it
effectively with all of our stakeholders.
is needed most, we are focusing on three key areas to drive the
The BoD’s Corporate Culture and Responsibility Committee
sustainability transition: planet, people, partnerships.
(the CCRC) is the UBS body primarily responsible for corporate
– Planet: Climate is a clear focus for us as we shift toward a
culture, responsibility and sustainability. The CCRC oversees our
lower-carbon future. We have committed to achieving net-
sustainability and impact strategy and activities and approves
zero greenhouse gas emissions resulting from all aspects of our
Group-wide sustainability and impact objectives. The Group CEO
business by 2050.
has delegated to the GEB lead for sustainability and impact, Suni
– People: We believe in a diverse, equitable and inclusive society.
Harford, the responsibility for setting the firm’s sustainability and
We are taking action to get there, within our own workplace
impact strategy, in agreement with fellow GEB members.
and beyond.
The GEB sets the overall risk appetite for the firm and resolves
– Partnerships: By working in partnership with other thought
overarching matters relating to sustainability and climate risks,
leaders and standard setters, our goal is to achieve impact on
including risk management framework, policies, and disclosure.
a truly global scale.
› Refer to the Sustainability Report 2021, available from 11 March
2022 under “Annual reporting” at ubs.com/investors, for more
information about how UBS is advancing sustainability in the
financial sector and beyond
Group Risk Control is responsible for the development and
implementation of principles and an appropriate independent
control framework for sustainability and climate risks within UBS,
and the integration of the principles and the framework into the
firm’s overall risk management and risk appetite frameworks.
Our sustainability and impact governance
Group Sustainability and Impact
Sustainability activities,
including sustainable
finance, are
created in 2021 to support the GEB lead for sustainability and
overseen at the highest level of UBS, by the Board of Directors
impact with carrying out her responsibilities. GSI comprises the
(the BoD) and the Group Executive Board (the GEB), and are
Chief Sustainability and Social Impact offices, headed by the Chief
grounded in our Code of Conduct and Ethics (the Code).
Sustainability Officer (the CSO) and the Head Social Impact. The
The Group Sustainability and Impact (GSI) organization was
Code of Conduct and Ethics
CSO is responsible for driving the implementation of the Group-
wide sustainability and impact strategy, including reporting on
In our Code of Conduct and Ethics, the BoD and the GEB set out
our progress toward net zero, and the execution thereof by the
the principles and practices that define our ethical standards and
business divisions and Group Functions. The Head Social Impact is
the way we do business, which apply to all aspects of our
responsible for driving and implementing our social impact
business. All employees must affirm annually that they have read
strategy, including UBS Community Impact, UBS Philanthropy
and will adhere to the Code and other key policies, supporting a
Services and UBS Global Visionaries. Progress toward the firm’s
culture where ethical and responsible behavior is part of our
sustainability and impact strategy, including climate strategy, and
everyday operations. In our Code we make a commitment to
associated targets is reviewed at least annually by the GEB and
acting with the long term in mind and creating value for clients,
the CCRC.
employees and shareholders. We aspire to do our part to create a
Sustainability Risk, Finance, Compliance and Legal functions
The Chief Risk Officer for Sustainability oversees sustainability
activities relating to risk, including the climate risk program, and
supports the GEB by providing leadership on sustainability in
cooperation with the business divisions and Group Functions.
The Sustainability Chief Financial Officer, a member of the
Group Finance function, ensures that sustainability considerations
are embedded into the firm’s financial decision-making processes,
supports the expanding external sustainability disclosures arising
requirements and voluntary
from both new
commitments made by our firm, and oversees the continued
development of the firm’s financial control environment that
underpins our disclosures.
regulatory
in 2021 due to the strategic
The Sustainability Expert Group within the GCRG function was
established
importance of
sustainability to UBS, the rapidly evolving nature of the regulatory
and policy agenda in this area, and GCRG’s desire to ensure the
firm is able to interact effectively and proactively with policy-
makers, the regulatory supervisors of the Group and other
relevant stakeholders.
The global environmental, social and governance (ESG) legal
team within the Group General Counsel function advises the
business on sustainability-related risks across UBS’s operations. It
plays an important role in advising the business teams on existing
and emerging rules and regulations governing sustainable
investing and sustainable lending.
› Refer to “Board of Directors” in the “Corporate governance”
section of this report for more information about the CCRC
› Refer to the Sustainability Report 2021, available from 11 March
2022 under “Annual reporting” at ubs.com/investors, for more
information about our governance of sustainability and impact
generate more revenue, 57% believe it could improve client
relationships and 55% believe it could do the same for
relationships with employees.
A global survey published in 2021 titled “Resetting the agenda
How ESG is shaping our future”3 found that three-quarters of
institutional investors agree that the COVID-19 pandemic will
accelerate the general interest in ESG and capital inflows into
sustainable investments over the next three to five years. Of those
surveyed, 65% plan to integrate ESG into at least 25% of their
assets under management for the next 12 months. Importantly,
almost three-quarters of survey respondents agreed that
investments integrating ESG factors performed better financially
than equivalent traditional investments in the three years prior to
2020.
We are committed to serving our clients’ growing sustainable
finance needs and expectations. More fundamentally, we believe
sustainable finance is the future of finance. Recognition of impact
on financial performance, regulatory developments, evolving
societal norms, investor demand and consumer preference are
factors that contribute to drive the continued evolution of
mainstream investing toward more holistic long-term-oriented
approaches.
We 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 outcomes. Fundamentally, for the benefit of
our clients, we are helping to shape the landscape of sustainable
finance by using thought leadership, innovation and partnerships
to support them in their sustainability efforts.
› Refer to the Sustainability Report 2021, available from 11 March
2022 under “Annual reporting” at ubs.com/investors, for more
information about our sustainability and impact strategy and
Our approach to sustainable finance
activities
The UN estimates the gap in funding needed to achieve the SDGs
by 2030 at USD 2.5 trillion to USD 3 trillion annually,1 with some
experts putting the number even higher. We recognize this as
both a challenge for society and an opportunity for our clients. As
a global financial institution, we have a role in reaching the SDGs,
by directing capital to where it is needed the most.
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, while also
managing the risks associated with this transformational
challenge.
Our clients’ growing interest in sustainable finance is clearly
shown in a number of key surveys. According to a global UBS
Investor Sentiment survey,2 66% of investors see sustainable
investing as highly important to their portfolio strategy. When it
comes to business owners, 61% believe sustainability could
› Refer to the sub-section below for more information about our
climate governance, strategy, risk management, and metrics and
targets and to the UBS Climate Report 2021, available from
11 March 2022 under “Annual reporting” at ubs.com/investors,
for the full UBS climate disclosures
Defining sustainable finance
Sustainable finance refers broadly to any form of financial service
that aims to achieve positive sustainability outcomes, including
through the integration of ESG criteria into business or investment
decisions. This encompasses sustainable investing and sustainable
financing solutions. Sustainable finance has long been a topic
firm-wide and there is now a sharpened understanding in the
market of its importance, accelerated by factors such as the
COVID-19 pandemic and a changing climate. Our aim is to
continue to help our clients meet their investment and financing
objectives through sustainable finance.
11 un.org/sustainabledevelopment/sg-finance-strategy
22 About the survey: UBS surveyed 3,004 investors and 1,202 business owners with at least USD 1 million in investable assets (for investors) or at least USD 1 million in annual revenue and at least one employee other
than themselves (for business owners), between 28 September and 18 October 2021. The global sample was split across 15 locations: Argentina, Brazil, Mainland China, France, Germany, Hong Kong SAR, Italy, Japan,
Mexico, Russia, Singapore, Switzerland, the UAE, the UK and the US.
33 The survey was conducted by the Economist Intelligence Unit, commissioned by UBS, and surveyed 450 institutional investors working in asset and wealth management firms, corporate pension funds, endowment
funds, family offices, government agencies, hedge funds, insurance companies, pension funds, sovereign wealth funds and reinsurers in North America, Europe and Asia Pacific.
48
49
49
Our strategy, business model and environment Our strategy, business model and environment | How we create value for our stakeholders
Sustainable investment
Sustainable investment (SI) focuses on investment decisions that
seek to make a difference, while generating competitive financial
returns. SI strategies aim to better risk manage portfolios in line
with 21st-century challenges and / or to align investments with
investors’ sustainability values, while also targeting improved
portfolio risk and return characteristics.
We have long recognized that clients and other stakeholders
need transparency about the sustainability objectives of our
various investment products. During 2021, the European Union’s
Sustainable Finance Disclosure Regulation (the SFDR) provided the
first formal, comprehensive legislative framework establishing an
important marker for the industry’s efforts in this area.
Consequently, we have further evolved our own definitions of SI,
which now include the following two categories.
– Sustainability focus: strategies that have explicit sustainable
intentions or objectives that drive the strategy. Underlying
investments may contribute to positive sustainability outcomes
through products / services / use of proceeds.
– Impact investing: investment strategies that have an explicit
intention of generating measurable, verifiable, positive
sustainability outcomes. Impact generated is attributable to
investor action and / or contribution.
ESG integration and exclusion
We also identify two approaches that consider ESG factors in the
investment process to varying degrees, but which on their own
are not considered sustainable investment.
– ESG integration: considers ESG factors alongside traditional
financial metrics to assess the risk-return profile in the
investment process. This approach is rapidly becoming an
industry standard, as the inclusion of such factors has been
shown to benefit overall investment risk-return considerations.
– Exclusion: when individual companies or entire industries are
excluded from portfolios because their activities do not meet
certain ESG criteria and / or do not align with the values of
clients and / or UBS.
Sustainable financing
We offer products and solutions, including access to capital
markets, to clients looking to finance assets that demonstrate
sustainability characteristics and / or support the transition to a
low-carbon economy. Financing activities can be on-balance sheet
(such as loans and mortgages) or off-balance sheet (such as access
to debt and equity markets). We also provide advice on ESG
factors (both financial and non-financial), such as integrated
disclosure requirements.
We use regulatory and market standards where these are
available; for example, in the debt capital markets business, we
refer to the International Capital Market Association (ICMA)
Green, Social or Sustainability-Linked Bond Principles. Where such
guidelines or standards are not available, we aim to align with
market best practice. This is the case, for example, with equity
capital markets activities.
Our established sustainability and climate risk (SCR, previously
known at UBS as environmental and social risk, or ESR) framework
is used to analyze potential transactions and client relationships in
order to limit any negative impact on the environment and
society. Moreover, as one of the world’s largest asset gathering
businesses, we are in a privileged position to leverage the
framework,
experience gained
established in 2019 by our Asset Management business, to the
benefit of our financing clients.
from our Climate Aware
› Refer to the “Key achievements in 2021” chart in the
Sustainability Report 2021, available from 11 March 2022 under
“Annual reporting” at ubs.com/investors
In 2021, we noted continued strong momentum in our
sustainable finance activities. SI assets grew to USD 251 billion,
compared with USD 141 billion in 2020, and assets subject to ESG
integration and to exclusions grew to USD 813 billion in 2021,
compared with USD 645 billion in 2020. Jointly, SI assets and
assets subject to ESG integration and to exclusions reached over
23% of client invested assets, up from 18.8% in 2020. In addition
to generally supportive markets, the growth was driven by client
demand, our focus on advancing sustainable solutions, and
converting traditional funds to sustainable ones.
Investment approaches
“Traditional” investing
– No explicit sustainability objectives
– Manage sustainability and all risks
related to investment performance
– May use ESG tools, but these
do not drive the strategy
UBS’s defi nition of sustainable investments
Sustainability focus
– Target market-rate investment
Impact investing
– Target market-rate investment
returns
returns
– Have explicit sustainable intentions
or objectives that drive the strategy
– Underlying investments may
contribute to positive sustainability
outcomes through products,
services and / or proceeds
– Have explicit intentions to generate
measurable, verifi able, positive
sustainability outcomes
– Impact attributable to investor
action and / or contribution
50
50
Our strategy, business model and environment | How we create value for our stakeholders
Sustainable investment
Sustainable financing
UBS total invested assets1,2
Sustainable investment (SI) focuses on investment decisions that
We offer products and solutions, including access to capital
seek to make a difference, while generating competitive financial
markets, to clients looking to finance assets that demonstrate
returns. SI strategies aim to better risk manage portfolios in line
sustainability characteristics and / or support the transition to a
with 21st-century challenges and / or to align investments with
low-carbon economy. Financing activities can be on-balance sheet
investors’ sustainability values, while also targeting improved
(such as loans and mortgages) or off-balance sheet (such as access
portfolio risk and return characteristics.
to debt and equity markets). We also provide advice on ESG
USD billion, except where indicated
SSuussttaaiinnaabbllee iinnvveessttmmeennttss
Sustainability focus3
Impact investing4
TToottaall ssuussttaaiinnaabbllee iinnvveessttmmeennttss5
We have long recognized that clients and other stakeholders
factors (both financial and non-financial), such as integrated
SSII pprrooppoorrttiioonn ooff ttoottaall iinnvveesstteedd aasssseettss ((%%))
need transparency about the sustainability objectives of our
disclosure requirements.
various investment products. During 2021, the European Union’s
We use regulatory and market standards where these are
ESG integration6
Exclusion7
Sustainable Finance Disclosure Regulation (the SFDR) provided the
available; for example, in the debt capital markets business, we
TToottaall EESSGG iinntteeggrraattiioonn aanndd eexxcclluussiioonn
first formal, comprehensive legislative framework establishing an
refer to the International Capital Market Association (ICMA)
EESSGG iinntteeggrraattiioonn aanndd eexxcclluussiioonn pprrooppoorrttiioonn ooff ttoottaall iinnvveesstteedd aasssseettss ((%%))
GRI
FS11
FS11
FS11
FS11
FS11
FS11
3311..1122..22002211
For the year ended
31.12.20
31.12.19
% change from
31.12.20
222222..77
2288..55
225511..22
55..55
555588..00
225555..11
881133..22
1177..77
127.7
13.1
140.8
3.4
512.8
132.2
645.0
15.4
46.4
9.1
55.5
1.5
372.3
52.2
424.5
11.8
74.4
117.1
78.4
8.8
93.0
26.1
3,606.6
4,187.2
44,,559966..22
9.8
UBS total invested assets
11 We are refocusing our sustainable investment reporting on those investment strategies exhibiting an explicit sustainability intention. ESG integration and exclusion approaches, although considering ESG aspects in
the investment process, are in and of themselves not considered sustainable investment strategies. 22 FS represents the performance indicators defined in the Financial Services Sector Supplement of the Global
Reporting Initiative (GRI) reporting framework. 33 Strategies that have explicit sustainable intentions or objectives that drive the strategy. Underlying investments may contribute to positive sustainability outcomes
through products / services / use of proceeds. Examples include Global Wealth Management’s Discretionary Manage SI mandate solution and Asset Management’s strategies such as its Global Sustainable Equities
product. 44 Strategies that have explicit intentions of generating measurable, verifiable and positive sustainability outcomes. Impact generated is attributable to investor action and / or contributions. Examples include
Global Wealth Management’s Oncology Impact funds and Asset Management’s Global Engage for Impact Equity funds. 55 In 2021, UBS converted funds to the sustainability focus and impact investment categories,
in line with corresponding changes to the funds’ underlying investment policies. The main impact was on sustainability focus and impact strategies in Asset Management of USD 38 billion and sustainability focus
fund conversions in Global Wealth Management. 66 Strategies that integrate ESG factors into the fundamental financial analysis to improve risk / return. 77 Strategies that avoid investments in companies that do
not meet certain ESG criteria and / or do not align with the values of clients and / or UBS. The enhancement of the UBS ESG exclusion policy to include a broader set of exclusions in the third quarter of 2021 was the
main driver (>50%) of the increase in exclusion assets in 2021.
important marker for the industry’s efforts in this area.
Green, Social or Sustainability-Linked Bond Principles. Where such
Consequently, we have further evolved our own definitions of SI,
guidelines or standards are not available, we aim to align with
which now include the following two categories.
market best practice. This is the case, for example, with equity
– Sustainability focus: strategies that have explicit sustainable
capital markets activities.
intentions or objectives that drive the strategy. Underlying
Our established sustainability and climate risk (SCR, previously
investments may contribute to positive sustainability outcomes
known at UBS as environmental and social risk, or ESR) framework
through products / services / use of proceeds.
is used to analyze potential transactions and client relationships in
– Impact investing: investment strategies that have an explicit
order to limit any negative impact on the environment and
intention of generating measurable, verifiable, positive
society. Moreover, as one of the world’s largest asset gathering
sustainability outcomes. Impact generated is attributable to
businesses, we are in a privileged position to leverage the
investor action and / or contribution.
experience gained
from our Climate Aware
framework,
established in 2019 by our Asset Management business, to the
ESG integration and exclusion
benefit of our financing clients.
We also identify two approaches that consider ESG factors in the
investment process to varying degrees, but which on their own
› Refer to the “Key achievements in 2021” chart in the
Sustainability Report 2021, available from 11 March 2022 under
are not considered sustainable investment.
– ESG integration: considers ESG factors alongside traditional
“Annual reporting” at ubs.com/investors
financial metrics to assess the risk-return profile in the
In 2021, we noted continued strong momentum in our
investment process. This approach is rapidly becoming an
sustainable finance activities. SI assets grew to USD 251 billion,
industry standard, as the inclusion of such factors has been
compared with USD 141 billion in 2020, and assets subject to ESG
shown to benefit overall investment risk-return considerations.
integration and to exclusions grew to USD 813 billion in 2021,
– Exclusion: when individual companies or entire industries are
compared with USD 645 billion in 2020. Jointly, SI assets and
excluded from portfolios because their activities do not meet
assets subject to ESG integration and to exclusions reached over
certain ESG criteria and / or do not align with the values of
23% of client invested assets, up from 18.8% in 2020. In addition
to generally supportive markets, the growth was driven by client
demand, our focus on advancing sustainable solutions, and
converting traditional funds to sustainable ones.
clients and / or UBS.
Investment approaches
UBS’s defi nition of sustainable investments
“Traditional” investing
Sustainability focus
Impact investing
– No explicit sustainability objectives
– Target market-rate investment
– Target market-rate investment
– Manage sustainability and all risks
returns
returns
related to investment performance
– Have explicit sustainable intentions
– Have explicit intentions to generate
– May use ESG tools, but these
do not drive the strategy
or objectives that drive the strategy
measurable, verifi able, positive
– Underlying investments may
sustainability outcomes
contribute to positive sustainability
– Impact attributable to investor
action and / or contribution
outcomes through products,
services and / or proceeds
Our offering to clients
Our private clients benefit from fully diversified sustainable
portfolios, as well as advisory options. In 2020, we made
sustainable investments the preferred solution for private clients
investing globally. In July 2021, we expanded our sustainable
investing offering with a new advisory solution that enables
clients to tailor their sustainable investments to their personal
preferences. In 2021, our flagship SI mandates, based on our
sustainable investing strategic asset allocation (SI SAA), exceeded
USD 30 billion under management.
Our institutional clients benefit from the holistic integration of
ESG factors into the investment decision-making process across
the entire suite of investment funds and strategies. Underpinning
our ESG integration activities is a robust stewardship program,
including engagement and proxy voting. We have continued to
build on our position as a leading provider of sustainable
exchange-traded funds (ETFs), launching 17 new sustainable ETFs
in 2021, including a full suite of benchmarks aligned with the Paris
Agreement. We remain firmly positioned as Europe’s second-
largest sustainable ETF-provider, with an SI asset base of USD 40
billion as of 31 December 2021.
Our retail clients in Switzerland have access to appropriate and
relevant SI products. Interest in SI solutions continued to be strong
in 2021. UBS ManageTM SI, a Global Wealth Management
product, represented almost 70% of Personal Banking’s mandate
sales. In addition, 47% of total custody assets in Personal Banking
are composed of sustainable investments.
For our Swiss corporate and institutional clients, supplier and
producer transactions in commodity trade finance are monitored
according to our SCR standards. Furthermore, our sustainable
finance advice extends to strategic positioning of business
models, disclosure practices and benchmarking.
Our corporate clients benefit from a range of financing and
advisory solutions at all stages on their sustainability journey. In
2021, Global Banking, within our Investment Bank, set up an ESG
Advisory team to assist established corporate clients with the
integration of ESG risks and opportunities into their decisions
related to strategy, operations and financing, thereby supporting
their positioning in the financial markets. They also help young
ESG-driven companies with the raising of private and / or public
financing.
› Refer to the Sustainability Report 2021, available from 11 March
2022 under “Annual reporting” at ubs.com/investors, for more
information about our sustainable investing and financing
offering, including financing solutions, advisory and research
and insights
Managing sustainability and climate risks
At UBS, SCR is defined as the risk that UBS is negatively impacted
by or negatively impacts climate change, loss of biodiversity,
human rights infringements, and other environmental, social and
governance matters. We apply an SCR policy framework with the
aim of identifying and managing potential adverse impacts on the
environment and / or to human rights, as well as the associated
environmental and social risks to which our clients’ and our own
assets are exposed.
› Refer to “Sustainability and climate risk” in the “Risk
management and control” section of this report for more
information
50
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Our strategy, business model and environment Our strategy, business model and environment | How we create value for our stakeholders
Partnerships
– Establish UBS as a leading facilitator of discussion, debate and
idea generation.
– Drive standards, research and development, and product
development through partnerships across the financial
ecosystem.
› Refer to the Sustainability Report 2021, available from 11 March
2022 under “Annual reporting” at ubs.com/investors, for more
information about UBS’s sustainability achievements in 2021 and
our progress on key targets
Taking climate action1
Our climate governance
As part of its annual approval of our sustainability and impact
objectives, the CCRC also oversees UBS’s climate strategy, as set
by the GEB. During its six meetings throughout the course of the
year, the CCRC reviews the GEB’s activities in executing our
climate strategy and, jointly with the BoD’s Risk Committee,
evaluates the progress of our climate risk program. The committee
also reviews the alignment of our climate disclosures with the
recommendations of the Task Force on Climate-related Financial
Disclosures (the TCFD).
We manage these annual plans and goals through our ISO
14001-certified environmental management system (the EMS),
with management accountabilities across our firm. The EMS helps
us reduce environmental risks, seize market opportunities, and
continually improve our environmental, climate and resource-
efficiency performance.
In May 2021, we established a net-zero task force to help
progress toward our ambition of reaching net zero by 2050. The
GEB lead for sustainability and impact chairs the task force. Senior
representatives from across our firm, including from the business,
risk and finance, attend the task force’s monthly meetings.
› Refer to the UBS Climate Report 2021, available from 11 March
2022 under “Annual reporting” at ubs.com/investors, for UBS’s
full climate disclosures
Our sustainability targets and progress
We work with a long-term focus on providing appropriate returns
to all of our stakeholders in a responsible manner. To underline
our commitment, we provide transparent targets and report on
progress made against them wherever possible. In 2021, we
included new targets, in particular pertaining to our commitment
to becoming a net-zero bank. Our targets, as set out below, can
therefore only partly be compared with what we set out in
previous years.
Our key targets
Planet, people, partnerships
– USD 400 billion invested assets in sustainable investments by
2025.
Planet
– Set decarbonization targets for 2030 for financing of the fossil
fuel, power generation and real estate sectors (from 2020
levels):
– reduce absolute financed emissions associated with UBS
loans to fossil fuel companies by 71%;
– reduce emissions intensity associated with UBS loans to
power generation companies by 49%;
– reduce emissions intensity of UBS’s commercial real estate
lending portfolio by 44%; and
– reduce emissions intensity of UBS’s residential real estate
lending portfolio by 42%.
– Align USD 235 billion of invested assets to net zero by 2030
(Asset Management).
– Achieve net-zero emissions across discretionary client
portfolios by 2050.
– Achieve net-zero emissions resulting from our own operations
(scopes 1 and 2) by 2025; cut energy consumption by 15% by
2025 (compared with 2020).
– Offset historical emissions back to the year 2000 by sourcing
carbon offsets (achieved by the end of 2021) and by offsetting
credit delivery and full retirement in registry (by the end of
2025).
– Engage with our key vendors on targeting net zero by 2035.
People
– 30% global female representation at Director level and above
by 2025.
– 26% US ethnic minority representation at Director level and
above by 2025.
– 26% UK ethnic minority representation at Director level and
above by 2025.
– Raise USD 1 billion in donations to our client philanthropy
foundations and funds and reach 25 million beneficiaries by
2025 (cumulative for 2021–2025).
– Support one million beneficiaries through our community
impact activities by 2025 (cumulative for 2020–2024).
11 This sub-section provides key information from the UBS Climate Report 2021, which contains our full climate disclosures and follows the recommendations provided by the TCFD. The Climate Report is available
from 11 March 2022 under “Annual reporting” at ubs.com/investors, integrated in the UBS Sustainability Report 2021 or as a standalone document.
52
52
Our strategy, business model and environment | How we create value for our stakeholders
previous years.
Our key targets
Planet, people, partnerships
2025.
Planet
levels):
Our sustainability targets and progress
Partnerships
– Establish UBS as a leading facilitator of discussion, debate and
We work with a long-term focus on providing appropriate returns
idea generation.
to all of our stakeholders in a responsible manner. To underline
– Drive standards, research and development, and product
our commitment, we provide transparent targets and report on
development through partnerships across the financial
progress made against them wherever possible. In 2021, we
ecosystem.
included new targets, in particular pertaining to our commitment
to becoming a net-zero bank. Our targets, as set out below, can
therefore only partly be compared with what we set out in
› Refer to the Sustainability Report 2021, available from 11 March
2022 under “Annual reporting” at ubs.com/investors, for more
information about UBS’s sustainability achievements in 2021 and
our progress on key targets
Taking climate action1
As part of its annual approval of our sustainability and impact
objectives, the CCRC also oversees UBS’s climate strategy, as set
by the GEB. During its six meetings throughout the course of the
– Set decarbonization targets for 2030 for financing of the fossil
year, the CCRC reviews the GEB’s activities in executing our
fuel, power generation and real estate sectors (from 2020
climate strategy and, jointly with the BoD’s Risk Committee,
evaluates the progress of our climate risk program. The committee
– reduce absolute financed emissions associated with UBS
also reviews the alignment of our climate disclosures with the
loans to fossil fuel companies by 71%;
recommendations of the Task Force on Climate-related Financial
– reduce emissions intensity associated with UBS loans to
Disclosures (the TCFD).
power generation companies by 49%;
We manage these annual plans and goals through our ISO
– reduce emissions intensity of UBS’s commercial real estate
14001-certified environmental management system (the EMS),
lending portfolio by 44%; and
with management accountabilities across our firm. The EMS helps
– reduce emissions intensity of UBS’s residential real estate
us reduce environmental risks, seize market opportunities, and
lending portfolio by 42%.
continually improve our environmental, climate and resource-
– Align USD 235 billion of invested assets to net zero by 2030
efficiency performance.
(Asset Management).
portfolios by 2050.
– Achieve net-zero emissions across discretionary client
progress toward our ambition of reaching net zero by 2050. The
GEB lead for sustainability and impact chairs the task force. Senior
– Achieve net-zero emissions resulting from our own operations
representatives from across our firm, including from the business,
(scopes 1 and 2) by 2025; cut energy consumption by 15% by
risk and finance, attend the task force’s monthly meetings.
2025 (compared with 2020).
– Offset historical emissions back to the year 2000 by sourcing
› Refer to the UBS Climate Report 2021, available from 11 March
2022 under “Annual reporting” at ubs.com/investors, for UBS’s
In May 2021, we established a net-zero task force to help
carbon offsets (achieved by the end of 2021) and by offsetting
full climate disclosures
credit delivery and full retirement in registry (by the end of
– Engage with our key vendors on targeting net zero by 2035.
2025).
People
by 2025.
above by 2025.
above by 2025.
– 30% global female representation at Director level and above
– 26% US ethnic minority representation at Director level and
– 26% UK ethnic minority representation at Director level and
– Raise USD 1 billion in donations to our client philanthropy
foundations and funds and reach 25 million beneficiaries by
2025 (cumulative for 2021–2025).
– Support one million beneficiaries through our community
impact activities by 2025 (cumulative for 2020–2024).
11 This sub-section provides key information from the UBS Climate Report 2021, which contains our full climate disclosures and follows the recommendations provided by the TCFD. The Climate Report is available
from 11 March 2022 under “Annual reporting” at ubs.com/investors, integrated in the UBS Sustainability Report 2021 or as a standalone document.
52
– USD 400 billion invested assets in sustainable investments by
Our climate governance
Managing climate-related fi nancial risks
Acting on a low-carbon future
Our climate strategy
In April 2021, we committed to achieving net-zero greenhouse
Our climate strategy
gas emissions resulting from all aspects of our business by 2050
In April 2021, we committed to achieving net-zero greenhouse
(scope 1, 2 and 3 emissions). We are publishing our journey
gas emissions resulting from all aspects of our business by 2050
toward this ambition in our climate roadmap.
(scope 1, 2 and 3 emissions). We are publishing our journey
toward this ambition in our climate roadmap.
Our climate strategy covers two main areas: managing climate-
related financial risks and acting for a low-carbon future.
Our climate strategy covers two main areas: managing climate-
Underpinning these two areas are four strategic pillars.
related financial risks and acting for a low-carbon future.
Underpinning these two areas are four strategic pillars.
Governance
Strategy
Protecting our
clients’ assets
– managing climate- related
risks and opportunities
through our innovative
products and services in
investment, fi nancing
and research
Protecting our
own assets
– limiting our risk appetite
for carbon-related assets
– estimating our fi rm’s
vulnerability to climate
risks
Reducing our
climate impact
– sourcing 100% of our
electricity consumption
from renewable sources
– responsible supply chain
management
Mobilizing capital
– from private and
institutional clients
– toward the orderly
transition to a
low-carbon economy
Risks and opportunities
Metrics and targets
1. Protecting our clients’ assets
As a global financial institution, it is our responsibility to help
1. Protecting our clients’ assets
clients navigate through the challenges of the transition to a low-
As a global financial institution, it is our responsibility to help
carbon economy. We help our clients assess, manage and protect
clients navigate through the challenges of the transition to a low-
their assets from climate-related risks by offering innovative
carbon economy. We help our clients assess, manage and protect
products and services in investment, financing and research. We
their assets from climate-related risks by offering innovative
work collaboratively across our industry and with our clients,
products and services in investment, financing and research. We
ensuring they have access to best practice, robust science-based
work collaboratively across our industry and with our clients,
approaches, standardized methodologies, and quality data for
ensuring they have access to best practice, robust science-based
measuring and mitigating climate risks. Our activities include
approaches, standardized methodologies, and quality data for
engaging on climate topics with the companies we invest in. For
measuring and mitigating climate risks. Our activities include
example, our Asset Management business division has
engaging on climate topics with the companies we invest in. For
implemented an engagement program with 46 companies from
example, our Asset Management business division has
the oil and gas, electric and other utilities, metals and mining,
implemented an engagement program with 46 companies from
construction materials, chemicals, and automotive sectors. During
the oil and gas, electric and other utilities, metals and mining,
2021, we also supported 70 climate-related resolutions.
construction materials, chemicals, and automotive sectors. During
2021, we also supported 70 climate-related resolutions.
2. Protecting our own assets
We seek to protect our assets by limiting our risk appetite for
2. Protecting our own assets
carbon-related assets. We use scenario-based stress-testing
We seek to protect our assets by limiting our risk appetite for
approaches and other forward-looking portfolio analyses to
carbon-related assets. We use scenario-based stress-testing
estimate our vulnerability to climate-related risks. As of
approaches and other forward-looking portfolio analyses to
31 December 2021, we had reduced our lending exposure to
estimate our vulnerability to climate-related risks. As of
carbon-related assets to 9.9% (USD 45.6 billion) of our total
31 December 2021, we had reduced our lending exposure to
customer lending exposure. This was down from 10.4% at the
carbon-related assets to 9.9% (USD 45.6 billion) of our total
end of 2020 and 10.7% at the end of 2019.
customer lending exposure. This was down from 10.4% at the
end of 2020 and 10.7% at the end of 2019.
3. Reducing our climate impact
We are committed to achieving net-zero emissions in our own
3. Reducing our climate impact
operations (scopes 1 and 2) by 2025 by replacing fossil fuel
We are committed to achieving net-zero emissions in our own
heating systems, maintaining our 100%-renewable electricity
operations (scopes 1 and 2) by 2025 by replacing fossil fuel
heating systems, maintaining our 100%-renewable electricity
coverage and investing in credible carbon removal projects
(including negative emissions
technology). We will also
coverage and investing in credible carbon removal projects
compensate for our historical scope 1 and 2 emissions back to the
technology). We will also
(including negative emissions
year 2000 by using credible and clear carbon offsets and
compensate for our historical scope 1 and 2 emissions back to the
investments in nature-based solutions. Furthermore, we are
year 2000 by using credible and clear carbon offsets and
currently working to understand and quantify the scope 3
investments in nature-based solutions. Furthermore, we are
emissions in our supply chain. We are engaging with our key
currently working to understand and quantify the scope 3
vendors on targeting net zero by 2035.
emissions in our supply chain. We are engaging with our key
vendors on targeting net zero by 2035.
4. Mobilizing capital
We mobilize private and institutional capital through investments
4. Mobilizing capital
that help the world mitigate and adapt to climate change. We
We mobilize private and institutional capital through investments
were the first major global financial institution to have made
that help the world mitigate and adapt to climate change. We
sustainable investments the preferred solution for our private
were the first major global financial institution to have made
clients wishing to invest globally. We also support our goal of
sustainable investments the preferred solution for our private
mobilizing capital as a lender and corporate advisor. For corporate
clients wishing to invest globally. We also support our goal of
clients, we support the issuance of green, social, sustainability and
mobilizing capital as a lender and corporate advisor. For corporate
sustainability-linked bonds – and the raising of capital in
clients, we support the issuance of green, social, sustainability and
international capital markets – in line with recognized market
sustainability-linked bonds – and the raising of capital in
guidelines, such as the ICMA Green Bond Principles. We also
international capital markets – in line with recognized market
extend green and sustainable loans in line with the Loan Market
guidelines, such as the ICMA Green Bond Principles. We also
Association. In 2021, we began offering borrowers Green
extend green and sustainable loans in line with the Loan Market
Mortgages via the key4 platform, the first Swiss real estate
Association. In 2021, we began offering borrowers Green
platform for investment properties that promotes sustainable
Mortgages via the key4 platform, the first Swiss real estate
mortgages.
platform for investment properties that promotes sustainable
› Refer to the UBS Climate Report 2021, available from 11 March
mortgages.
2022 under “Annual reporting” at ubs.com/investors, for a full
› Refer to the UBS Climate Report 2021, available from 11 March
description of UBS’s climate strategy
2022 under “Annual reporting” at ubs.com/investors, for a full
description of UBS’s climate strategy
53
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Our strategy, business model and environment
Our strategy, business model and environment | How we create value for our stakeholders
Our management of climate risks
Climate risks can arise from either changing climate conditions
(physical risks) or from efforts to mitigate climate change
(transition risks). The physical and transition risks from a changing
climate contribute to a structural change across economies and,
consequently, can affect banks and the financial sector through
financial and non-financial impacts.
In March 2020, Group Risk Control established our firm’s
climate risk program to further integrate climate risk in the firm’s
risk management framework and standard processes. The
program follows a multi-year roadmap to address regulatory
expectations and is engaging with stakeholders and experts both
internally and externally to further develop climate risk
methodologies, to deliver on ongoing climate stress testing
exercises and to build capacity to respond to climate risk
management expectations.
We currently identify and manage climate risks in our own
operations, our balance sheet, client assets and the supply chain.
To protect our clients’ and our own assets from climate-related
risks, in 2021, we continued to drive the integration of climate-
related risk into our standard risk management framework.
Our climate-related metrics and targets
For many years, we have been developing methodologies that
enable us to disclose climate-related metrics more robustly and
transparently. Most recently, regulators and standard setters have
provided more guidance on metrics. We firmly aim to keep pace
with these new developments and requirements and further
evolve our climate-related metrics. This commitment remains, as
does our determination to continue leading the way in efforts to
mitigate climate change.
UBS supports the goals of the Paris Agreement, which includes
aligning our own operations and business activities with a
pathway of a five-step net-zero plan to: (i) measure carbon
emissions; (ii) define a roadmap and set targets; (iii) reduce
climate impact; (iv) finance climate action and support the
transition of our clients; and (v) communicate and engage.
› Refer to the UBS Climate Report 2021, available from 11 March
2022 under “Annual reporting” at ubs.com/investors, for a full
description of UBS’s net-zero targets, including baselines and
pathways
We further integrated climate risk in: (i) risk identification and
setting;
measurement;
(iii) management and control; and (iv) reporting processes across
the organization.
(ii) monitoring and
risk appetite
› Refer to “Sustainability and climate risk” in the “Risk
management and control” section of this report
› Refer to the UBS Climate Report 2021, available from 11 March
2022 under “Annual reporting” at ubs.com/investors, for a full
description of UBS’s management of climate risks
54
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Our strategy, business model and environment | How we create value for our stakeholders
Our management of climate risks
Our climate-related metrics and targets
Climate risks can arise from either changing climate conditions
For many years, we have been developing methodologies that
(physical risks) or from efforts to mitigate climate change
enable us to disclose climate-related metrics more robustly and
(transition risks). The physical and transition risks from a changing
transparently. Most recently, regulators and standard setters have
climate contribute to a structural change across economies and,
provided more guidance on metrics. We firmly aim to keep pace
consequently, can affect banks and the financial sector through
with these new developments and requirements and further
financial and non-financial impacts.
evolve our climate-related metrics. This commitment remains, as
In March 2020, Group Risk Control established our firm’s
does our determination to continue leading the way in efforts to
climate risk program to further integrate climate risk in the firm’s
mitigate climate change.
risk management framework and standard processes. The
UBS supports the goals of the Paris Agreement, which includes
program follows a multi-year roadmap to address regulatory
aligning our own operations and business activities with a
expectations and is engaging with stakeholders and experts both
pathway of a five-step net-zero plan to: (i) measure carbon
internally and externally to further develop climate risk
emissions; (ii) define a roadmap and set targets; (iii) reduce
methodologies, to deliver on ongoing climate stress testing
climate impact; (iv) finance climate action and support the
exercises and to build capacity to respond to climate risk
transition of our clients; and (v) communicate and engage.
management expectations.
We currently identify and manage climate risks in our own
operations, our balance sheet, client assets and the supply chain.
› Refer to the UBS Climate Report 2021, available from 11 March
2022 under “Annual reporting” at ubs.com/investors, for a full
description of UBS’s net-zero targets, including baselines and
To protect our clients’ and our own assets from climate-related
pathways
risks, in 2021, we continued to drive the integration of climate-
related risk into our standard risk management framework.
We further integrated climate risk in: (i) risk identification and
measurement;
(ii) monitoring and
risk appetite
setting;
(iii) management and control; and (iv) reporting processes across
the organization.
› Refer to “Sustainability and climate risk” in the “Risk
management and control” section of this report
› Refer to the UBS Climate Report 2021, available from 11 March
2022 under “Annual reporting” at ubs.com/investors, for a full
description of UBS’s management of climate risks
Climate-related metrics 2021
Risk management
Carbon-related assets (USD billion)1,2
of which: UBS AG (standalone) 3
of which: UBS Switzerland AG (standalone) 3
Proportion of total customer lending exposure, gross (%)
Total exposure to climate-sensitive sectors, transition risk (USD billion)2,4
of which: UBS AG (standalone) 3
of which: UBS Switzerland AG (standalone) 3
Proportion of total customer lending exposure, gross (%)
Total exposure to climate-sensitive sectors, physical risk (USD billion)2,4
of which: UBS AG (standalone) 3
of which: UBS Switzerland AG (standalone) 3
Proportion of total customer lending exposure, gross (%)
Identified significant climate-related financial risk on balance sheet5
Opportunities
Number of green, sustainability, and sustainability-linked bond deals6
Total deal value of green, sustainability, and sustainability-linked bond deals (USD billion)6
UBS apportioned deal value of above (USD billion)
Stewardship – voting
Number of climate-related resolutions voted upon7
Proportion of supported climate-related resolutions (%)
Own operations (reporting period: July to June)
Net GHG footprint (1,000 metric tons CO2e)8
Change from baseline 2004 (%)
For the year ended
% change from
3311..1122..2211
31.12.20
31.12.19
31.12.20
4455..66
77..00
3377..99
99..99
3377..55
44..66
3322..88
88..22
2255..55
1100..88
1133..66
55..66
NNoonnee
9988
6633..33
1133..22
8899
7788..66
45.4
7.6
37.1
10.4
37.5
5.4
31.7
8.6
26.2
11.5
13.5
6.0
None
29
19.3
5.7
50
88.0
40.1
7.5
31.9
10.7
33.4
5.8
27.3
9.0
25.6
13.1
11.7
6.9
None
26
15.6
3.4
44
81.8
3300
75
((9922..00))
(79.0)
104
(71.2)
0.4
(8.7)
2.4
0.0
(15.9)
3.4
(2.8)
(6.1)
1.4
237.9
78.0
(60.0)
Share of renewable electricity (%)
11 The carbon-related assets metric has been updated to cover the four non-financial groups as defined by the TCFD, i.e., energy, transportation, materials and buildings, and agriculture, food and forest products. 22 Includes total
loans and advances to customers and guarantees as well as irrevocable loan commitments (within the scope of expected credit loss). 33 Based on standalone IFRS numbers. 44 Climate-sensitive sectors are defined as those business
activities that are rated as having high, moderately high or moderate vulnerability to transition risks and physical risks. For more details, refer to the “UBS lending to climate-sensitive sectors” table under “Sustainability and climate
risk” in the “Risk management and control” section of this report and “Climate scenario analysis” in the “What” section of the Sustainability Report 2021, available from 11 March 2022 under “Annual reporting” at ubs.com/investors.
Physical risk number includes USD 4 billion of loans backed by real estate in regions with elevated physical climate risks. Global Wealth Management corporate lending to customers represents 1.1% of all on- and off-balance sheet
loans and advances to customers, and is excluded from the climate-sensitive sectors analysis in 2021. 55 Methodologies for assessing climate-related financial risk are emerging and may change over time, as described in the UBS
Climate Report 2021, available from 11 March 2022 under “Annual reporting” at ubs.com/investors. 66 Such as, but not limited to, ICMA Green Bond Principles, Sustainability Bond Principles, and Sustainability-linked Bond Principles.
77 This excludes proposals related to Japanese companies that included changes to the companies’ articles of association. 2021 numbers include shareholder and management proposals, 2020 and 2019 numbers shareholder proposals
only. This reflects the increasingly common market practice of climate-related proposals being presented by management. 88 Net greenhouse gas (GHG) footprint equals gross GHG emissions minus GHG reductions from renewable
electricity 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 (scopes 1, 2 and 3) is provided in appendix 4 to the Sustainability Report 2021, available from
11 March 2022 under “Annual reporting” at ubs.com/investors.
110000
72
85
Reporting to our stakeholders on our sustainability
strategy and activities
Information about all our sustainability efforts and commitments
is provided in our Sustainability Report 2021, available under
“Annual reporting” at ubs.com/investors. The content of the
Sustainability Report 2021 has been prepared in accordance with
Global Reporting Initiative (GRI) Standards (the “comprehensive”
option) and with the German rules implementing the EU Directive
information
on disclosure of non-financial and diversity
(2014/95/EU). Our reporting on sustainability has been reviewed
on a limited assurance basis by Ernst & Young Ltd against the GRI
Standards.
› Refer to the Sustainability Report 2021, available from 11 March
2022 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 and for
information on UBS AG and UBS Europe SE disclosures pursuant
to EU Taxonomy Art. 8
54
55
55
Our strategy, business model and environment Our strategy, business model and environment | Regulation and supervision
Regulation and supervision
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 (a G-SIB), as
designated by the Financial Stability Board, and a systemically
relevant bank (an 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 its 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 are among the most stringent in the world. We
are also subject to short-term liquidity coverage ratio rules and 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
› Refer to “Industry trends” in the “Our environment” section of
this report for more information about revisions of the Swiss
too-big-to-fail liquidity framework
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, pursuant to which
the Federal Reserve Board has supervisory authority over the US
operations of both UBS Group AG and UBS AG.
In addition to being a financial holding company under the
Bank Holding Company Act, UBS AG has US branches, 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 as a
securities-based swap dealer with the Securities and Exchange
Commission (the SEC).
UBS Americas Holding LLC, the intermediate holding company
for our operations in the US outside of the UBS AG branch
network, 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-
insured depository institution subsidiary, is licensed and regulated
by state regulators in Utah.
UBS Financial Services Inc., UBS Securities LLC and several other
US subsidiaries of UBS 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, which 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.
Regulation and supervision in Germany / the EU
UBS Europe SE is 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 Federal Financial Supervisory Authority (the BaFin) and
supervisory support by the German Bundesbank. The entity is
subject to EU and German laws and regulations. UBS Europe SE
maintains branches in Denmark, France, Italy, Luxembourg, the
Netherlands, Poland, Spain, Sweden and Switzerland, and is
subject to conduct supervision by authorities in all those countries.
56
56
Our strategy, business model and environment | Regulation and supervision
Regulation and supervision
As a financial services provider based in Switzerland, UBS is subject
Regulation and supervision outside Switzerland
to consolidated supervision by the Swiss Financial Market
Supervisory Authority (FINMA). Our entities are also regulated and
Regulation and supervision in the US
supervised by authorities in each country where they conduct
In the US, UBS is subject to regulation and supervision by the Board
business. Through UBS AG and UBS Switzerland AG, both licensed
of Governors of the Federal Reserve System (the Federal Reserve
as banks in Switzerland, UBS may engage in a full range of financial
Board) under a number of laws. UBS Group AG and UBS AG are
services activities in Switzerland and abroad, including personal
both subject to the Bank Holding Company Act, pursuant to which
banking, commercial banking, investment banking and asset
the Federal Reserve Board has supervisory authority over the US
management.
operations of both UBS Group AG and UBS AG.
As a global systemically important bank (a G-SIB), as
In addition to being a financial holding company under the
designated by the Financial Stability Board, and a systemically
Bank Holding Company Act, UBS AG has US branches, which are
relevant bank (an SRB) in Switzerland, we are subject to stricter
authorized and supervised by the Office of the Comptroller of the
regulatory requirements and supervision than most other Swiss
Currency. UBS AG is registered as a swap dealer with the
banks.
information
› Refer to the “Our evolution” section of this report for more
› Refer to the “Regulatory and legal developments” and “Risk
factors” sections of this report for more information
Regulation and supervision in Switzerland
Supervision
Commodity Futures Trading Commission (the CFTC) and as a
securities-based swap dealer with the Securities and Exchange
Commission (the SEC).
UBS Americas Holding LLC, the intermediate holding company
for our operations in the US outside of the UBS AG branch
network, 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
UBS Group AG and its subsidiaries are subject to consolidated
resolution planning and governance.
supervision by FINMA under the Swiss Banking Act and related
UBS Bank USA, a Federal Deposit Insurance Corporation-
ordinances, which impose standards for matters such as minimum
insured depository institution subsidiary, is licensed and regulated
capital, liquidity, risk concentration and internal organization
by state regulators in Utah.
standards. FINMA meets its statutory supervisory responsibilities
UBS Financial Services Inc., UBS Securities LLC and several other
through licensing, regulation, supervision, and enforcement. It is
US subsidiaries of UBS are subject to regulation by a number of
responsible for prudential supervision and mandates audit firms to
different government agencies and self-regulatory organizations,
perform regulatory audits and other supervisory tasks on its behalf.
including the SEC, the Financial Industry Regulatory Authority, the
Capital adequacy and liquidity regulation
As an internationally active Swiss SRB, we are subject to capital and
CFTC, the Municipal Securities Rulemaking Board and national
securities exchanges, depending on the nature of their business.
total loss-absorbing capacity requirements that are based on both
Regulation and supervision in the UK
RWA and LRD and are among the most stringent in the world. We
Our regulated UK operations are mainly subject to the authority
are also subject to short-term liquidity coverage ratio rules and to
of the Prudential Regulation Authority (the PRA), which is part of
long-term minimum funding requirements.
› Refer to the “Capital, liquidity and funding, and balance sheet”
the Bank of England, and the Financial Conduct Authority (the
FCA). We are also subject to the rules of the London Stock
section of this report for more information about the Swiss SRB
Exchange and other securities and commodities exchanges of
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
which UBS AG is a member.
UBS AG has a UK-registered branch in London, which 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
report for more information about the introduction of the net
subject to the authority of the PRA.
stable funding ratio
› Refer to “Industry trends” in the “Our environment” section of
this report for more information about revisions of the Swiss
too-big-to-fail liquidity framework
Regulation and supervision in Germany / the EU
UBS Europe SE is 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 Federal Financial Supervisory Authority (the BaFin) and
supervisory support by the German Bundesbank. The entity is
subject to EU and German laws and regulations. UBS Europe SE
maintains branches in Denmark, France, Italy, Luxembourg, the
Netherlands, Poland, Spain, Sweden and Switzerland, and is
subject to conduct supervision by authorities in all those countries.
Regulation and supervision in Asia Pacific
We operate in 13 locations in Asia Pacific and are subject to the
regulation and supervision by local financial regulators. Our regional
hubs are Singapore and Hong Kong SAR.
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.
In Mainland China, UBS has multiple licenses to operate its core
business lines, and the various UBS entities are subject to
regulation by a number of different government agencies. The
People’s Bank of China oversees the macro capital markets
policies and ensures coordinated supervisory approaches by the
China Banking and Insurance Commission, the China Securities
and Regulatory Commission, and the exchanges.
Financial crime prevention
Combating money laundering and terrorist financing has been a
major focus of many governments in recent years. Laws and
regulations, including the US Bank Secrecy Act, require effective
policies, procedures and controls to detect, prevent and report
money laundering and terrorist financing, and the verification of
client identities. 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.
› Refer to “Non-financial risk” in the “Risk management and
control” section of this report for more information
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.
› 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 maintain systemic functions in
case of impending insolvency. 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. FINMA published its most
recent assessment of Swiss SRBs’ emergency and recovery and
resolution plans in March 2021, which confirmed that our Swiss
emergency plan is effective, subject to further reduction of joint
and several liabilities. Since the previous assessment, UBS has
reduced its joint and several liabilities to the requested level.
FINMA acknowledged progress made
in UBS’s overall
resolvability, by building up the necessary capabilities or removing
obstacles to the implementation of the resolution strategy.
UBS’s crisis management framework
Our crisis management framework includes three key governance
bodies (see chart on the following page), 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
non-viability (PONV) as defined by Swiss law (referred to as
“impending insolvency” in the Banking Act) 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.
56
57
57
Our strategy, business model and environment Our strategy, business model and environment | Regulation and supervision
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(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:75)(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)
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(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)
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(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)
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(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)
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(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 restore financial
strength if UBS comes under severe capital and liquidity stress.
Quantitative and qualitative triggers are monitored daily and
subject to predefined governance and escalation processes.
Recovery options are linked to owners and checklists with the
objectives being capital preservation, capital raising and raising
funding, and disposal or wind-down of businesses.
Global Resolution Strategy
FINMA is responsible for developing the resolution strategy for UBS.
The planning includes measures that FINMA can take to resolve UBS
in an orderly manner if the Group enters into resolution. FINMA has
the ultimate authority and responsibility to execute the resolution,
in cooperation with the Swiss National Bank, the Swiss Federal
Department of Finance and other key authorities. 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 undercapitalized
subsidiaries would be made simultaneously with losses transmitted
to 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 recovery and resolution plans
The Swiss emergency plan demonstrates how UBS’s systemically
important functions and critical operations in Switzerland can
continue if the UBS Group cannot be restructured. This is achieved
mainly by maintaining UBS Switzerland AG as a separate legal
entity. FINMA has confirmed that the Swiss emergency plan is
effective, subject to further reduction of joint and several
liabilities.
The 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 UBS 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 down-streaming 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
recovery plan and the resolution strategy for the UBS Group to
provide the tools necessary to recapitalize and restructure the
entity in case of material financial distress.
Other local recovery and resolution plans exist for various
Group entities and jurisdictions.
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Our strategy, business model and environment | Regulation and supervision
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(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:52)(cid:71)(cid:85)(cid:81)(cid:78)(cid:87)(cid:86)(cid:75)(cid:81)(cid:80)
(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)
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(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)
Global Recovery Plan
Local recovery and resolution plans
The GRP gives senior management a tool to restore financial
The Swiss emergency plan demonstrates how UBS’s systemically
strength if UBS comes under severe capital and liquidity stress.
important functions and critical operations in Switzerland can
Quantitative and qualitative triggers are monitored daily and
continue if the UBS Group cannot be restructured. This is achieved
subject to predefined governance and escalation processes.
mainly by maintaining UBS Switzerland AG as a separate legal
Recovery options are linked to owners and checklists with the
entity. FINMA has confirmed that the Swiss emergency plan is
objectives being capital preservation, capital raising and raising
effective, subject to further reduction of joint and several
funding, and disposal or wind-down of businesses.
liabilities.
Global Resolution Strategy
The US resolution plan sets out the steps that could be taken
to resolve the UBS Americas Holding LLC group if it suffered
FINMA is responsible for developing the resolution strategy for UBS.
material financial distress and the UBS Group was unable or
The planning includes measures that FINMA can take to resolve UBS
unwilling to provide financial support. As required by US
in an orderly manner if the Group enters into resolution. FINMA has
regulations, our US plan contemplates that UBS Americas Holding
the ultimate authority and responsibility to execute the resolution,
LLC will commence US bankruptcy proceedings. Prior to
in cooperation with the Swiss National Bank, the Swiss Federal
commencement thereof, the plan envisages UBS Americas
Department of Finance and other key authorities. The SPE bail-in
Holding LLC down-streaming financial resources to subsidiaries to
strategy would involve writing down the Group’s remaining equity
facilitate orderly wind-down or disposal of businesses.
and additional tier 1 and tier 2 instruments, as well as bail-in of total
Following the cross-border merger of UBS Limited into
loss-absorbing (TLAC)-eligible senior unsecured bonds at the UBS
UBS Europe SE, the enlarged European operating subsidiary has
Group AG level. An internal recapitalization of undercapitalized
developed resolution plans based on Single Resolution Board
subsidiaries would be made simultaneously with losses transmitted
requirements. Given the relatively small size of UBS Europe SE
to UBS AG and, ultimately, UBS Group AG. Post-resolution
compared with the overall Group, emphasis is placed on the
restructuring measures could include disposal and winding down of
recovery plan and the resolution strategy for the UBS Group to
businesses and assets. FINMA noted that we have already taken key
provide the tools necessary to recapitalize and restructure the
preparatory steps and made good progress regarding global
entity in case of material financial distress.
resolvability.
Other local recovery and resolution plans exist for various
Group entities and jurisdictions.
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Regulatory and legal developments
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Developments regarding Sanctions and Export Controls
International developments regarding capital regulation
As a result of the Russian invasion of Ukraine on 24 February
2022, Switzerland, the US, the EU, the UK and others have
announced unprecedented levels of sanctions and other measures
against Russia and certain Russian entities and nationals. UBS’s
policy is to comply with all applicable laws, including sanctions
and export controls, in the jurisdictions in which it operates. At
present, numerous complex regimes are developing rapidly in
response to the escalating conflict and UBS is working carefully
and assiduously to comply with all relevant requirements and to
address their potential consequences.
Developments regarding the too-big-to-fail regulation
In March 2021, the Swiss Financial Market Supervisory Authority
(FINMA) published its annual assessment of the recovery and
resolution plans of systemically important financial institutions in
Switzerland. The report shows that FINMA approved UBS’s group
recovery plan and assessed its Swiss Emergency Plan as effective.
It also highlighted that UBS made further progress in improving
its global resolvability by building up the necessary capabilities and
removing obstacles to the implementation of the resolution
strategy, while pointing out areas for further improvement.
review of
the Swiss
In June 2021, the Swiss Federal Council issued the results of its
bi-annual
regulatory
framework. The Swiss Federal Council concluded that no
fundamental changes to the framework are needed. Potential
areas for adjustment identified include further tightening of the
liquidity requirements for systemically important banks and the
alignment of incentive systems to support a bank’s resolvability.
too-big-to-fail
In September 2021, the Swiss Federal Department of Finance
launched a consultation on proposed revisions to the Swiss
Liquidity Ordinance, with the aim of strengthening the resilience
of systemically important banks in Switzerland. As proposed, the
revisions would increase the regulatory minimum liquidity
requirements for systemically important banks, including UBS. The
final rule is expected to be published later this year.
In March 2021, US banking regulators, including the Federal
Reserve Board (the FRB), the OCC and the Federal Deposit
Insurance Corporation (the FDIC) decided not to extend the
temporary exclusion of central bank deposits and US Treasury
securities from the leverage exposure calculation for the
supplementary leverage ratio beyond March 2021. The temporary
exemption was applicable to UBS Americas Holding LLC (UBSAH)
with respect to US regulatory capital requirements. In addition,
the Federal Reserve announced that the limits on capital
distributions imposed during the COVID-19 pandemic would be
removed after 30 June 2021. As a result, capital distributions by
UBSAH will generally be permitted for as long as it meets
regulatory capital requirements, including the incremental stress
capital buffer set by the FRB as part of its Comprehensive Capital
Analysis and Review stress test (CCAR). Following the completion
of the annual Dodd–Frank Act Stress Tests (DFAST) and CCAR,
UBSAH was assigned a stress capital buffer (an SCB) of 7.1%
(previously 6.7%) under the SCB rule as of 1 October 2021.
In July 2021, the European Central Bank announced its
decision to remove COVID-19-related restrictions on capital
distributions and share buybacks by banks with effect from
1 October 2021.
In October 2021, the European Commission (the EC) published
a legislative proposal to amend the EU’s prudential rules for banks
to implement the remaining elements of Basel III and revised rules
on resolution. Once finalized, the EC envisages that these
requirements are likely to take effect beginning in 2025 and UBS
Europe SE will be subject to these final provisions.
In addition, the proposal, which may be adjusted in the political
process and is expected to be finalized by the end of 2023,
includes a requirement that certain banking and investment
services must be provided through a branch in the EU. UBS Group
entities currently provide such services in the EU on a cross-border
basis. UBS will assess the final requirements to determine whether
changes are required ahead of the new framework entering into
force.
Reactivation of the Swiss countercyclical buffer
Swiss stamp duty and withholding tax
In January 2022, the Swiss Federal Council decided, at the request
of the SNB, to reactivate the countercyclical capital buffer, at a
maximum level of 2.5% on risk-weighted positions that are
directly or
in
Switzerland. This is expected to increase our common equity tier
1 (CET1) minimum capital requirement by approximately 30 basis
points. The reactivated countercyclical capital buffer will become
effective on 30 September 2022.
indirectly backed by residential properties
In June 2021, the Swiss Parliament approved an extension of the
current withholding tax exemption for total loss-absorbing
capacity instruments, including additional tier 1, from 2021 until
the end of 2026.
In December 2021, the Swiss Parliament also adopted a
legislation that will abolish the withholding tax on bond interest
payments (for bonds issued from the beginning of 2023 onward)
and will eliminate the securities transfer stamp tax on domestic
bonds. However, the withholding tax on interest paid on bank
deposits of natural persons with tax domicile in Switzerland is
maintained. The reform intends to strengthen the debt capital
market in Switzerland, and is expected to take effect in 2023,
subject to an optional referendum.
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Our strategy, business model and environment Our strategy, business model and environment | Regulatory and legal developments
OECD corporate tax reform
In October 2021, the G20 endorsed the final political agreement
on the two-pillar solution reached by the OECD / G20 Inclusive
Framework on Base Erosion and Profit Shifting (BEPS). The two-
pillar solution consists of Pillar 1, which provides taxing rights to
the market jurisdiction from where the profits are derived, and
Pillar 2, which introduces a minimum corporate tax rate of 15%.
The G20 called for all the rules to enter into force at a global level
by 2024, with some to be implemented in 2023. At the time of
publication in October 2021, 137 of the 141 members of the
Framework had agreed to the reform and planned to incorporate
the new rules into their respective national legislation, including
Switzerland. As financial services are expected to be out of scope
of Pillar 1, UBS will primarily be affected by Pillar 2. The impact of
the reform on UBS will depend on implementation by the
adhering countries of the reform.
In January 2022, the Swiss Federal Council presented the key
aspects of the implementation in Switzerland. The relevant
changes will require a constitutional amendment, which triggers
a mandatory referendum. The government aims to implement the
minimum tax rate as of 1 January 2024.
Revision of the Swiss Anti-Money-Laundering Act
In March 2021, the Swiss Parliament granted final approval for
the revision of the Swiss Anti-Money-Laundering (AML) Act,
which incorporates several but not all, of the recommendations
from the enhanced follow-up process of the Financial Action Task
Force on Money Laundering (the FATF). The revision will introduce
into Swiss law further specifications of the obligation to file
suspicious activity reports and increase the frequency of client
data reviews. It will also improve transparency by incorporating
additional legal requirements for associations with elevated risks
of terrorist financing. However, the FATF’s recommendation to
extend the scope of the Swiss AML Act to advisors (e.g., attorneys,
fiduciaries, and tax advisors) was not adopted by the Swiss
Parliament.
On 1 October 2021, the Federal Council issued a draft revision
of the Anti-Money-Laundering Ordinance (AMLO) to detail the
implementation of the changes. The consultation on the AMLO
ended on 17 January 2022, and the revisions are expected to
enter into force by mid-2022. UBS is in the process of adjusting
its AML processes to reflect the new requirements.
Developments regarding environmental, social and
governance matters
2021 saw a significant number of sustainability-related policy
developments, with a particular focus on disclosure requirements,
across various jurisdictions.
In March 2021, the EU Sustainable Finance Disclosures
Regulation (the SFDR) came into effect. The regulation defines
standards regarding, among other matters, how investors should
be informed about sustainability risks and how the impact of
investments on the environment and society should be disclosed.
This regulation concerns any prospectus of UBS’s EU-domiciled
and EU-marketed funds.
In April 2021, the EC published a legislative proposal for a
revised Non-Financial Reporting Directive (NFRD) requiring firms
to publish enhanced information about their activities with regard
to environmental, social and governance (ESG)-related matters.
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In July 2021, the EC adopted regulations prescribing the
content, methodology and presentation of climate-related
disclosures that are required under Art. 8 of the EU Taxonomy
Regulation. As part of their non-financial reporting, credit
institutions will be required to disclose a green asset ratio covering
the banking book and certain trading portfolios, as well as other
key performance indicators (KPIs), including the proportion of
green taxonomy-aligned off-balance sheet exposures and fees
and commission income. Starting with the annual reporting for
2021, taxonomy-eligible assets are required to be disclosed; the
remaining set of KPIs is to be fully phased in for our annual
reporting for 2025. These disclosure requirements will apply to
UBS AG and UBS Europe SE.
In August 2021, the Swiss Federal Council decided to introduce
mandatory reporting requirements for large Swiss companies
based on the recommendations of the Financial Stability Board
(the FSB) Task Force on Climate-related Financial Disclosures (the
TCFD). A consultation on the draft proposal is planned in mid-
2022, with mandatory requirements expected to apply to the
2023 annual reporting. Our disclosures are already largely aligned
with the 2017 TCFD recommendations and we expect to fully
implement those by the end of 2022.
In November 2021, the Swiss Federal Council published several
recommendations to increase transparency regarding climate-
related information and reporting in the Swiss financial center,
including that: i) financial market participants use comparable and
meaningful climate compatibility indicators to create transparency
for all financial products and client portfolios; and ii) the financial
sector joins international net-zero alliances. UBS has joined the
Glasgow Financial Alliance for Net Zero (GFANZ) and is
participating in an industry-wide working group led by the Swiss
Federal Department of Finance (the FDF) to develop climate
compatibility indicators. The Swiss Federal Council has also
instructed the FDF to work with the Department of the
Environment, Transport, Energy and Communications (DETEC)
and FINMA to jointly assess, by the end of 2022, whether any
changes to financial market rules may help avoid greenwashing,
and, if necessary, to propose binding guidelines.
regarding:
In November 2021, FINMA issued guidance on preventing and
combating greenwashing in the context of sustainability-related
collective investment schemes. The guidance sets out FINMA’s
expectations
sustainability
the
characteristics in fund documents of respective Swiss collective
investment schemes; appropriate organizational structures of
institutions that manage sustainability-related Swiss or foreign
collective investment schemes; and the integration of ESG
considerations into the process of advising clients.
advertised
In November 2021, the Swiss Environmental Commission of
the Council of States agreed to start work on an indirect
counterproposal to the “Glacier Initiative.” Both the original
initiative and the counterproposal aim to embed in national law a
net-zero target to be achieved by 2050. The Environmental
Commission of the National Council will formulate a draft in early
2022, but the public vote will not take place before 2023.
In November 2021, the Basel Committee on Banking
Supervision (the BCBS) issued a consultation on Principles for the
effective management and supervision of climate-related financial
risks. The consultation paper proposes 18 principles to improve
climate-related financial risk management by banks and
supervisors. The proposal states that banks should incorporate
climate risks into their capital and liquidity adequacy assessments.
Our strategy, business model and environment | Regulatory and legal developments
OECD corporate tax reform
In July 2021, the EC adopted regulations prescribing the
content, methodology and presentation of climate-related
In October 2021, the G20 endorsed the final political agreement
disclosures that are required under Art. 8 of the EU Taxonomy
on the two-pillar solution reached by the OECD / G20 Inclusive
Regulation. As part of their non-financial reporting, credit
Framework on Base Erosion and Profit Shifting (BEPS). The two-
institutions will be required to disclose a green asset ratio covering
pillar solution consists of Pillar 1, which provides taxing rights to
the banking book and certain trading portfolios, as well as other
the market jurisdiction from where the profits are derived, and
key performance indicators (KPIs), including the proportion of
Pillar 2, which introduces a minimum corporate tax rate of 15%.
green taxonomy-aligned off-balance sheet exposures and fees
The G20 called for all the rules to enter into force at a global level
and commission income. Starting with the annual reporting for
by 2024, with some to be implemented in 2023. At the time of
2021, taxonomy-eligible assets are required to be disclosed; the
publication in October 2021, 137 of the 141 members of the
remaining set of KPIs is to be fully phased in for our annual
Framework had agreed to the reform and planned to incorporate
reporting for 2025. These disclosure requirements will apply to
the new rules into their respective national legislation, including
UBS AG and UBS Europe SE.
Switzerland. As financial services are expected to be out of scope
In August 2021, the Swiss Federal Council decided to introduce
of Pillar 1, UBS will primarily be affected by Pillar 2. The impact of
mandatory reporting requirements for large Swiss companies
the reform on UBS will depend on implementation by the
based on the recommendations of the Financial Stability Board
adhering countries of the reform.
(the FSB) Task Force on Climate-related Financial Disclosures (the
In January 2022, the Swiss Federal Council presented the key
TCFD). A consultation on the draft proposal is planned in mid-
aspects of the implementation in Switzerland. The relevant
2022, with mandatory requirements expected to apply to the
changes will require a constitutional amendment, which triggers
2023 annual reporting. Our disclosures are already largely aligned
a mandatory referendum. The government aims to implement the
with the 2017 TCFD recommendations and we expect to fully
minimum tax rate as of 1 January 2024.
implement those by the end of 2022.
Revision of the Swiss Anti-Money-Laundering Act
In November 2021, the Swiss Federal Council published several
recommendations to increase transparency regarding climate-
related information and reporting in the Swiss financial center,
In March 2021, the Swiss Parliament granted final approval for
including that: i) financial market participants use comparable and
the revision of the Swiss Anti-Money-Laundering (AML) Act,
meaningful climate compatibility indicators to create transparency
which incorporates several but not all, of the recommendations
for all financial products and client portfolios; and ii) the financial
from the enhanced follow-up process of the Financial Action Task
sector joins international net-zero alliances. UBS has joined the
Force on Money Laundering (the FATF). The revision will introduce
Glasgow Financial Alliance for Net Zero (GFANZ) and is
into Swiss law further specifications of the obligation to file
participating in an industry-wide working group led by the Swiss
suspicious activity reports and increase the frequency of client
Federal Department of Finance (the FDF) to develop climate
data reviews. It will also improve transparency by incorporating
compatibility indicators. The Swiss Federal Council has also
additional legal requirements for associations with elevated risks
instructed the FDF to work with the Department of the
of terrorist financing. However, the FATF’s recommendation to
Environment, Transport, Energy and Communications (DETEC)
extend the scope of the Swiss AML Act to advisors (e.g., attorneys,
and FINMA to jointly assess, by the end of 2022, whether any
fiduciaries, and tax advisors) was not adopted by the Swiss
changes to financial market rules may help avoid greenwashing,
Parliament.
and, if necessary, to propose binding guidelines.
On 1 October 2021, the Federal Council issued a draft revision
In November 2021, FINMA issued guidance on preventing and
of the Anti-Money-Laundering Ordinance (AMLO) to detail the
combating greenwashing in the context of sustainability-related
implementation of the changes. The consultation on the AMLO
collective investment schemes. The guidance sets out FINMA’s
ended on 17 January 2022, and the revisions are expected to
expectations
regarding:
the
advertised
sustainability
enter into force by mid-2022. UBS is in the process of adjusting
characteristics in fund documents of respective Swiss collective
its AML processes to reflect the new requirements.
Developments regarding environmental, social and
governance matters
2021 saw a significant number of sustainability-related policy
developments, with a particular focus on disclosure requirements,
across various jurisdictions.
In March 2021, the EU Sustainable Finance Disclosures
Regulation (the SFDR) came into effect. The regulation defines
be informed about sustainability risks and how the impact of
investments on the environment and society should be disclosed.
This regulation concerns any prospectus of UBS’s EU-domiciled
and EU-marketed funds.
In April 2021, the EC published a legislative proposal for a
revised Non-Financial Reporting Directive (NFRD) requiring firms
to publish enhanced information about their activities with regard
to environmental, social and governance (ESG)-related matters.
investment schemes; appropriate organizational structures of
institutions that manage sustainability-related Swiss or foreign
collective investment schemes; and the integration of ESG
considerations into the process of advising clients.
In November 2021, the Swiss Environmental Commission of
the Council of States agreed to start work on an indirect
counterproposal to the “Glacier Initiative.” Both the original
initiative and the counterproposal aim to embed in national law a
net-zero target to be achieved by 2050. The Environmental
Commission of the National Council will formulate a draft in early
In November 2021, the Basel Committee on Banking
Supervision (the BCBS) issued a consultation on Principles for the
effective management and supervision of climate-related financial
risks. The consultation paper proposes 18 principles to improve
climate-related financial risk management by banks and
supervisors. The proposal states that banks should incorporate
climate risks into their capital and liquidity adequacy assessments.
standards regarding, among other matters, how investors should
2022, but the public vote will not take place before 2023.
In November 2021, the International Financial Reporting
Standards (IFRS) Foundation Trustees announced the creation of
a new standard-setting board, the International Sustainability
Standards Board (ISSB), which will be tasked with developing a
comprehensive global baseline for sustainability-related disclosure
standards that will provide investors and other capital market
participants with information about companies’ sustainability-
related risks and opportunities in order to help them make
informed decisions.
In December 2021, the Swiss Federal Council opened the
consultation on the revised CO2 Act following its rejection in a
public vote earlier in 2021. The new proposal contains measures
to reduce carbon emissions for the period from 2025 to 2030 and
mandates FINMA and the Swiss National Bank to report on
climate-related financial risks.
In December 2021, the Federal Council specified new due
diligence requirements to implement the counterproposal to the
Responsible Business Initiative. The changes to the Code of
Obligations require large Swiss companies to report on risks of
their business activities in the areas of the environment, social
issues, employee concerns, human rights, and the fight against
corruption, as well as on the measures taken to mitigate these
risks. Companies active in sensitive areas with a risk of child labor
and conflict minerals must comply with additional due diligence
and reporting obligations. The details of these requirements are
outlined in a separate ordinance. The new provisions entered into
force on 1 January 2022. The law grants companies one year to
adapt to the new obligations. These will therefore be applied for
the first time in the 2023 financial year.
In December 2021, the US Office of the Comptroller of the
Currency (the OCC) issued a consultation on supervisory guidance
regarding firms’ climate risk management practices. While the
proposal broadly aligns with that issued by the BCBS in November,
it also represents the first step of US banking regulators regarding
expectations of supervised firms in their capacity to measure and
control exposures to potential climate change issues.
Starting with our 2021 annual reporting, we comply with the
revised FINMA Circular 2016/1 “Disclosure – banks,” which
includes climate risk-related disclosure requirements. We provide
information required by Art. 8 of the EU Taxonomy Regulation,
starting with the disclosure of taxonomy-eligible assets of UBS AG
and UBS Europe SE on a standalone basis for year-end 2021.
Developments regarding digitalization and innovation in
finance
Regulatory discussions on various aspects of digital innovation in
finance and, in particular, virtual assets have increased and
continued to evolve. However, national regulatory approaches on
the subject still differ widely.
In June 2021, the BCBS consulted on an approach to the
prudential treatment of virtual assets as part of a multi-year
process to develop internationally aligned prudential rules.
In October 2021, the Committee on Payments and Market
Infrastructures and the International Organization of Securities
Commissions (IOSCO) consulted on guidance proposing that the
Principles for Financial Market Infrastructures should also apply to
systemically important stablecoin arrangements.
In October 2021, the FATF updated its 2019 Guidance for a
risk-based approach to virtual assets and virtual asset service
providers (VASPs), who are subject to the same relevant FATF
measures that apply to financial institutions. The guidance aims
to help countries and VASPs understand their obligations
regarding anti-money laundering and terrorist financing and
effectively implement the FATF’s requirements.
In November 2021, EU legislators made further progress
toward agreement on the Markets in Crypto-Assets Regulation,
which aims to establish a comprehensive EU-wide regulatory
framework for the issuance of, and provision of services related
to, various types of virtual assets. The legislation is expected to be
finalized by mid-2022.
In November 2021, the US President’s Working Group on
Financial Markets released a paper on stablecoins recommending
that US Congress enact legislation to restrict issuers of stablecoins
to supervised, deposit-taking banks. In the absence of legislation,
the US Financial Stability Oversight Council could designate the
activity as systemically important and place them under the
authority of the Federal Reserve.
In 2021, several central banks continued their efforts to actively
explore central bank digital currencies (CBDC), including with
each other, with the BIS Innovation Hub network and with
commercial banks. For example, UBS participated in SNB- and
Swiss Infrastructure and Exchange (SIX)-led CBDC projects named
Helvetia and Jura. The introduction of CBDC could potentially
have a significant impact on the financial sector, though the
implications are not yet fully understood. In January 2022, the
Federal Reserve released its discussion paper on CBDC, seeking
public input on the advantages and disadvantages of these
products and the preservation of monetary and financial stability
while complementing existing means of payment.
In February 2022, the Swiss Federal Council published its report
on framework conditions for digital finance in Switzerland, which
includes measures linked to 12 prioritized action areas. The
Federal Department of Finance will implement the measures in
2022 and subsequent years in close coordination with relevant
stakeholders, including the private sector. Among the policy
topics addressed are open finance, artificial
intelligence,
distributed ledger technology, cybersecurity, green fintech, the
Cloud, data sharing and cross-border data flows.
Operational resilience and cybersecurity
In 2021, there were several regulatory developments on
operational resilience and cybersecurity.
In March 2021, the BCBS published its Principles for
Operational Resilience (the BCBS Principles), providing global
standards intended to strengthen the ability of banks to absorb
operational risk-related events that could cause significant
operational failures or widescale disruption in financial markets.
In March 2021, the Prudential Regulation Authority (the PRA)
and the Financial Conduct Authority (the FCA) published their
final rules on the UK operational resilience framework. The new
rules require firms to identify their important business services, set
impact tolerances for such and commence testing against severe
but plausible scenarios by 31 March 2022. Firms are expected to
introduce any required resilience reinforcements by 31 March
2025. The rules in the UK will apply to UBS AG London Branch
and other Group entities that provide services to UBS AG London
Branch.
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Our strategy, business model and environment Our strategy, business model and environment | Regulatory and legal developments
deposit 50% of the contribution obligations in securities or Swiss
francs. The revision also introduces amendments with regard to
insolvency law and segregation, in particular the introduction of
a more detailed and solid legal basis for bail-in, including the
ranking of claims subject to bail in, ensuring legal certainty for the
operationalization of a bail-in. The new provisions also provide for
the subordination of bail-in-bonds, with the exception of such
bail-in-bonds issued by a holding company if other debt ranking
pari passu does not exceed 5% of the total bail-in-bond debt. The
revised Banking Act will enter into force at the beginning of 2023.
We expect moderate costs for all Switzerland-based UBS Group
entities that are within the scope of the revision.
Review of restrictions on the business model of
PostFinance AG
In January 2021, the Swiss Federal Council announced that it
intends to privatize PostFinance AG, a Swiss systemically
important bank, which is held by the state-owned Swiss Post AG.
As a result, the prohibition on PostFinance AG granting
mortgages and other types of loans would be lifted, among other
changes. As the envisaged changes require a revision of the Post
Organization Act, the Swiss Parliament will ultimately decide on
any changes.
In June 2021, the Swiss Federal Council submitted a dispatch
to the Swiss Parliament. If the revision passes the legislative
process, which is expected to start in 2022, the reform could
further intensify competition in the Swiss mortgage market.
Registration under the US security-based swaps
regulations
In October 2021, FINMA and the US Securities and Exchange
Commission (the SEC) finalized a memorandum of understanding
relating to cooperation in oversight of Swiss entities registered
under the SEC’s security-based swaps regulations. The SEC also
published a substituted compliance order modifying the
application of certain of its regulations for Swiss security-based
swap dealers. Under SEC regulations, UBS AG has been registered
as a security-based swap dealer since 1 November 2021.
Developments regarding LIBOR
In March 2021, the FCA confirmed that the one-week and two-
month US dollar London Interbank Offered Rate (USD LIBOR)
settings, along with all GBP, EUR, CHF, and JPY LIBOR settings,
would, immediately after 31 December 2021, either cease to be
provided by any administrator or no longer be representative of
the underlying market. The FCA further confirmed that the
remaining USD LIBOR settings will cease immediately after
30 June 2023.
In October 2021, the FRB issued guidance that banks should,
with limited exceptions, cease to enter into new contracts
referencing USD LIBOR as soon as practicable and, in any event,
no later than 31 December 2021.
In the fourth quarter of 2021, both the Monetary Authority of
Singapore and the Hong Kong Monetary Authority issued
consultations on proposed rules to incorporate the BCBS
Principles for Operational Resilience into their regulatory and
supervisory frameworks. Rules in the UK, Singapore and Hong
Kong SAR are broadly aligned to the BCBS Principles.
UBS established a global Enhanced Operational Resilience
program
the aim of ensuring
implementation and alignment with key regulatory requirements
on operational resilience.
in August 2020 with
In November 2021, the US banking regulators, including the
FRB, the OCC and the FDIC published final rules regarding
computer security incident reporting requirements, including
thresholds and timing, that apply to supervised banks and service
providers and become effective in April 2022.
In January 2022, the Swiss Federal Council initiated a
consultation on a proposal to introduce a reporting obligation for
cyberattacks on critical infrastructures, including banks. The
proposal defines the tasks of the National Cybersecurity Centre,
the designated central recipient of the reports. The consultation
will last until 14 April 2022. Once finalized, UBS will need to
adjust its reporting processes accordingly.
Developments regarding the relationship between
Switzerland and the European Union
In May 2021, the Swiss Federal Council terminated negotiations
on the Institutional Framework Agreement (the IFA) between
Switzerland and the European Union (the EU) due to substantial
differences of opinion regarding key aspects of the agreement.
The IFA would have formed a mutually agreed basis to consolidate
and further develop Switzerland’s bilateral market access
approach with the EU. As a result, the EU is unlikely to be ready
to conclude new market access agreements – including on
financial services – with Switzerland in the near future.
In November 2021, the Swiss Federal Council decided to
extend the existing measure protecting the Swiss stock exchange
infrastructure (which was due to expire on 31 December 2021)
until 31 December 2025 and to open a consultation on
Financial Market
incorporating
Infrastructure Act. In the absence of mutual recognition of
equivalence by both Swiss and EU authorities, the measure
requires EU investment firms to trade Swiss equities on Swiss stock
exchanges. UBS had previously adjusted its internal processes to
reflect this measure.
this measure
into
the
Revision of the Swiss Banking Act
In December 2021, the Swiss Parliament adopted a revision of the
Banking Act. The legislative amendment aims to strengthen
depositor protection and promote financial system stability by
reducing the time needed to pay out protected deposits through
the depositor protection scheme in the event a bank enters
bankruptcy. Among other measures, it will also require banks to
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Our strategy, business model and environment | Regulatory and legal developments
In the fourth quarter of 2021, both the Monetary Authority of
deposit 50% of the contribution obligations in securities or Swiss
Singapore and the Hong Kong Monetary Authority issued
francs. The revision also introduces amendments with regard to
consultations on proposed rules to incorporate the BCBS
insolvency law and segregation, in particular the introduction of
Principles for Operational Resilience into their regulatory and
a more detailed and solid legal basis for bail-in, including the
supervisory frameworks. Rules in the UK, Singapore and Hong
ranking of claims subject to bail in, ensuring legal certainty for the
Kong SAR are broadly aligned to the BCBS Principles.
operationalization of a bail-in. The new provisions also provide for
UBS established a global Enhanced Operational Resilience
the subordination of bail-in-bonds, with the exception of such
program
in August 2020 with
the aim of ensuring
bail-in-bonds issued by a holding company if other debt ranking
implementation and alignment with key regulatory requirements
pari passu does not exceed 5% of the total bail-in-bond debt. The
on operational resilience.
revised Banking Act will enter into force at the beginning of 2023.
In November 2021, the US banking regulators, including the
We expect moderate costs for all Switzerland-based UBS Group
FRB, the OCC and the FDIC published final rules regarding
entities that are within the scope of the revision.
computer security incident reporting requirements, including
thresholds and timing, that apply to supervised banks and service
Review of restrictions on the business model of
providers and become effective in April 2022.
PostFinance AG
In January 2022, the Swiss Federal Council initiated a
consultation on a proposal to introduce a reporting obligation for
In January 2021, the Swiss Federal Council announced that it
cyberattacks on critical infrastructures, including banks. The
intends to privatize PostFinance AG, a Swiss systemically
proposal defines the tasks of the National Cybersecurity Centre,
important bank, which is held by the state-owned Swiss Post AG.
the designated central recipient of the reports. The consultation
As a result, the prohibition on PostFinance AG granting
will last until 14 April 2022. Once finalized, UBS will need to
mortgages and other types of loans would be lifted, among other
adjust its reporting processes accordingly.
Developments regarding the relationship between
any changes.
Switzerland and the European Union
changes. As the envisaged changes require a revision of the Post
Organization Act, the Swiss Parliament will ultimately decide on
In June 2021, the Swiss Federal Council submitted a dispatch
to the Swiss Parliament. If the revision passes the legislative
In May 2021, the Swiss Federal Council terminated negotiations
process, which is expected to start in 2022, the reform could
on the Institutional Framework Agreement (the IFA) between
further intensify competition in the Swiss mortgage market.
Switzerland and the European Union (the EU) due to substantial
differences of opinion regarding key aspects of the agreement.
Registration under the US security-based swaps
The IFA would have formed a mutually agreed basis to consolidate
regulations
and further develop Switzerland’s bilateral market access
approach with the EU. As a result, the EU is unlikely to be ready
In October 2021, FINMA and the US Securities and Exchange
to conclude new market access agreements – including on
Commission (the SEC) finalized a memorandum of understanding
financial services – with Switzerland in the near future.
relating to cooperation in oversight of Swiss entities registered
In November 2021, the Swiss Federal Council decided to
under the SEC’s security-based swaps regulations. The SEC also
extend the existing measure protecting the Swiss stock exchange
published a substituted compliance order modifying the
infrastructure (which was due to expire on 31 December 2021)
application of certain of its regulations for Swiss security-based
until 31 December 2025 and to open a consultation on
swap dealers. Under SEC regulations, UBS AG has been registered
incorporating
this measure
into
the
Financial Market
as a security-based swap dealer since 1 November 2021.
Infrastructure Act. In the absence of mutual recognition of
equivalence by both Swiss and EU authorities, the measure
Developments regarding LIBOR
requires EU investment firms to trade Swiss equities on Swiss stock
exchanges. UBS had previously adjusted its internal processes to
In March 2021, the FCA confirmed that the one-week and two-
reflect this measure.
Revision of the Swiss Banking Act
month US dollar London Interbank Offered Rate (USD LIBOR)
settings, along with all GBP, EUR, CHF, and JPY LIBOR settings,
would, immediately after 31 December 2021, either cease to be
provided by any administrator or no longer be representative of
In December 2021, the Swiss Parliament adopted a revision of the
the underlying market. The FCA further confirmed that the
Banking Act. The legislative amendment aims to strengthen
remaining USD LIBOR settings will cease immediately after
depositor protection and promote financial system stability by
30 June 2023.
reducing the time needed to pay out protected deposits through
In October 2021, the FRB issued guidance that banks should,
the depositor protection scheme in the event a bank enters
with limited exceptions, cease to enter into new contracts
bankruptcy. Among other measures, it will also require banks to
referencing USD LIBOR as soon as practicable and, in any event,
no later than 31 December 2021.
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
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. A market downturn and weak
macroeconomic conditions can be precipitated by a number of
factors, including geopolitical events, such as international armed
conflicts, the imposition of sanctions, global trade or global supply
chain disruptions, changes in monetary or fiscal policy, changes in
trade policies or
trade disputes, significant
inflationary or deflationary price changes, disruptions in one or
sectors, natural disasters,
more concentrated economic
pandemics, civil unrest, acts of violence, war or terrorism. Such
developments can have unpredictable and destabilizing effects.
international
For example, as a result of the Russian invasion of Ukraine on
24 February 2022 and the ongoing hostilities, Switzerland, the
US, the EU, the UK and others have announced sanctions against
certain Russian banks, companies and individuals, as well as the
Russian Central Bank, and have announced that certain Russian
banks will be barred from using the Society for Worldwide
(SWIFT) messaging
Interbank Financial Telecommunication
system. In addition, it is estimated that one million people have
been displaced inside Ukraine and many of those displaced may
seek refuge in Poland and other neighboring countries, as the
conflict continues these numbers are likely to increase. The scale
of the conflict and the unprecedented speed and extent of
sanctions may produce many of the effects described above,
including in ways that cannot now be anticipated.
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. As financial markets
are global and highly interconnected, 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 or as result of the imposition of sanctions on
individuals, entities or countries), 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 invested assets 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.
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 than some other financial service
providers.
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Our strategy, business model and environment Our strategy, business model and environment | Risk factors
Our results of operations and financial condition may be
adversely affected by the COVID-19 pandemic and the response
to it
The COVID-19 pandemic and the governmental measures taken
to manage it, as well as labor market displacements, supply chain
disruptions, and inflationary pressures, may continue to adversely
affect global and regional economic conditions, resulting in
contraction in the global economy, substantial volatility in the
financial markets, crises in markets for goods and services, as well
as significant disruptions in certain regional real estate markets,
increased unemployment, increased credit and counterparty risk,
and operational challenges. Governments and central banks
around the world reacted to the economic crisis caused by the
pandemic by implementing stimulus and liquidity programs and
cutting interest rates and have begun to phase out pandemic
relief. In addition, while vaccination campaigns have had
significant success in some regions and a number of economies
are recovering, outbreaks in locations where vaccination rates are
low or vaccines are unavailable on a large scale, as well as the
spread of new variants of COVID-19, create uncertainty around a
sustainable recovery. Resurgence of the pandemic, ineffectiveness
of vaccines and continuance or imposition of new pandemic
control measures may result in additional adverse effects on the
global economy negatively affecting UBS’s results of operations
and financial condition.
The COVID-19 pandemic affected all of UBS’s businesses, and
these effects could be greater in the future if adverse conditions
persist or worsen. These effects included declines in some asset
prices, spikes in volatility, inflationary pressures, supply chain
disruptions, 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 many of these effects have
reversed as economies have reopened and economic stimulus has
been maintained, or were offset by high levels of client activity
and by improved asset prices in many sectors in 2021, these
favorable conditions may not persist. In particular, real estate
markets in some regions may be significantly disrupted as a result
of repeated temporary closures of business, sheltering-in-place
directives, and remote work protocols enacted to respond to
seasonal increases in infection rates of COVID-19.
Should inflationary pressures or other adverse global market
conditions persist, or should the pandemic lead to additional
economic or 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 losses in
our loan portfolios, loan commitments and other assets, and
impairments of other financial assets.
A fall in equity markets and consequent 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 downgrades to our credit ratings.
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.
Our credit risk exposure to clients, trading counterparties and
other financial institutions would increase under adverse or
other economic conditions
Credit risk is an integral part of many of our activities, including
lending, underwriting and derivatives activities. Adverse economic
or market conditions, or the imposition of sanctions or other
restrictions on clients, counterparties or financial institutions, 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. Market closures
the imposition of exchange controls, sanctions or other measures
may limit our ability to settle existing transactions or to realize on
collateral, which may result in unexpected increases in exposures.
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. 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.
Interest rate trends and changes could negatively affect our
financial results
The low or negative interest rate environment, particularly in
Switzerland 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.
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Our strategy, business model and environment | Risk factors
Our results of operations and financial condition may be
and financial condition, as well as our regulatory capital and
adversely affected by the COVID-19 pandemic and the response
liquidity ratios, will depend on future developments, including the
to it
scope and duration of the pandemic and any recovery period, the
The COVID-19 pandemic and the governmental measures taken
adequacy of vaccine distribution plans and execution of those
to manage it, as well as labor market displacements, supply chain
plans, as well as the efficacy of vaccines against potential virus
disruptions, and inflationary pressures, may continue to adversely
variants, future actions taken by governmental authorities, central
affect global and regional economic conditions, resulting in
banks and other third parties in response to the pandemic, and
contraction in the global economy, substantial volatility in the
the effects on our customers, counterparties, employees and
financial markets, crises in markets for goods and services, as well
third-party service providers.
as significant disruptions in certain regional real estate markets,
increased unemployment, increased credit and counterparty risk,
Our credit risk exposure to clients, trading counterparties and
and operational challenges. Governments and central banks
other financial institutions would increase under adverse or
around the world reacted to the economic crisis caused by the
other economic conditions
pandemic by implementing stimulus and liquidity programs and
Credit risk is an integral part of many of our activities, including
cutting interest rates and have begun to phase out pandemic
lending, underwriting and derivatives activities. Adverse economic
relief. In addition, while vaccination campaigns have had
or market conditions, or the imposition of sanctions or other
significant success in some regions and a number of economies
restrictions on clients, counterparties or financial institutions, may
are recovering, outbreaks in locations where vaccination rates are
lead to impairments and defaults on these credit exposures.
low or vaccines are unavailable on a large scale, as well as the
Losses may be exacerbated by declines in the value of collateral
spread of new variants of COVID-19, create uncertainty around a
securing loans and other exposures. In our prime brokerage,
sustainable recovery. Resurgence of the pandemic, ineffectiveness
securities finance and Lombard lending businesses, we extend
of vaccines and continuance or imposition of new pandemic
substantial amounts of credit against securities collateral, the
control measures may result in additional adverse effects on the
value or liquidity of which may decline rapidly. Market closures
global economy negatively affecting UBS’s results of operations
the imposition of exchange controls, sanctions or other measures
and financial condition.
may limit our ability to settle existing transactions or to realize on
The COVID-19 pandemic affected all of UBS’s businesses, and
collateral, which may result in unexpected increases in exposures.
these effects could be greater in the future if adverse conditions
Our Swiss mortgage and corporate lending portfolios are a large
persist or worsen. These effects included declines in some asset
part of our overall lending. We are therefore exposed to the risk
prices, spikes in volatility, inflationary pressures, supply chain
of adverse economic developments in Switzerland, including
disruptions, lower or negative interest rates, widening of credit
property valuations in the housing market, the strength of the
spreads and credit deterioration. These effects have resulted in
Swiss franc and its effect on Swiss exports, prevailing negative
decreases in the valuation of loans and commitments, an increase
interest rates applied by the Swiss National Bank, economic
in the allowance for credit losses and lower valuations of certain
conditions within the Eurozone or the EU, and the evolution of
classes of trading assets. While many of these effects have
agreements between Switzerland and the EU or European
reversed as economies have reopened and economic stimulus has
Economic Area, which represent Switzerland’s largest export
been maintained, or were offset by high levels of client activity
market. We have exposures related to real estate in various
and by improved asset prices in many sectors in 2021, these
countries, including a substantial Swiss mortgage portfolio.
markets in some regions may be significantly disrupted as a result
could nevertheless be exposed to losses if a substantial
of repeated temporary closures of business, sheltering-in-place
deterioration in the Swiss real estate market were to occur.
directives, and remote work protocols enacted to respond to
As we experienced in 2020, under the IFRS 9 expected credit
seasonal increases in infection rates of COVID-19.
loss (ECL) regime, credit loss expenses may increase rapidly at the
Should inflationary pressures or other adverse global market
onset of an economic downturn as a result of higher levels of
conditions persist, or should the pandemic lead to additional
credit impairments (stage 3), as well as higher ECL from stages 1
economic or market disruptions, we may experience reduced
and 2. Substantial increases in ECL could exceed expected loss for
client activity and demand for our products and services, increased
regulatory capital purposes and adversely affect our common
utilization of lending commitments, significantly increased client
equity tier 1 (CET1) capital and regulatory capital ratios.
defaults, continued and increasing credit and valuation losses in
our loan portfolios, loan commitments and other assets, and
Interest rate trends and changes could negatively affect our
impairments of other financial assets.
financial results
A fall in equity markets and consequent decline in invested
The low or negative interest rate environment, particularly in
assets would also reduce recurring fee income in our Global
Switzerland and the Eurozone, may further erode interest margins
Wealth Management and Asset Management businesses. These
and adversely affect the net interest income generated by the
factors and other consequences of the COVID-19 pandemic may
Personal & Corporate Banking and Global Wealth Management
negatively affect our financial condition, including possible
businesses. The Swiss National Bank permits Swiss banks to make
constraints on capital and liquidity, as well as a higher cost of
deposits up to a threshold at zero interest. Any reduction in or
capital, and possible downgrades to our credit ratings.
limitation on the use of this exemption from the otherwise
The extent to which the pandemic, and the related adverse
applicable negative interest rates would exacerbate the effect of
economic conditions, affect our businesses, results of operations
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. Interest rates in the US and some other markets are
expected to increase as central banks respond to higher inflation.
As returns for alternatives to deposits, such as money market
funds, increase with interest rates, we may experience outflows
of customer deposits or a higher cost of deposit funding if
customers shift from deposits to alternative products.
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.
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 adversely affect our profits, balance sheet and
capital, leverage and liquidity coverage ratios.
favorable conditions may not persist. In particular, real estate
Although we believe this portfolio is prudently managed, we
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 cause
us to record additional provisions for such matters 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. This award was reduced to an
aggregate of EUR 1.8 billion by the Court of Appeal, and UBS has
further appealed this judgment.
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.
For a number of years we have been, and we continue to be,
subject to a very high level of regulatory scrutiny and to certain
regulatory measures that constrain our strategic flexibility. We
believe we have remediated the deficiencies that led to significant
losses in the past and made substantial changes in our controls
and conduct risk frameworks to address the issues highlighted by
the LIBOR-related, foreign exchange and precious metals
regulatory resolutions. We have also undertaken extensive efforts
to implement new regulatory requirements and meet heightened
expectations.
risk control, anti-money
We continue to be in active dialog with regulators concerning
the actions we are taking to improve our operational risk
management,
laundering, data
management and other frameworks, and otherwise seek to meet
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.
Substantial changes in regulation may adversely affect our
businesses and our ability to execute our strategic plans
Since the financial crisis of 2008, we are subject to significant
including recovery and resolution
regulatory requirements,
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 jurisdictions, and Switzerland’s requirements
for major 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.
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Our strategy, business model and environment Our strategy, business model and environment | Risk factors
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
improve
moved significant operations
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 transferred substantially all the operations
of Personal & Corporate Banking and Global Wealth
Management booked in Switzerland to UBS Switzerland AG to
improve resolvability.
These changes 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
increased capital and
in affected
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
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.
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We expect our risk-weighted assets (RWA) to further increase
as the effective date for additional capital standards promulgated
by the Basel Committee on Banking Supervision (the BCBS) draws
nearer.
Increases in capital and liquidity standards could significantly
curtail our ability to pursue strategic opportunities or to return
capital to shareholders.
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.
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.
UBS experienced cross-border outflows over a number of years
as a result of heightened focus by fiscal authorities on cross-
border investment and fiscal amnesty programs, in 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 enforcement, additional
cross-border tax information exchange regimes, national tax
amnesty or 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.
Our strategy, business model and environment | Risk factors
Our implementation of additional regulatory requirements and
We expect our risk-weighted assets (RWA) to further increase
changes in supervisory standards, as well as our compliance with
as the effective date for additional capital standards promulgated
existing laws and regulations, continue to receive heightened
by the Basel Committee on Banking Supervision (the BCBS) draws
scrutiny from supervisors. If we do not meet supervisory
nearer.
expectations in relation to these or other matters, or if additional
Increases in capital and liquidity standards could significantly
supervisory or regulatory issues arise, we would likely be subject
curtail our ability to pursue strategic opportunities or to return
to further regulatory scrutiny as well as measures that may further
capital to shareholders.
constrain our strategic flexibility.
Market regulation and fiduciary standards: Our wealth and
Resolvability and resolution and recovery planning: We have
asset management businesses operate in an environment of
moved significant operations
into subsidiaries to
improve
increasing regulatory scrutiny and changing standards with
resolvability and meet other regulatory requirements, and this has
respect to fiduciary and other standards of care and the focus on
resulted in substantial implementation costs, increased our capital
mitigating or eliminating conflicts of interest between a manager
and funding costs and reduced operational flexibility. For
or advisor and the client, which require effective implementation
example, we have transferred all of our US subsidiaries under a
across the global systems and processes of investment managers
US intermediate holding company to meet US regulatory
and other industry participants. For example, we have made
requirements, and have transferred substantially all the operations
material changes to our business processes, policies and the terms
of Personal & Corporate Banking and Global Wealth
on which we interact with these clients in order to comply with
Management booked in Switzerland to UBS Switzerland AG to
SEC Regulation Best Interest, which is intended to enhance and
improve resolvability.
clarify the duties of brokers and investment advisers to retail
These changes create operational, capital, liquidity, funding
customers, the Volcker Rule, which limits our ability to engage in
and tax inefficiencies. Our operations in subsidiaries are subject to
proprietary trading, as well as changes in European and Swiss
local capital, liquidity, stable funding, capital planning and stress
market conduct regulation. Future changes in the regulation of
testing requirements. These requirements have resulted in
our duties to customers may require us to make further changes
increased capital and
liquidity
requirements
in affected
to our businesses, which would result in additional expense and
subsidiaries, which limit our operational flexibility and negatively
may adversely affect our business. We may also become subject
affect our ability to benefit from synergies between business units
to other similar regulations substantively limiting the types of
and to distribute earnings to the Group.
activities in which we may engage or the way we conduct our
Under the Swiss too-big-to-fail (TBTF) framework, we are
operations.
required to put in place viable emergency plans to preserve the
In many instances, we provide services on a cross-border basis,
operation of systemically important functions in the event of a
and we are therefore sensitive to barriers restricting market access
failure. Moreover, under this framework and similar regulations in
for third-country firms. In particular, efforts in the EU to
the US, the UK, the EU and other jurisdictions in which we
harmonize the regime for third-country firms to access the
operate, we are required to prepare credible recovery and
European market may have the effect of creating new barriers
resolution plans detailing the measures that would be taken to
that adversely affect our ability to conduct business in these
recover in a significant adverse event or in the event of winding
jurisdictions from Switzerland.
In addition, a number of
down the Group or the operations in a host country through
jurisdictions are increasingly regulating cross-border activities
resolution or insolvency proceedings. If a recovery or resolution
based on determinations of equivalence of home country
plan that we produce is determined by the relevant authority to
regulation, substituted compliance or similar principles of comity.
be inadequate or not credible, relevant regulation may permit the
A negative determination with respect to Swiss equivalence could
authority to place limitations on the scope or size of our business
limit our access to the market in those jurisdictions and may
in that jurisdiction, or oblige us to hold higher amounts of capital
negatively influence our ability to act as a global firm. For
or liquidity or to change our legal structure or business in order to
example, the EU declined to extend its equivalence determination
remove the relevant impediments to resolution.
for Swiss exchanges, which lapsed as of 30 June 2019.
Capital and prudential standards: As an internationally active
UBS experienced cross-border outflows over a number of years
Swiss systemically relevant bank (an SRB), we are subject to capital
as a result of heightened focus by fiscal authorities on cross-
and total loss-absorbing capacity (TLAC) requirements that are
border investment and fiscal amnesty programs, in anticipation of
among the most stringent in the world. Moreover, many of our
the implementation in Switzerland of the global automatic
subsidiaries must comply with minimum capital, liquidity and
exchange of tax information, and as a result of the measures UBS
similar requirements and, as a result, UBS Group AG and UBS AG
has implemented in response to these changes. Further changes
have contributed a significant portion of their capital and provide
in local tax laws or regulations and their enforcement, additional
substantial liquidity to these subsidiaries. These funds are available
cross-border tax information exchange regimes, national tax
to meet funding and collateral needs in the relevant entities, but
amnesty or enforcement programs or similar actions may affect
are generally not readily available for use by the Group as a whole.
our clients’ ability or willingness to do business with us and could
result in additional cross-border outflows.
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 also have limited
ability under Swiss law or in Swiss courts to reject them, seek their
suspension, or challenge their imposition, including measures that
require or result in the deferment of payments.
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 regulatory capital
instruments and, if such regulatory capital is fully written down,
convert debt instruments of the entity subject to proceedings into
equity. 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.
Upon full or partial write-down of the equity and regulatory
instruments of the entity subject to restructuring
capital
proceedings, the 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 likely 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 subsequent 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. 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 such
obligations are not written down or converted.
We may be unable to fully realize our sustainability, climate,
environmental and social goals, which could damage our
business prospects, reputation and lead to increased regulatory
scrutiny and increased risk of litigation
We have set ambitious goals for environmental, social and
governance matters. These goals include our ambitions for
environmental sustainability in our operations, including carbon
emissions, in the business we do with clients and in products that
we offer. They also include goals or ambitions for diversity in our
workforce and supply chain, and support for the United Nations
Sustainable Development Goals. There is substantial uncertainty
as to the scope of actions that may be required of us,
governments and others to achieve the goals we have set, and
many of our goals and objectives are only achievable with a
combination of government and private action. National and
international standards, industry and scientific practices, and
regulatory taxonomies and disclosure obligations addressing
these matters are in a state of rapid development. Although we
have defined and disclosed our goals based on the standards that
exist today, there can be no assurance that the various ESG
regulatory and disclosure regimes under which we operate will
not come into conflict with one another or that the current
standards will not be
than our
understanding or change in a manner that substantially increases
the cost or effort for us to achieve such goals or that such goals
may prove to be considerably more difficult or even impossible to
achieve. If we are not able to achieve the goals we have set, or
can only do so at significant expense to our business, we may fail
to meet regulatory expectations, incur damage to our reputation
or be exposed to risk of litigation or other adverse action.
interpreted differently
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Our strategy, business model and environment Our strategy, business model and environment | Risk factors
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 litigation, regulatory and similar
matters. Such judgments, including the underlying estimates and
experience,
encompass
assumptions, which
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 may be
subject to a wide range of potential outcomes and significant
uncertainty. For example, the broad range of potential outcomes
in our 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,
our financial results may also be negatively affected.
historical
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 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.
We may be unable to maintain our capital strength
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 risk 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
regulatory
types of positions, changes
interpretations on the inclusion or exclusion of items contributing
to our shareholders equity in regulatory capital, 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
increased counterparty
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,
risk,
adverse currency movements,
deterioration in the economic environment or 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, as well as 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 are proposed to take
effect in 2023, are expected to increase our RWA.
The leverage ratio is a balance sheet-driven measure and
therefore limits balance sheet-intensive activities, such as 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 | Risk factors
Our financial results may be negatively affected by changes to
the financial results of our businesses, the effect of changes to
assumptions and valuations, as well as changes to accounting
capital standards, methodologies and interpretations that may
standards
adversely affect the calculation of our CET1 ratios, the imposition
We prepare our consolidated financial statements in accordance
of risk add-ons or capital buffers, and the application of additional
with International Financial Reporting Standards (IFRS). The
capital, liquidity and similar requirements to subsidiaries. The
application of these accounting standards requires the use of
results of our businesses may be adversely affected by events
judgment based on estimates and assumptions that may involve
arising from other risk factors described herein. In some cases,
significant uncertainty at the time they are made. This is the case,
such as litigation and regulatory risk and operational risk events,
for example, with respect to the measurement of fair value of
losses may be sudden and large. These risks could reduce the
financial instruments, the recognition of deferred tax assets, the
amount of capital available for return to shareholders and hinder
assessment of the impairment of goodwill, expected credit losses
our ability to achieve our capital returns target of a progressive
and estimation of provisions for litigation, regulatory and similar
cash dividend coupled with a share repurchase program.
matters. Such judgments, including the underlying estimates and
Our eligible capital may be reduced by losses recognized within
assumptions, which
encompass
historical
experience,
net profit or other comprehensive income. Eligible capital may
expectations of the future and other factors, are regularly
also be reduced for other reasons, including acquisitions which
evaluated to determine their continuing relevance based on
change the level of goodwill, changes in temporary differences
current conditions. Using different assumptions could cause the
related to deferred tax assets included in capital, adverse currency
reported results to differ. Changes in assumptions, or failure to
movements affecting the value of equity, prudential adjustments
make the changes necessary to reflect evolving market conditions,
that may be required due to the valuation uncertainty associated
may have a significant effect on the financial statements in the
with certain
types of positions, changes
in
regulatory
periods when changes occur. Estimates of provisions may be
interpretations on the inclusion or exclusion of items contributing
subject to a wide range of potential outcomes and significant
to our shareholders equity in regulatory capital, and changes in
uncertainty. For example, the broad range of potential outcomes
the value of certain pension fund assets and liabilities or in the
in our proceeding in France increases the uncertainty associated
interest rate and other assumptions used to calculate the changes
with assessing the appropriate provision. If the estimates and
in our net defined benefit obligation recognized in other
assumptions in future periods deviate from the current outlook,
comprehensive income.
our financial results may also be negatively affected.
RWA are driven by our business activities, by changes in the risk
Changes to IFRS or interpretations thereof may cause future
profile of our exposures, by changes in our foreign currency
reported results and financial position to differ from current
exposures and foreign exchange rates, and by regulation. For
expectations, or historical results to differ from those previously
instance, substantial market volatility, a widening of credit spreads,
reported due to the adoption of accounting standards on a
adverse currency movements,
increased counterparty
risk,
retrospective basis. Such changes may also affect our regulatory
deterioration in the economic environment or increased operational
capital and ratios. For example, the introduction of the expected
risk could result in an increase in RWA. We have significantly
credit loss (ECL) framework under IFRS 9 in 2018 fundamentally
reduced our market risk and credit risk RWA in recent years.
changed how credit risk arising from loans, loan commitments,
However, increases in operational risk RWA, particularly those
guarantees and certain revocable facilities is accounted for. Under
arising from litigation, regulatory and similar matters, and
the regime, credit loss expenses may increase rapidly at the onset
regulatory changes in the calculation of RWA, as well as regulatory
of an economic downturn as a result of higher levels of credit
add-ons to RWA, have offset a substantial portion of this reduction.
impairments (stage 3), as well as higher ECL from stages 1 and 2,
Changes in the calculation of RWA, the imposition of additional
only gradually diminishing once the economic outlook improves.
supplemental RWA charges or multipliers applied to certain
As we observed in 2020, this effect may be more pronounced in
exposures and other methodology changes, as well as the
a deteriorating economic environment. Substantial increases in
implementation of the capital standards promulgated by the Basel
ECL could exceed expected loss for regulatory capital purposes
Committee on Banking Supervision, which are proposed to take
and adversely affect our CET1 capital and regulatory capital ratios.
effect in 2023, are expected to increase our RWA.
We may be unable to maintain our capital strength
The leverage ratio is a balance sheet-driven measure and
therefore limits balance sheet-intensive activities, such as lending,
Capital strength enables us to grow our businesses and absorb
more than activities that are less balance sheet intensive, and it
increases in regulatory and capital requirements. It reassures our
may constrain our business even if we satisfy other risk-based
clients and stakeholders, allows us to maintain our capital return
capital requirements. Our leverage ratio denominator is driven by,
policy and contributes to our credit ratings. Our capital ratios are
among other things, the level of client activity, including deposits
driven primarily by RWA, the leverage ratio denominator and
and loans, foreign exchange rates, interest rates and other market
eligible capital, all of which may fluctuate based on a number of
factors. Many of these factors are wholly or partly outside of our
factors, some of which are outside our control. Our ability to
control.
maintain our capital ratios is subject to numerous risks, including
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 any potential increase in
the US federal corporate tax rate. 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. Conversely, an increase in US
corporate tax rates would result in an increase in the Group’s
DTAs.
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
forecasts, tax rates and other factors
in evaluating the
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 tax rate, particularly
in the year in which the change is made.
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 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 to that
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.
Strategy, management and operational risks
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
in different currencies, to comply with
diverse markets
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
third parties, including clearing systems, exchanges, information
processors and central counterparties. Any failure of our or third-
party systems could have an adverse effect on us. These risks may
be greater as we deploy newer technologies, such as blockchain,
or products that rely on these technologies. 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 remedying these 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.
As a significant proportion of our staff have been and will
continue working from outside the offices as a consequence of
the COVID-19 pandemic, we have faced, and will continue to
face, new challenges and operational
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 prove not to have been
effective in the current unprecedented operating environment.
risks,
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Our strategy, business model and environment Our strategy, business model and environment | Risk factors
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.
For financial institutions, cybersecurity risks have increased due
to the widespread use of digital technologies, cloud computing
and mobile devices to conduct financial business and transactions.
In addition, cyberattacks by hackers,
terrorists, criminal
organizations, nation states and extremists have also increased in
frequency and sophistication. Current geopolitical tensions also
may lead to increased risk of cyberattack from foreign state
actors. In particular, the Russian invasion of Ukraine and the
imposition of significant sanctions on Russia by Switzerland, the
US, the EU, the UK and others may result in an increase in the risk
of cyberattacks.
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. We may be subject to enforcement actions as
regulatory focus on cybersecurity increases and regulators have
announced new rules, guidance and initiatives on ransomware
and other cybersecurity-related issues.
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 collect,
use and transfer personal information requires substantial
resources and may affect the ways in which we conduct our
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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.
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 to
comply with such laws and 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
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 reputation. Frequent
changes in sanctions imposed and increasingly complex sanctions
imposed on countries, entities and individuals, as exemplified by
the breadth and scope of the sanctions imposed in relation the
Russian invasion of Ukraine, increase our cost of monitoring and
complying with sanctions requirements and increase the risk that
we will not identify in a timely manner client activity that is subject
to a sanction.
the objective of
fully meeting
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 regarding our internal 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.
In addition, despite the contingency plans that we have in
place, our ability to conduct business may be adversely affected
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
terrorism and involve electrical, communications, transportation
or other services that we use or that are used by third parties with
whom we conduct business.
Our strategy, business model and environment | Risk factors
We use automation as part of our efforts to improve efficiency,
business. In the event that we fail to comply with applicable laws,
reduce the risk of error and improve our client experience. We
we may be exposed to regulatory fines and penalties and other
intend to expand the use of robotic processing, machine learning
sanctions. We may also incur such penalties if our vendors or
and artificial intelligence to further these goals. Use of these tools
other service providers or clients or counterparties fail to comply
presents their own risks, including the need for effective design
with these laws or to maintain appropriate controls over protected
and testing; the quality of the data used for development and
data. In addition, any loss or exposure of client or other data may
operation of machine learning and artificial intelligence tools may
adversely damage our reputation and adversely affect our
adversely affect their functioning and result in errors and other
business.
operational risks.
A major focus of US and other countries’ governmental policies
For financial institutions, cybersecurity risks have increased due
relating to financial institutions in recent years has been on
to the widespread use of digital technologies, cloud computing
fighting money laundering and terrorist financing. We are
and mobile devices to conduct financial business and transactions.
required to maintain effective policies, procedures and controls to
In addition, cyberattacks by hackers,
terrorists, criminal
detect, prevent and report money laundering and terrorist
organizations, nation states and extremists have also increased in
financing, and to verify the identity of our clients under the laws
frequency and sophistication. Current geopolitical tensions also
of many of the countries in which we operate. We are also subject
may lead to increased risk of cyberattack from foreign state
to laws and regulations related to corrupt and illegal payments to
actors. In particular, the Russian invasion of Ukraine and the
government officials by others, such as the US Foreign Corrupt
imposition of significant sanctions on Russia by Switzerland, the
Practices Act and the UK Bribery Act. We have implemented
US, the EU, the UK and others may result in an increase in the risk
policies, procedures and internal controls that are designed to
of cyberattacks.
comply with such laws and regulations. Notwithstanding this, US
We and other financial services firms have been subject to
regulators have found deficiencies in the design and operation of
breaches of security and to cyber- and other forms of attack, some
anti-money laundering programs in our US operations. We have
of which are sophisticated and targeted attacks intended to gain
undertaken a significant program to address these regulatory
access to confidential information or systems, disrupt service or
findings with
the objective of
fully meeting
regulatory
destroy data. These attacks may be attempted through the
expectations for our programs. Failure to maintain and implement
introduction of viruses or malware, phishing and other forms of
adequate programs to combat money laundering, terrorist
social engineering, distributed denial of service attacks and other
financing or corruption, or any failure of our programs in these
means. These attempts may occur directly, or using equipment or
areas, could have serious consequences both from
legal
security passwords of our employees, third-party service providers
enforcement action and from damage to our reputation. Frequent
or other users. In addition to external attacks, we have
changes in sanctions imposed and increasingly complex sanctions
experienced loss of client data from failure by employees and
imposed on countries, entities and individuals, as exemplified by
others to follow internal policies and procedures and from
the breadth and scope of the sanctions imposed in relation the
misappropriation of our data by employees and others. We may
Russian invasion of Ukraine, increase our cost of monitoring and
not be able to anticipate, detect or recognize threats to our
complying with sanctions requirements and increase the risk that
systems or data and our preventative measures may not be
we will not identify in a timely manner client activity that is subject
effective to prevent an attack or a security breach. In the event of
to a sanction.
a security breach, notwithstanding our preventative measures, we
As a result of new and changed regulatory requirements and
may not immediately detect a particular breach or attack. Once a
the changes we have made in our legal structure, the volume,
particular attack is detected, time may be required to investigate
frequency and complexity of our regulatory and other reporting
and assess the nature and extent of the attack. A successful
has remained elevated. Regulators have also significantly
breach or circumvention of security of our systems or data could
increased expectations regarding our internal reporting and data
have significant negative consequences for us,
including
aggregation, as well as management reporting. We have incurred
disruption of our operations, misappropriation of confidential
and continue to incur significant costs to implement infrastructure
information concerning us or our customers, damage to our
to meet these requirements. Failure to meet external reporting
systems, financial losses for us or our customers, violations of data
requirements accurately and in a timely manner or failure to meet
privacy and similar laws, litigation exposure and damage to our
regulatory expectations of internal reporting, data aggregation
reputation. We may be subject to enforcement actions as
and management reporting could result in enforcement action or
regulatory focus on cybersecurity increases and regulators have
other adverse consequences for us.
announced new rules, guidance and initiatives on ransomware
In addition, despite the contingency plans that we have in
and other cybersecurity-related issues.
place, our ability to conduct business may be adversely affected
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 that
disruption due to natural disasters, pandemics, civil unrest, war or
we comply with applicable laws and regulations when we collect,
terrorism and involve electrical, communications, transportation
use and transfer personal information requires substantial
or other services that we use or that are used by third parties with
resources and may affect the ways in which we conduct our
whom we conduct business.
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. We also may seek to implement
our strategy through acquisitions or strategic partnerships to
expand or improve our product offerings or target additional
client segments. Our investments in new technology and our
acquisitions and strategic partnerships 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 to provide digitally based 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.
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 or,
changes which arise from the introduction of work from home or
other flexible ways of working or agile work methodologies 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.
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.
We have not always been able to prevent serious losses arising
from risk management failures and extreme or sudden market
events. We recorded substantial losses on fixed-income trading
positions in the 2008 financial crisis, in the unauthorized trading
incident in 2011 and, more recently, positions resulting from the
default of a US prime brokerage client. We revise and strengthen
our risk management and control frameworks to seek to address
identified shortcomings. Nonetheless, we could suffer further
losses in the future if, for example:
– we do not fully identify the risks in our portfolio, in particular
risk concentrations and correlated risks;
– our assessment of the risks identified, or our response to
negative trends, proves to be untimely, inadequate, insufficient
or incorrect;
– our risk models prove insufficient to predict the scale of
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.
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.
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Our strategy, business model and environment Our strategy, business model and environment | Risk factors
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, as well as competition
from new technology-based market entrants, which may not be
subject to the same level of regulation. Barriers to entry in
individual markets and pricing levels are being eroded by new
technology. We expect these trends to continue and 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.
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 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 linked 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.
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, particularly where we compete with companies that
are not subject to these constraints. 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.
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. In the past, 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.
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
restrictions in financing agreements and 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 and from engaging in
repurchases of shares, if we do not pay interest on these
instruments.
72
72
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 addition, as experienced 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.
The requirement to maintain a liquidity coverage ratio of high-
quality liquid assets to estimated stressed short-term net cash
outflows, and other similar liquidity and funding 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.
profitability of Global Wealth Management,
in particular.
reverse, and improvements tend to be slow and difficult to
Liquidity and funding risk
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.
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.
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.
Our strategy, business model and environment | Risk factors
We may not be successful in implementing changes in our
compromise our ability to execute our strategy and to successfully
wealth management businesses to meet changing market,
improve our operating and control environment, and could affect
regulatory and other conditions
our business performance. Swiss law requires that shareholders
In recent years, inflows from lower-margin segments and markets
approve the compensation of the Board of Directors (the BoD)
have been replacing outflows from higher-margin segments and
and the GEB each year. If our shareholders fail to approve the
markets, in particular for cross-border clients. This dynamic,
compensation for the GEB or the BoD, this could have an adverse
combined with changes in client product preferences as a result
effect on our ability to retain experienced directors and our senior
of which low-margin products account for a larger share of our
management.
revenues than in the past, has put downward pressure on Global
Wealth Management’s margins.
Our reputation is critical to our success
We are exposed to possible outflows of client assets in our
Our reputation is critical to the success of our strategic plans,
asset-gathering businesses and to changes affecting the
business and prospects. Reputational damage is difficult to
Initiatives that we may implement to overcome the effects of
measure. In the past, our reputation has been adversely affected
changes in the business environment on our profitability, balance
by our losses during the financial crisis, investigations into our
sheet and capital positions may not succeed in counteracting
cross-border private banking services, criminal resolutions of
those effects and may cause net new money outflows and
LIBOR-related and foreign exchange matters, as well as other
reductions in client deposits, as happened with our balance sheet
matters. We believe that reputational damage as a result of these
and capital optimization program in 2015. There is no assurance
events was an important factor in our loss of clients and client
that we will be successful in our efforts to offset the adverse effect
assets across our asset-gathering businesses. New events that
of these or similar trends and developments.
cause reputational damage could have a material adverse effect
on our results of operation and financial condition, as well as our
We may be unable to identify or capture revenue or competitive
ability to achieve our strategic goals and financial targets.
opportunities, or retain and attract qualified employees
The financial services industry is characterized by intense
As UBS Group AG is a holding company, its operating results,
competition, continuous innovation, restrictive, detailed, and
financial condition and ability to pay dividends and other
sometimes fragmented regulation and ongoing consolidation. We
distributions and / or to pay its obligations in the future depend
face competition at the level of local markets and individual
on funding, dividends and other distributions received directly or
business lines, and from global financial institutions that are
indirectly from its subsidiaries, which may be subject to
comparable to us in their size and breadth, as well as competition
restrictions
from new technology-based market entrants, which may not be
UBS Group AG’s ability to pay dividends and other distributions
subject to the same level of regulation. Barriers to entry in
and to pay its obligations in the future will depend on the level of
individual markets and pricing levels are being eroded by new
funding, dividends and other distributions, if any, received from
technology. We expect these trends to continue and competition
UBS AG and other subsidiaries. The ability of such subsidiaries to
to increase. Our competitive strength and market position could
make loans or distributions, directly or indirectly, to UBS Group
be eroded if we are unable to identify market trends and
AG may be restricted as a result of several factors, including
developments, do not respond to such trends and developments
restrictions in financing agreements and the requirements of
by devising and implementing adequate business strategies, do
applicable law and regulatory, fiscal or other restrictions. In
not adequately develop or update our technology including our
particular, UBS Group AG’s direct and indirect subsidiaries,
digital channels and tools, or are unable to attract or retain the
including UBS AG, UBS Switzerland AG, UBS Americas Holding
qualified people needed.
LLC and UBS Europe SE, are subject to laws and regulations that
The amount and structure of our employee compensation is
restrict dividend payments, authorize regulatory bodies to block
affected not only by our business results, but also by competitive
or reduce the flow of funds from those subsidiaries to UBS Group
factors and regulatory considerations.
AG, or could affect their ability to repay any loans made to, or
In response to the demands of various stakeholders, including
other investments in, such subsidiary by UBS Group AG or another
regulatory authorities and shareholders, and in order to better
member of the Group. For example, in the early stages of the
align the interests of our staff with other stakeholders, we have
COVID-19 pandemic, the European Central Bank ordered all
increased average deferral periods for stock awards, expanded
banks under its supervision to cease dividend distributions and the
forfeiture provisions and, to a more limited extent, introduced
Federal Reserve Board has limited capital distributions by bank
clawback provisions for certain awards linked to business
holding companies and
intermediate holding companies.
performance. We have also introduced individual caps on the
Restrictions and regulatory actions of this kind could impede
proportion of fixed to variable pay for the Group Executive Board
access to funds that UBS Group AG may need to meet its
(GEB) members, as well as certain other employees.
obligations or to pay dividends to shareholders. In addition, UBS
Constraints on the amount or structure of employee
Group AG’s right to participate in a distribution of assets upon a
compensation, higher levels of deferral, performance conditions
subsidiary’s liquidation or reorganization is subject to all prior
and other circumstances triggering the forfeiture of unvested
claims of the subsidiary’s creditors.
awards may adversely affect our ability to retain and attract key
Our capital instruments may contractually prevent UBS Group
employees, particularly where we compete with companies that
AG from proposing the distribution of dividends to shareholders,
are not subject to these constraints. The loss of key staff and the
other than in the form of shares and from engaging in
inability to attract qualified replacements could seriously
repurchases of shares, if we do not pay interest on these
instruments.
72
73
73
Our strategy, business model and environment Financial and
operating
performance
Management report
2
Financial and operating performance | Accounting and financial reporting
Accounting and financial reporting
Significant accounting and financial reporting changes in
2021
Amendments to IFRS as a consequence of Interest Rate
Benchmark Reform
Effective from 1 January 2021, we have adopted 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 interbank offered rates
(IBORs) are reformed or replaced, in particular in the area of hedge
accounting. The amendments also
introduced additional
disclosure requirements covering how we are managing the
transition to alternative benchmark rates, our progress as of the
reporting date and the risks to which we are exposed because of
the transition.
› Refer to “Note 1b Changes in accounting policies, comparability
and other adjustments” and “Note 25 Interest rate benchmark
reform” in the “Consolidated financial statements” section of
this report for more information
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 Material 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
76
76
Financial and operating performance | Accounting and financial reporting
Accounting and financial reporting
Group performance
Critical accounting estimates and judgments
Significant accounting and financial reporting changes in
Income statement
In preparing our financial statements in accordance with
International Financial Reporting Standards (IFRS), as issued by the
2021
Amendments to IFRS as a consequence of Interest Rate
International Accounting Standards Board (the IASB), we apply
Benchmark Reform
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
Effective from 1 January 2021, we have adopted 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 interbank offered rates
(IBORs) are reformed or replaced, in particular in the area of hedge
accounting. The amendments also
introduced additional
disclosure requirements covering how we are managing the
transition to alternative benchmark rates, our progress as of the
reporting date and the risks to which we are exposed because of
losses to the Group, beyond what we expected or provided for.
the transition.
Key areas involving a high degree of judgment and areas
where estimates and assumptions are significant to the
› Refer to “Note 1b Changes in accounting policies, comparability
and other adjustments” and “Note 25 Interest rate benchmark
reform” in the “Consolidated financial statements” section of
this report for more information
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 Material accounting policies” in the
“Consolidated financial statements” section of this report for
› Refer to the “Risk factors” section of this report for more
more information
information
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, amortization and impairment of non-financial 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
76
For the year ended
% change from
3311..1122..2211
31.12.20
31.12.19
31.12.20
66,,770055
55,,885500
114488
2244,,337722
((11,,998855))
2222,,338877
445522
3355,,554422
1188,,338877
55,,555533
22,,111188
2266,,005588
99,,448844
11,,999988
77,,448866
2299
77,,445577
55,,111199
1133
55,,110066
5,862
6,960
(694)
20,961
(1,775)
19,186
1,076
32,390
17,224
4,885
2,126
24,235
8,155
1,583
6,572
15
6,557
8,312
36
8,276
4,501
6,842
(78)
19,110
(1,696)
17,413
212
28,889
16,084
5,288
1,940
23,312
5,577
1,267
4,310
6
4,304
5,091
2
5,089
14
(16)
16
12
17
(58)
10
7
14
0
8
16
26
14
92
14
(38)
(64)
(38)
77
77
Financial and operating performance
Financial and operating performance | Group performance
2021 compared with 2020
Results
In 2021, net profit attributable to shareholders increased by
USD 900 million, or 14%, to USD 7,457 million, which included a
net tax expense of USD 1,998 million.
Profit before tax increased by USD 1,329 million, or 16%, to
USD 9,484 million, reflecting higher operating income, partly
offset by an increase in operating expenses. Operating income
increased by USD 3,152 million, or 10%, to USD 35,542 million,
mainly reflecting a USD 3,201 million increase in net fee and
commission income. Net credit loss releases were USD 148
million, compared with net credit loss expenses of USD 694
million in 2020. This was partly offset by USD 624 million lower
other income and a USD 267 million decrease in total combined
net interest income and other net income from financial
instruments measured at fair value through profit or loss.
Operating expenses increased by USD 1,823 million, or 8%, to
USD 26,058 million. This increase was mainly driven by
USD 1,163 million higher personnel expenses and USD 668
million higher general and administrative expenses.
Operating income
Operating income increased by USD 3,152 million, or 10%, to
USD 35,542 million.
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
decreased by USD 267 million to USD 12,555 million.
The Investment Bank decreased by USD 576 million to
USD 5,067 million, largely driven by a USD 713 million decrease
in our Financing business in Global Markets, primarily reflecting a
loss of USD 861 million incurred in the first half of 2021 on the
default of a US-based client of our prime brokerage business,
partly offset by higher capital markets financing revenues.
Derivatives & Solutions increased by USD 169 million, mainly due
to higher revenues from equity derivatives, partly offset by lower
income from foreign exchange, rates and credit products.
Group Functions recognized negative income of USD 397
million, compared with negative income of USD 302 million. This
was largely due to USD 113 million lower net income in Group
Treasury, mainly reflecting net effects related to accounting
asymmetries, including hedge accounting ineffectiveness, partly
offset by lower negative revenues related to centralized Group
Treasury risk management services. In addition, 2021 included
valuation gains of USD 58 million on auction rate securities in
Non-core and Legacy Portfolio, compared with valuation losses of
USD 9 million in the prior year.
Global Wealth Management increased by USD 302 million to
USD 5,341 million, mainly driven by higher net interest income,
largely reflecting growth in lending revenues from higher volumes
and margins, partly offset by lower deposit revenues, mainly due
to lower US dollar interest rates and despite higher deposit
volumes.
Personal & Corporate Banking increased by USD 98 million to
USD 2,557 million, mainly due to higher net interest income,
driven by proactive deposit management.
› 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
Net interest income and other net income from financial instruments measured at fair value through profit or loss
For the year ended
31.12.20
3311..1122..2211
31.12.19
% change from
31.12.20
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 Bank 2
Global Banking
Global Markets
55,,227744
11,,443311
55,,885500
1122,,555555
55,,334411
44,,224444
11,,009977
22,,555577
22,,112200
443377
((1133))
55,,006677
559966
44,,447711
((339977))
4,563
1,299
6,960
12,822
5,039
4,027
1,012
2,459
2,049
409
(16)
5,643
585
5,057
(302)
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)
16
10
(16)
(2)
6
5
8
4
3
7
(16)
(10)
2
(12)
31
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, respectively. 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.
78
78
Financial and operating performance | Group performance
2021 compared with 2020
Results
In 2021, net profit attributable to shareholders increased by
USD 900 million, or 14%, to USD 7,457 million, which included a
net tax expense of USD 1,998 million.
Profit before tax increased by USD 1,329 million, or 16%, to
USD 9,484 million, reflecting higher operating income, partly
offset by an increase in operating expenses. Operating income
increased by USD 3,152 million, or 10%, to USD 35,542 million,
mainly reflecting a USD 3,201 million increase in net fee and
commission income. Net credit loss releases were USD 148
million, compared with net credit loss expenses of USD 694
million in 2020. This was partly offset by USD 624 million lower
other income and a USD 267 million decrease in total combined
net interest income and other net income from financial
instruments measured at fair value through profit or loss.
Operating expenses increased by USD 1,823 million, or 8%, to
USD 26,058 million. This increase was mainly driven by
USD 1,163 million higher personnel expenses and USD 668
million higher general and administrative expenses.
Operating income
USD 35,542 million.
Operating income increased by USD 3,152 million, or 10%, to
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
decreased by USD 267 million to USD 12,555 million.
The Investment Bank decreased by USD 576 million to
USD 5,067 million, largely driven by a USD 713 million decrease
in our Financing business in Global Markets, primarily reflecting a
loss of USD 861 million incurred in the first half of 2021 on the
default of a US-based client of our prime brokerage business,
partly offset by higher capital markets financing revenues.
Derivatives & Solutions increased by USD 169 million, mainly due
to higher revenues from equity derivatives, partly offset by lower
income from foreign exchange, rates and credit products.
Group Functions recognized negative income of USD 397
million, compared with negative income of USD 302 million. This
was largely due to USD 113 million lower net income in Group
Treasury, mainly reflecting net effects related to accounting
asymmetries, including hedge accounting ineffectiveness, partly
offset by lower negative revenues related to centralized Group
Treasury risk management services. In addition, 2021 included
valuation gains of USD 58 million on auction rate securities in
Non-core and Legacy Portfolio, compared with valuation losses of
USD 9 million in the prior year.
Global Wealth Management increased by USD 302 million to
USD 5,341 million, mainly driven by higher net interest income,
largely reflecting growth in lending revenues from higher volumes
and margins, partly offset by lower deposit revenues, mainly due
to lower US dollar interest rates and despite higher deposit
volumes.
Personal & Corporate Banking increased by USD 98 million to
USD 2,557 million, mainly due to higher net interest income,
driven by proactive deposit management.
› 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
Net interest income and other net income from financial instruments measured at fair value through profit or loss
For the year ended
3311..1122..2211
31.12.20
31.12.19
% change from
31.12.20
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
55,,227744
11,,443311
55,,885500
1122,,555555
55,,334411
44,,224444
11,,009977
22,,555577
22,,112200
443377
((1133))
55,,006677
559966
44,,447711
((339977))
4,563
1,299
6,960
12,822
5,039
4,027
1,012
2,459
2,049
409
(16)
5,643
585
5,057
(302)
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)
16
10
(16)
(2)
6
5
8
4
3
7
(16)
(10)
2
(12)
31
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, respectively. 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.
USD million
comprehensive income
TToottaall
Global Wealth Management
of which: net interest income
Personal & Corporate Banking
of which: net interest income
Asset Management
Investment Bank 2
Global Banking
Global Markets
Group Functions
78
Net fee and commission income
Net fee and commission income increased by USD 3,201 million
to USD 22,387 million.
Fees for portfolio management and related services increased
by USD 1,753 million to USD 9,762 million, driven by Global
Wealth Management, reflecting higher average fee-generating
assets, due to positive market performance and net new fee-
generating assets.
Investment fund fees increased by USD 501 million to
USD 5,790 million, mainly driven by Global Wealth Management,
reflecting higher average fee-generating assets. Management
fees in Asset Management increased on a higher average invested
asset base, partly offset by lower performance-based fee income,
compared with the particularly high levels in 2020.
Underwriting fees increased by USD 378 million to USD 1,463
million, largely driven by higher equity underwriting revenues
from public offerings in the Investment Bank.
M&A and corporate finance fees increased by USD 366 million
to USD 1,102 million, primarily reflecting higher revenues from
M&A transactions in our Global Banking business in the
Investment Bank, due to an increase in the number of transactions
that closed in 2021.
Net brokerage fees increased by USD 265 million to USD 4,123
million, reflecting higher levels of client activity in the Cash
Equities business of the Investment Bank, as well as in Global
Wealth Management.
› 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 decreased by USD 624 million to USD 452 million,
mainly driven by lower gains from disposals of subsidiaries and
associates, largely reflecting a USD 37 million gain from the sale
of our remaining minority investment in Clearstream Fund Centre
AG (previously Fondcenter AG) in 2021, compared with a gain of
USD 631 million from the partial sale of Fondcenter AG (now
Clearstream Fund Centre AG) in 2020. In 2021, we also
recognized a gain of USD 100 million from the sale of our
domestic wealth management business in Austria and income of
USD 51 million related to a legacy bankruptcy claim. In the prior
year, we recognized a USD 215 million gain from the sale of
intellectual property rights associated with the Bloomberg
Commodity Index family.
› Refer to “Note 5 Other income” in the “Consolidated financial
statements” section of this report for more information
› Refer to “Note 30 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 our remaining investment in Clearstream Fund
Centre AG and the sale of our domestic wealth management
business in Austria
Credit loss expense / release
Total net credit loss releases were USD 148 million, compared
with net credit loss expenses of USD 694 million in the prior year,
reflecting net releases of USD 123 million related to stage 1 and
2 positions and net releases of USD 25 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 expenses / releases
› Refer to the “Risk factors” section of this report for more
information
Credit loss (expense) / release
USD million
FFoorr tthhee yyeeaarr eennddeedd 3311..1122..2211
Stages 1 and 2
Stage 3
TToottaall ccrreeddiitt lloossss ((eexxppeennssee)) // rreelleeaassee
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
Global
Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group
Functions
2288
11
2299
(48)
(40)
((8888))
3
(23)
((2200))
6622
2244
8866
(129)
(128)
((225577))
23
(44)
((2211))
00
((11))
((11))
0
(2)
((22))
0
0
00
3344
00
3344
(88)
(217)
((330055))
(4)
(26)
((3300))
00
00
00
0
(42)
((4422))
0
(7)
((77))
Total
112233
2255
114488
(266)
(429)
((669944))
22
(100)
((7788))
79
79
Financial and operating performance Financial and operating performance | Group performance
Operating expenses
Operating expenses increased by USD 1,823 million, or 8%, to
USD 26,058 million.
increased by USD 1,163 million
Personnel expenses
Personnel expenses
to
USD 18,387 million, including net restructuring expenses of
USD 200 million, compared with USD 106 million in the prior
year. Total restructuring expenses in 2021 are net of curtailment
gains of USD 80 million, which represent a reduction in the
defined benefit obligation (DBO) related to the Swiss pension plan
resulting from a decrease in headcount following restructuring
activities.
Financial advisor compensation increased by USD 769 million
to USD 4,860 million, due to an increase in compensable
revenues.
Salary costs increased by USD 316 million to USD 7,339
million, mainly driven by foreign currency translation effects and
higher restructuring expenses.
Social security expenses increased by USD 79 million to
USD 978 million, broadly in line with higher salary expenses.
› Refer to the “Compensation” section of this report for more
information
› Refer to “Note 6 Personnel expenses,” “Note 27 Post-
employment benefit plans” and “Note 28 Employee benefits:
variable compensation” 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
General and administrative expenses
General and administrative expenses increased by USD 668
million to USD 5,553 million, mainly driven by a USD 740 million
(EUR 650 million) increase in litigation provisions for the French
cross-border matter and USD 106 million higher IT expenses.
These effects were partly offset by lower consulting fees and
outsourcing costs.
Net expenses for the UK and German bank levies were USD 58
million in 2021 and included a USD 16 million credit related to
prior years. In 2020, net expenses for the UK and German bank
levies were USD 55 million and included a USD 27 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, amortization and impairment of non-financial
assets decreased by USD 8 million to USD 2,118 million, mainly
driven by lower impairment expenses on internally generated
software, a decrease in depreciation expenses related to leased
properties and lower amortization of intangible assets, partly
offset by higher depreciation expenses on internally generated
software.
› 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
31.12.20
17,224
7,023
3,429
2,634
795 5
4,091
2,680 5
4,885
197
4,688
2,126
24,235
3311..1122..2211
1188,,338877
77,,333399
33,,441199
22,,997799
444400
44,,886600
22,,776688
55,,555533
991111
44,,664422
22,,111188
2266,,005588
31.12.19
16,084
6,518
3,001
2,352
650
4,043
2,521
5,288
165
5,122
1,940
23,312
% change from
31.12.20
7
4
0
13
(45)
19
3
14
363
(1)
0
8
Depreciation, amortization and impairment of non-financial 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 formulaic 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 and USD 40 million within Other personnel expenses in this table.
80
80
Operating expenses increased by USD 1,823 million, or 8%, to
million to USD 5,553 million, mainly driven by a USD 740 million
General and administrative expenses increased by USD 668
USD 26,058 million.
Personnel expenses
(EUR 650 million) increase in litigation provisions for the French
cross-border matter and USD 106 million higher IT expenses.
These effects were partly offset by lower consulting fees and
Personnel expenses
increased by USD 1,163 million
to
outsourcing costs.
USD 18,387 million, including net restructuring expenses of
Net expenses for the UK and German bank levies were USD 58
USD 200 million, compared with USD 106 million in the prior
million in 2021 and included a USD 16 million credit related to
year. Total restructuring expenses in 2021 are net of curtailment
prior years. In 2020, net expenses for the UK and German bank
gains of USD 80 million, which represent a reduction in the
levies were USD 55 million and included a USD 27 million credit
defined benefit obligation (DBO) related to the Swiss pension plan
related to prior years.
resulting from a decrease in headcount following restructuring
We believe that the industry continues to operate in an
Financial advisor compensation increased by USD 769 million
regulatory and similar matters will remain elevated for the
to USD 4,860 million, due to an increase in compensable
foreseeable future, and we continue to be exposed to a number
environment in which expenses associated with litigation,
Salary costs increased by USD 316 million to USD 7,339
of these matters, the timing of a resolution, and the potential
million, mainly driven by foreign currency translation effects and
effects of resolutions on our future business, financial results or
of significant claims and regulatory matters. The outcome of many
activities.
revenues.
higher restructuring expenses.
Social security expenses increased by USD 79 million to
USD 978 million, broadly in line with higher salary expenses.
› Refer to the “Compensation” section of this report for more
information
› Refer to “Note 6 Personnel expenses,” “Note 27 Post-
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
employment benefit plans” and “Note 28 Employee benefits:
Depreciation, amortization and impairment
variable compensation” in the “Consolidated financial
statements” section of this report for more information
Depreciation, amortization and impairment of non-financial
assets decreased by USD 8 million to USD 2,118 million, mainly
driven by lower impairment expenses on internally generated
software, a decrease in depreciation expenses related to leased
properties and lower amortization of intangible assets, partly
offset by higher depreciation expenses on internally generated
software.
› 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
% change from
31.12.20
3311..1122..2211
1188,,338877
77,,333399
33,,441199
22,,997799
444400
44,,886600
22,,776688
55,,555533
991111
44,,664422
22,,111188
2266,,005588
31.12.20
17,224
7,023
3,429
2,634
795 5
4,091
2,680 5
4,885
197
4,688
2,126
31.12.19
16,084
6,518
3,001
2,352
650
4,043
2,521
5,288
165
5,122
1,940
24,235
23,312
7
4
0
13
(45)
19
3
14
363
(1)
0
8
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, amortization and impairment of non-financial assets
TToottaall ooppeerraattiinngg eexxppeennsseess
Financial and operating performance | Group performance
Operating expenses
General and administrative expenses
Tax
Income tax expenses of USD 1,998 million were recognized for
the Group in 2021, representing an effective tax rate of 21.1%,
compared with USD 1,583 million for 2020, which represented
an effective tax rate of 19.4%. The income tax expenses for 2021
included Swiss tax expenses of USD 714 million and non-Swiss tax
expenses of USD 1,284 million.
The Swiss tax expenses included current tax expenses of
USD 680 million related to taxable profits of UBS Switzerland AG
and other Swiss entities. They also included deferred tax expenses
of USD 34 million, which reflect movements in temporary
differences.
The non-Swiss tax expenses included current tax expenses of
USD 884 million related to taxable profits earned by non-Swiss
subsidiaries and branches and net deferred tax expenses of
USD 400 million. Expenses of USD 734 million, which primarily
related to the amortization of deferred tax assets (DTAs)
previously recognized in relation to tax losses carried forward and
deductible temporary differences of UBS Americas Inc., were
partly offset by a benefit of USD 334 million in respect of the
remeasurement of DTAs. This benefit
included upward
revaluations of DTAs of USD 152 million for certain entities,
primarily in connection with our business planning process. It also
included USD 113 million in respect of additional DTA recognition
that primarily related to the contribution of real estate assets by
UBS AG to UBS Americas Inc. and UBS Financial Services Inc.,
which allowed the full recognition of DTAs in respect of the
associated historic real estate costs that were previously
capitalized for US tax purposes under elections that were made in
the fourth quarter of 2018. In addition, it included USD 69 million
in respect of an increase in the expected value of future tax
deductions for deferred compensation awards, due to an increase
in the Group’s share price during the year.
The pre-tax expense that was recognized in the year in respect
of the increase in litigation provisions for the French cross-border
matter did not result in any tax benefit.
Excluding any potential effects from the remeasurement of
DTAs in connection with next year’s business planning process
and any potential US corporate tax rate changes or other material
jurisdictional statutory tax rate changes that could be enacted
during the year, we expect a tax rate for 2022 of around 24%.
› 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
OCI related to cash flow hedges was negative USD 1,675
million, mainly reflecting net gains on hedging instruments that
were reclassified from OCI to the income statement as the hedged
forecast cash flows affected profit or loss.
Foreign currency translation OCI was negative USD 535
million, mainly due to the weakening of the euro (7%), the Swiss
franc (3%) and the Japanese yen (10%) against the US dollar.
OCI associated with financial assets measured at fair value
through OCI was negative USD 157 million, primarily reflecting
net unrealized losses of USD 203 million following increases in the
relevant US dollar long-term interest rates.
OCI related to cost of hedging was negative USD 26 million,
mainly driven by a tightening of the US dollar / euro cross-currency
basis that decreased the fair value of the cross-currency swaps.
Defined benefit plan OCI, net of tax, was negative USD 5
million. Total net pre-tax OCI related to the Swiss pension plan
was negative USD 336 million. This was mainly driven by an
extraordinary employer contribution of USD 254 million that
increased the gross plan assets and a pension plan curtailment of
USD 80 million that reduced the DBO against profit or loss. These
effects led to an offsetting OCI loss, as no net pension asset could
be recognized on the balance sheet as of 31 December 2021 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 790 million at the closing exchange rate as of 31 December
2021) in three installments in 2020, 2021 and 2022. The
extraordinary contribution of USD 254 million in the first quarter
of 2021 reflected the second installment paid (first installment in
the first quarter of 2020: USD 235 million).
Total pre-tax OCI related to our non-Swiss pension plans was
positive USD 339 million, mainly driven by the UK pension plan,
which recorded positive net pre-tax OCI of USD 207 million. The
positive OCI in the UK plan reflected gains of USD 277 million due
to a positive return on plan assets, partly offset by losses of
USD 71 million from remeasurement of the DBO. The DBO
remeasurement effect was mainly driven by a loss of USD 316
million due to an increase in the applicable inflation rate and a
USD 59 million experience loss representing the effects of
differences between the previous actuarial assumptions and what
actually occurred, partly offset by a USD 319 million gain due to
an increase in the applicable discount rate.
OCI related to own credit on financial liabilities designated at
fair value was positive USD 46 million, primarily reflecting effects
from time decay.
› Refer to “Statement of comprehensive income” in the
“Consolidated financial statements” section of this report for
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 formulaic 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 and USD 40 million within Other personnel expenses in this table.
In 2021, total comprehensive income attributable to shareholders
was USD 5,106 million, reflecting net profit of USD 7,457 million
and negative other comprehensive income (OCI), net of tax, of
USD 2,351 million.
› 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 26 Hedge accounting” in the “Consolidated
financial statements” section of this report for more information
about cash flow hedges of forecast transactions
› Refer to “Note 27 Post-employment benefit plans” in the
“Consolidated financial statements” section of this report for
more information about OCI related to defined benefit plans
Total comprehensive income attributable to shareholders
more information
80
81
81
Financial and operating performance Financial and operating performance | Group performance
Sensitivity to interest rate movements
As of 31 December 2021, 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 1.8 billion in
Global Wealth Management and Personal & Corporate Banking
in the first year after such a shift. Of this increase, approximately
USD 1.2 billion and USD 0.2 billion would result from changes in
US dollar and Swiss franc interest rates, respectively. A parallel
shift in yield curves by –100 basis points could lead to a combined
decrease in annual net interest income of approximately USD 0.8
billion in Global Wealth Management and Personal & Corporate
Banking in the first year after such a shift, predominantly driven
by positions denominated in US dollars.
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 2021 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 transaction-based revenues for Global
Wealth Management, and typically reflect the highest client
activity levels in the first quarter, with lower levels throughout the
rest of the year, especially during the summer months and the
end-of-year holiday season.
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 73.6%, compared with 73.3%,
reflecting higher operating expenses, with a partly offsetting
effect driven by an increase in operating income. 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 5.4 billion
to USD 45.3 billion, mainly as a result of operating profit before
tax of USD 9.5 billion, a USD 0.5 billion increase in eligible
deferred tax assets on temporary differences, a USD 0.4 billion
decrease in deduction of goodwill resulting from the sale of our
remaining minority investment in Clearstream Fund Centre AG
(previously Fondcenter AG) and an increase of USD 0.2 billion
related to the launch of our new operational partnership entity
with Sumitomo Mitsui Trust Holdings, Inc. These effects were
partly offset by dividend accruals of USD 1.7 billion, current tax
expenses of USD 1.6 billion, share repurchases under our share
repurchase program of USD 0.6 billion, negative foreign currency
effects of USD 0.6 billion, compensation- and own share-related
capital components of USD 0.4 billion, and negative effects from
defined benefit plans of USD 0.2 billion.
Our share repurchases in 2021 decreased CET1 capital by
USD 0.6 billion, reflecting shares repurchased under our share
repurchase programs of USD 2.6 billion, partly offset by the use
of the capital reserve for potential share repurchases of USD 2.0
billion. The capital reserve for potential share repurchases was
fully utilized during 2021.
Return on CET1 capital
Our return on CET1 capital (RoCET1) was 17.5%, compared with
17.4%, reflecting a USD 900 million increase in net profit
attributable to shareholders, with a partly offsetting effect driven
by USD 5.0 billion higher average CET1 capital.
Risk-weighted assets
Risk-weighted assets (RWA) increased by USD 13.1 billion to
USD 302.2 billion, primarily driven by increases of USD 12.0
billion in credit and counterparty credit risk RWA, USD 1.0 billion
in operational risk RWA and USD 0.9 billion in non-counterparty-
related risk. These increases were partly offset by a decrease of
USD 0.8 billion in market risk RWA.
Common equity tier 1 capital ratio
Our CET1 capital ratio increased 1.2 percentage points to 15.0%,
reflecting a USD 5.4 billion increase in CET1 capital that was partly
offset by the aforementioned increase in RWA.
Leverage ratio denominator
The leverage ratio denominator (the LRD) increased by USD 32
billion (excluding the temporary exemption that applied from
25 March 2020 until 1 January 2021 and was granted by the
Swiss Financial Market Supervisory Authority
(FINMA)) to
USD 1,069 billion, driven by asset size and other movements of
USD 54 billion, partly offset by a decrease due to currency effects
of USD 23 billion.
Common equity tier 1 leverage ratio
Our CET1 leverage ratio increased to 4.24% from 3.85%
(excluding the temporary exemption that applied from 25 March
2020 until 1 January 2021 and was granted by FINMA), as the
aforementioned USD 5.4 billion increase in CET1 capital was
partly offset by the aforementioned increase in the LRD.
Going concern leverage ratio
Our going concern leverage ratio increased to 5.7% from 5.4%
(excluding the temporary exemption that applied from 25 March
2020 until 1 January 2021 and was granted by FINMA), as the
USD 4.3 billion increase in our going concern capital was partly
offset by the aforementioned increase in the LRD.
Personnel
The number of personnel employed as of 31 December 2021 was
broadly stable at 71,385 (full-time equivalents), a net decrease of
166 compared with 31 December 2020.
82
82
As of or for the year ended
3311..1122..2211
31.12.20
31.12.19
77,,445577
6,557
4,304
6600,,666622
66,,337788
5544,,228833
99,,000033
4455,,228811
1122..66
1144..11
1177..55
59,445
6,480
52,965
13,075
39,890
11.3
12.8
17.4
54,501
6,469
48,032
12,497
35,535
7.9
9.0
12.4
Sensitivity to interest rate movements
effects of USD 0.6 billion, compensation- and own share-related
capital components of USD 0.4 billion, and negative effects from
Return on equity and CET1 capital
USD million, except where indicated
Net profit
Net profit attributable to shareholders
Equity
Equity attributable to shareholders
Less: goodwill and intangible assets
Tangible equity attributable to shareholders
Less: other CET1 deductions
CET1 capital
Return on equity
Return on equity (%)
Return on tangible equity (%)
Return on common equity tier 1 capital (%)
Financial and operating performance | Group performance
As of 31 December 2021, we estimate that a parallel shift in yield
defined benefit plans of USD 0.2 billion.
curves by +100 basis points could lead to a combined increase in
Our share repurchases in 2021 decreased CET1 capital by
annual net interest income of approximately USD 1.8 billion in
USD 0.6 billion, reflecting shares repurchased under our share
Global Wealth Management and Personal & Corporate Banking
repurchase programs of USD 2.6 billion, partly offset by the use
in the first year after such a shift. Of this increase, approximately
of the capital reserve for potential share repurchases of USD 2.0
USD 1.2 billion and USD 0.2 billion would result from changes in
billion. The capital reserve for potential share repurchases was
US dollar and Swiss franc interest rates, respectively. A parallel
fully utilized during 2021.
shift in yield curves by –100 basis points could lead to a combined
decrease in annual net interest income of approximately USD 0.8
Return on CET1 capital
billion in Global Wealth Management and Personal & Corporate
Our return on CET1 capital (RoCET1) was 17.5%, compared with
Banking in the first year after such a shift, predominantly driven
17.4%, reflecting a USD 900 million increase in net profit
by positions denominated in US dollars.
attributable to shareholders, with a partly offsetting effect driven
These estimates are based on a hypothetical scenario of an
by USD 5.0 billion higher average CET1 capital.
immediate change in interest rates, equal across all currencies and
relative to implied forward rates as of 31 December 2021 applied
Risk-weighted assets
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 13.1 billion to
USD 302.2 billion, primarily driven by increases of USD 12.0
billion in credit and counterparty credit risk RWA, USD 1.0 billion
in operational risk RWA and USD 0.9 billion in non-counterparty-
related risk. These increases were partly offset by a decrease of
USD 0.8 billion in market risk RWA.
Our revenues may show seasonal patterns, notably in the
Investment Bank and transaction-based revenues for Global
Common equity tier 1 capital ratio
Wealth Management, and typically reflect the highest client
activity levels in the first quarter, with lower levels throughout the
Our CET1 capital ratio increased 1.2 percentage points to 15.0%,
reflecting a USD 5.4 billion increase in CET1 capital that was partly
rest of the year, especially during the summer months and the
offset by the aforementioned increase in RWA.
end-of-year holiday season.
Key figures
Leverage ratio denominator
The leverage ratio denominator (the LRD) increased by USD 32
billion (excluding the temporary exemption that applied from
Below we provide an overview of selected key figures of the
25 March 2020 until 1 January 2021 and was granted by the
Group. For further information about key figures related to capital
Swiss Financial Market Supervisory Authority
(FINMA)) to
management, refer to the “Capital, liquidity and funding, and
USD 1,069 billion, driven by asset size and other movements of
balance sheet” section of this report.
USD 54 billion, partly offset by a decrease due to currency effects
of USD 23 billion.
Cost / income ratio
The cost / income ratio was 73.6%, compared with 73.3%,
Common equity tier 1 leverage ratio
reflecting higher operating expenses, with a partly offsetting
Our CET1 leverage ratio increased to 4.24% from 3.85%
effect driven by an increase in operating income. The cost /
(excluding the temporary exemption that applied from 25 March
income ratio is measured based on income before credit loss
2020 until 1 January 2021 and was granted by FINMA), as the
aforementioned USD 5.4 billion increase in CET1 capital was
partly offset by the aforementioned increase in the LRD.
expenses or releases.
Common equity tier 1 capital
Common equity tier 1 (CET1) capital increased by USD 5.4 billion
Going concern leverage ratio
to USD 45.3 billion, mainly as a result of operating profit before
Our going concern leverage ratio increased to 5.7% from 5.4%
tax of USD 9.5 billion, a USD 0.5 billion increase in eligible
(excluding the temporary exemption that applied from 25 March
deferred tax assets on temporary differences, a USD 0.4 billion
2020 until 1 January 2021 and was granted by FINMA), as the
decrease in deduction of goodwill resulting from the sale of our
USD 4.3 billion increase in our going concern capital was partly
remaining minority investment in Clearstream Fund Centre AG
offset by the aforementioned increase in the LRD.
(previously Fondcenter AG) and an increase of USD 0.2 billion
related to the launch of our new operational partnership entity
Personnel
with Sumitomo Mitsui Trust Holdings, Inc. These effects were
The number of personnel employed as of 31 December 2021 was
partly offset by dividend accruals of USD 1.7 billion, current tax
broadly stable at 71,385 (full-time equivalents), a net decrease of
expenses of USD 1.6 billion, share repurchases under our share
166 compared with 31 December 2020.
repurchase program of USD 0.6 billion, negative foreign currency
82
83
83
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 income2
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
% change from
3311..1122..2211
31.12.20
31.12.20
44,,224444
1111,,117700
33,,883366
116688
1199,,441199
2299
1199,,444499
1144,,666655
44,,778833
4,027
9,372
3,576
159
17,134
(88)
17,045
13,026
4,019
5
19
7
5
13
14
13
19
10
22
(5)
Performance measures and other information
Financial advisor variable compensation3,4
Compensation commitments with recruited financial advisors3,5
Pre-tax profit growth (year-on-year, %)2
Cost / income ratio (%)2
Average attributed equity (USD billion)6
Return on attributed equity (%)2,6
Risk-weighted assets (USD billion)6
Leverage ratio denominator (USD billion)6,7
Goodwill and intangible assets (USD billion)
Net new fee-generating assets (USD billion)2
Fee-generating assets (USD billion)2
Fee-generating asset margin (bps)2
Net new money (USD billion)2
Invested assets (USD billion)2
Loans, gross (USD billion)8
Customer deposits (USD billion)8
Recruitment loans to financial advisors3
Other loans to financial advisors3
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)2,9
(3)
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 Refer to “Alternative performance measures” in the appendix to this report for the definition and calculation method. 33 Relates to licensed professionals with the ability to provide investment
advice to clients in the Americas. 44 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. 55 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. 66 Refer to the “Capital, liquidity and funding, and balance sheet” section of this report
for more information. 77 The leverage ratio denominator calculated as of the respective date in 2020 does not reflect the effects of the temporary exemption that applied from 25 March 2020 until 1 January 2021
and was granted by FINMA in connection with COVID-19. Refer to the “Regulatory and legal developments” section of our Annual Report 2020 for more information. 88 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. 99 Refer to the “Risk management and control” section of this report for
more information about (credit-)impaired exposures. Excludes loans to financial advisors.
44,,338822
447799
1199..00
7755..55
1188..88
2255..44
9999..88
339999..66
55..00
110066..99
11,,448822
8822..66
111111..11
33,,330033
223344..11
336699..88
11,,883300
662233
00..22
99,,332299
3,589
502
18.3
76.0
17.1
23.6
87.2
371.2
5.1
40.8
1,277
86.2
43.3
3,016
213.1
348.0
1,872
697
0.4
9,575
10
10
6
(2)
(11)
15
8
(1)
16
84
84
Financial and operating performance | Global Wealth Management
Global Wealth Management
BBuussiinneessss ddiivviissiioonn ooppeerraattiinngg pprrooffiitt // ((lloossss)) bbeeffoorree ttaaxx
Performance measures and other information
Financial advisor variable compensation3,4
Compensation commitments with recruited financial advisors3,5
Global Wealth Management1
USD million, except where indicated
Results
Net interest income
Recurring net fee income2
Transaction-based income2
Other income
Income
Credit loss (expense) / release
TToottaall ooppeerraattiinngg iinnccoommee
TToottaall ooppeerraattiinngg eexxppeennsseess
Pre-tax profit growth (year-on-year, %)2
Cost / income ratio (%)2
Average attributed equity (USD billion)6
Return on attributed equity (%)2,6
Risk-weighted assets (USD billion)6
Leverage ratio denominator (USD billion)6,7
Goodwill and intangible assets (USD billion)
Net new fee-generating assets (USD billion)2
Fee-generating assets (USD billion)2
Fee-generating asset margin (bps)2
Net new money (USD billion)2
Invested assets (USD billion)2
Loans, gross (USD billion)8
Customer deposits (USD billion)8
Recruitment loans to financial advisors3
Other loans to financial advisors3
As of or for the year ended
% change from
3311..1122..2211
31.12.20
31.12.20
44,,338822
3,589
44,,224444
1111,,117700
33,,883366
116688
1199,,441199
2299
1199,,444499
1144,,666655
44,,778833
447799
1199..00
7755..55
1188..88
2255..44
9999..88
339999..66
55..00
110066..99
11,,448822
8822..66
111111..11
33,,330033
223344..11
336699..88
11,,883300
662233
00..22
99,,332299
4,027
9,372
3,576
159
17,134
(88)
17,045
13,026
4,019
502
18.3
76.0
17.1
23.6
87.2
371.2
5.1
40.8
1,277
86.2
43.3
3,016
213.1
348.0
1,872
697
0.4
9,575
19
5
7
5
13
14
13
19
22
(5)
10
15
8
(1)
16
10
10
6
(2)
(11)
(3)
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)2,9
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 Refer to “Alternative performance measures” in the appendix to this report for the definition and calculation method. 33 Relates to licensed professionals with the ability to provide investment
advice to clients in the Americas. 44 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. 55 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. 66 Refer to the “Capital, liquidity and funding, and balance sheet” section of this report
for more information. 77 The leverage ratio denominator calculated as of the respective date in 2020 does not reflect the effects of the temporary exemption that applied from 25 March 2020 until 1 January 2021
and was granted by FINMA in connection with COVID-19. Refer to the “Regulatory and legal developments” section of our Annual Report 2020 for more information. 88 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. 99 Refer to the “Risk management and control” section of this report for
more information about (credit-)impaired exposures. Excludes loans to financial advisors.
2021 compared with 2020
Results
Profit before tax increased by USD 764 million, or 19%, to
USD 4,783 million, driven by higher operating income, partly
offset by higher operating expenses, which included a USD 657
million increase in litigation provisions for the French cross-border
matter.
Operating income
Total operating income increased by USD 2,404 million, or 14%,
to USD 19,449 million, driven by increases across all operating
income lines.
Net
income
interest
increased by USD 217 million to
USD 4,244 million, mostly reflecting growth in loan revenues
from higher volumes and margins, partly offset by lower deposit
revenues, mainly due to lower US dollar interest rates and despite
higher deposit volumes.
Recurring net fee income increased by USD 1,798 million to
USD 11,170 million, primarily driven by higher average fee-
generating assets, reflecting positive market performance and net
new fee-generating assets.
Transaction-based income increased by USD 260 million to
USD 3,836 million, reflecting higher levels of client activity in the
Americas, EMEA and Switzerland.
Other income increased by USD 9 million to USD 168 million,
primarily driven by a gain of USD 100 million related to the sale
of our domestic wealth management business in Austria to LGT.
2020 included a gain of USD 60 million from the sale of a majority
stake in Fondcenter AG (now Clearstream Fund Centre AG).
Net credit loss releases were USD 29 million, compared with
net expenses of USD 88 million. Stage 1 and 2 credit loss releases
were USD 28 million, largely resulting from a partial release of a
post-model adjustment of USD 12 million during the year, as well
as model updates. Stage 3 net credit loss releases were USD 1
million.
Operating expenses
Total operating expenses increased by USD 1,639 million to
USD 14,665 million. This was mainly driven by an increase in
financial advisor variable compensation,
reflecting higher
compensable revenues, and by the aforementioned USD 657
million increase in litigation provisions for the French cross-border
matter.
Pre-tax profit growth
Pre-tax profit growth in 2021 was 19.0%, compared with 18.3%
in 2020. Our target range is 10–15% over the cycle.
Cost / income ratio
The cost / income ratio decreased to 75.5% from 76.0%,
reflecting positive operating leverage.
Fee-generating assets
Fee-generating assets increased by USD 205 billion, or 16%, to
USD 1,482 billion, predominantly driven by net new fee-
generating assets of USD 106.9 billion, with inflows across all
regions, and net positive market performance and foreign
currency effects of USD 98.0 billion.
Loans
Loans increased by USD 21.0 billion, or 10%, to USD 234.1
billion, primarily driven by net new loans of USD 25.1 billion,
partly offset by USD 3.0 billion from negative foreign exchange
effects and USD 1.1 billion from the reclassification of loans to
disposal groups held for sale in connection with the upcoming
sales of our domestic wealth management business in Spain and
UBS Swiss Financial Advisers AG. Net new loans were largely
driven by an increase in Lombard loans and mortgages. Loan
penetration was stable at 7.1% in 2021.
› Refer to the “Risk management and control” section of this
report for more information
84
85
85
Financial and operating performance Financial and operating performance | Global Wealth Management
Regional breakdown of performance measures
As of or for the year ended 31.12.21
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 (%)4
Loans, gross
Net new loans
Loan penetration (%)4,6
Fee-generating assets4
Net new fee-generating assets4
Invested assets4
Net new money4
Advisors (full-time equivalents)
Americas1
1100,,667722
88,,667711
22,,000011
8811..44
9922..005
1199..66
55..00
990000
6644..33
11,,884422
6600..33
66,,221188
Switzerland
11,,990066
11,,115566
775500
6600..88
4433..22
22..33
1155..33
113300
1100..66
228833
00..77
668855
EMEA2
33,,995533
33,,114411
881122
7799..66
4499..66
33..88
77..66
333344
1188..88
665544
2244..55
11,,449944
Asia Pacific
22,,990011
11,,666644
11,,223377
5577..44
4488..66
((00..55))
99..33
111166
1133..77
552211
2266..44
885522
Global Wealth
Management3
1199,,444499
1144,,666655
44,,778833
7755..55
223344..11
2255..11
77..11
11,,448822
110066..99
33,,330033
111111..11
99,,332299
11 Including the following business units: United States and Canada; and Latin America. 22 Including the following business units: Europe; Central & 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 16 million of total operating income, USD 34 million of total operating expenses, USD 17 million
of operating loss before tax, USD 0.6 billion of loans, USD 0.0 billion of net new loan outflows, USD 1 billion of fee-generating assets, USD 0.5 billion of net new fee-generating asset outflows, USD 3 billion of invested
assets, USD 0.8 billion of net new money outflows and 80 advisors in 2021. 44 Refer to “Alternative performance measures” in the appendix to this report for the definition and calculation method. 55 Loans include
customer brokerage receivables, which are presented in a separate reporting line on the balance sheet. 66 Loans, gross as a percentage of invested assets.
Regional comments: 2021 compared with 2020
Americas
Profit before tax increased by USD 641 million to USD 2,001
million. Operating income increased by USD 1,645 million to
USD 10,672 million, driven by higher recurring net fee, net
interest and transaction-based income. The cost / income ratio
decreased to 81.4% from 84.4%. Loans increased 27% to
USD 92 billion, reflecting USD 19.6 billion of net new loans. Fee-
generating assets increased 19% to USD 900 billion, mainly
driven by positive market performance and net new fee-
generating assets of USD 64.3 billion.
Switzerland
Profit before tax increased by USD 108 million to USD 750 million.
This included an USD 85 million increase in litigation provisions
for the French cross-border matter. Operating income increased
by USD 206 million to USD 1,906 million, mainly driven by higher
recurring net fee, net interest and transaction-based income. The
cost / income ratio decreased to 60.8% from 61.7%. Loans
increased 3% to USD 43 billion, driven by net new loans of
USD 2.3 billion, partly offset by negative foreign currency effects.
Fee-generating assets increased 17% to USD 130 billion, mainly
driven by net new fee-generating assets of USD 10.6 billion and
net positive market performance and foreign currency effects.
EMEA
Profit before tax decreased by USD 145 million to USD 812
million, driven by a USD 572 million increase in litigation
provisions for the French cross-border matter. Operating income
increased by USD 397 million to USD 3,953 million, due to higher
recurring net fee income and other income, which was driven by
the aforementioned gain from the sale of our domestic wealth
management business in Austria, as well as higher transaction-
based income. The cost / income ratio increased to 79.6% from
72.7%. Loans increased 3% to USD 50 billion, mainly reflecting
USD 3.8 billion of net new loans, partly offset by negative foreign
currency effects and the aforementioned reclassification of
USD 0.7 billion of loans to disposal groups held for sale. Fee-
generating assets increased 9% to USD 334 billion, mainly driven
by net new fee-generating assets of USD 18.8 billion and net
positive market performance and foreign currency effects.
Asia Pacific
Profit before tax increased by USD 176 million to USD 1,237
million. Operating income increased by USD 166 million to
USD 2,901 million, mostly driven by recurring net fee and net
interest income. The cost / income ratio decreased to 57.4% from
61.2%. Loans decreased 2% to USD 49 billion, driven by negative
foreign currency effects and net new loan outflows of USD 0.5
billion, as clients reduced their debts in light of market
uncertainty. Fee-generating assets increased 13% to USD 116
billion, mainly driven by net new fee-generating assets of
USD 13.7 billion.
86
86
Financial and operating performance | Global Wealth Management
Regional breakdown of performance measures
As of or for the year ended 31.12.21
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 (%)4
Loans, gross
Net new loans
Loan penetration (%)4,6
Fee-generating assets4
Net new fee-generating assets4
Invested assets4
Net new money4
Advisors (full-time equivalents)
Americas1
1100,,667722
Switzerland
11,,990066
11,,115566
Asia Pacific
Global Wealth
Management3
1199,,444499
1144,,666655
88,,667711
22,,000011
8811..44
9922..005
1199..66
55..00
990000
6644..33
11,,884422
6600..33
66,,221188
775500
6600..88
4433..22
22..33
1155..33
113300
1100..66
228833
00..77
668855
EMEA2
33,,995533
33,,114411
881122
7799..66
4499..66
33..88
77..66
333344
1188..88
665544
2244..55
11,,449944
22,,990011
11,,666644
11,,223377
5577..44
4488..66
((00..55))
99..33
111166
1133..77
552211
2266..44
885522
44,,778833
7755..55
223344..11
2255..11
77..11
11,,448822
110066..99
33,,330033
111111..11
99,,332299
11 Including the following business units: United States and Canada; and Latin America. 22 Including the following business units: Europe; Central & 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 16 million of total operating income, USD 34 million of total operating expenses, USD 17 million
of operating loss before tax, USD 0.6 billion of loans, USD 0.0 billion of net new loan outflows, USD 1 billion of fee-generating assets, USD 0.5 billion of net new fee-generating asset outflows, USD 3 billion of invested
assets, USD 0.8 billion of net new money outflows and 80 advisors in 2021. 44 Refer to “Alternative performance measures” in the appendix to this report for the definition and calculation method. 55 Loans include
customer brokerage receivables, which are presented in a separate reporting line on the balance sheet. 66 Loans, gross as a percentage of invested assets.
Regional comments: 2021 compared with 2020
EMEA
Americas
Profit before tax decreased by USD 145 million to USD 812
million, driven by a USD 572 million increase in litigation
Profit before tax increased by USD 641 million to USD 2,001
provisions for the French cross-border matter. Operating income
million. Operating income increased by USD 1,645 million to
increased by USD 397 million to USD 3,953 million, due to higher
USD 10,672 million, driven by higher recurring net fee, net
recurring net fee income and other income, which was driven by
interest and transaction-based income. The cost / income ratio
the aforementioned gain from the sale of our domestic wealth
decreased to 81.4% from 84.4%. Loans increased 27% to
management business in Austria, as well as higher transaction-
USD 92 billion, reflecting USD 19.6 billion of net new loans. Fee-
based income. The cost / income ratio increased to 79.6% from
generating assets increased 19% to USD 900 billion, mainly
72.7%. Loans increased 3% to USD 50 billion, mainly reflecting
driven by positive market performance and net new fee-
USD 3.8 billion of net new loans, partly offset by negative foreign
generating assets of USD 64.3 billion.
Switzerland
currency effects and the aforementioned reclassification of
USD 0.7 billion of loans to disposal groups held for sale. Fee-
generating assets increased 9% to USD 334 billion, mainly driven
This included an USD 85 million increase in litigation provisions
positive market performance and foreign currency effects.
for the French cross-border matter. Operating income increased
by USD 206 million to USD 1,906 million, mainly driven by higher
Asia Pacific
recurring net fee, net interest and transaction-based income. The
Profit before tax increased by USD 176 million to USD 1,237
cost / income ratio decreased to 60.8% from 61.7%. Loans
million. Operating income increased by USD 166 million to
increased 3% to USD 43 billion, driven by net new loans of
USD 2,901 million, mostly driven by recurring net fee and net
USD 2.3 billion, partly offset by negative foreign currency effects.
interest income. The cost / income ratio decreased to 57.4% from
Fee-generating assets increased 17% to USD 130 billion, mainly
61.2%. Loans decreased 2% to USD 49 billion, driven by negative
driven by net new fee-generating assets of USD 10.6 billion and
foreign currency effects and net new loan outflows of USD 0.5
net positive market performance and foreign currency effects.
billion, as clients reduced their debts in light of market
uncertainty. Fee-generating assets increased 13% to USD 116
billion, mainly driven by net new fee-generating assets of
USD 13.7 billion.
Personal & Corporate Banking
Personal & Corporate Banking – in Swiss francs1
CHF million, except where indicated
Results
Net interest income
Recurring net fee income2
Transaction-based income2
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)3
Return on attributed equity (%)2,3
Pre-tax profit growth (%) (year-on-year, %)2
Cost / income ratio (%)2
Net interest margin (bps)2
Risk-weighted assets (CHF billion)3
Leverage ratio denominator (CHF billion)3,4
Business volume for Personal Banking (CHF billion)2
Net new business volume for Personal Banking (CHF billion)2
Net new business volume growth for Personal Banking (%)2
Active Digital Banking clients in Personal Banking (%)2,5
Active Digital Banking clients in Corporate & Institutional Clients (%)2
Mobile Banking log-in share in Personal Banking (%)2
Client assets (CHF billion)2
As of or for the year ended
3311..1122..2211
31.12.20
% change from
31.12.20
11,,994411
777744
11,,007799
111100
33,,990044
7799
33,,998844
22,,339977
11,,558877
88..44
1199..00
3355..11
6611..44
114400
6666..77
222211..77
118844
55..33
33..00
7700..33
7799..33
7733..55
775511
1,916
676
985
74
3,650
(243)
3,407
2,233
1,175
8.3
14.1
(18.0)
61.2
142
63.8
219.9
179
11.6
6.9
66.1
77.9
68.0
702
1
15
10
49
7
17
7
35
1
4
1
3
7
2
Profit before tax increased by USD 108 million to USD 750 million.
by net new fee-generating assets of USD 18.8 billion and net
Loans, gross (CHF billion)
113399..33
136.4
Customer deposits (CHF billion)
Secured loan portfolio as a percentage of total loan portfolio, gross (%)2
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)2,6
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 “Alternative performance measures” in the appendix to this report for the definition and calculation method. 33 Refer to the “Capital, liquidity and funding, and balance sheet”
section of this report for more information. 44 The leverage ratio denominator calculated as of the respective date in 2020 does not reflect the effects of the temporary exemption that applied from 25 March 2020
until 1 January 2021 and was granted by FINMA in connection with COVID-19. Refer to the “Regulatory and legal developments” section of our Annual Report 2020 for more information. 55 In 2021, 86.4% 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). 66 Refer to the “Risk management
and control” section of this report for more information about (credit-)impaired exposures.
116622..11
161.1
92.9
9922..77
1.1
00..99
1
86
87
87
Financial and operating performance
Financial and operating performance | Personal & Corporate Banking
2021 compared with 2020
Results
Profit before tax increased by CHF 412 million, or 35%, to
CHF 1,587 million, reflecting higher operating income, partly
offset by higher operating expenses.
Operating income
Total operating income increased by CHF 577 million, or 17%, to
CHF 3,984 million, reflecting net credit loss releases, compared
with net credit loss expenses in the prior year, as well as increases
across all income lines.
Net interest income increased by CHF 25 million to CHF 1,941
million, mainly driven by proactive deposit management.
Recurring net fee income increased by CHF 98 million to
CHF 774 million, primarily driven by higher custody, mandate and
investment fund fees, resulting from an increase in average
custody assets, reflecting net new investment product inflows and
positive market performance.
Transaction-based income increased by CHF 94 million to
CHF 1,079 million, largely driven by higher revenues from credit
card and foreign exchange transactions, reflecting a continued
increase in spending on travel and leisure by clients following the
easing of COVID-19-related restrictions in certain countries
relative to 2020. The third quarter of 2020 included a CHF 17
million gain related to the sale of an equity investment.
Other income increased by CHF 36 million to CHF 110 million,
mostly driven by a gain of CHF 26 million from the sale of several
small properties in the second quarter of 2021.
Net credit loss releases were CHF 79 million, compared with
net expenses of CHF 243 million. Stage 1 and 2 credit loss releases
were CHF 57 million, largely resulting from a partial release of a
post-model adjustment during the year, as well as model updates.
Prior-year stage 1 and 2 net credit loss expenses were CHF 123
million, which mainly reflected 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. Stage 3 net
releases were CHF 23 million, compared with net expenses of
CHF 120 million, which included expenses of CHF 54 million
related to a case of fraud at a commodity trade finance
counterparty.
Operating expenses
Total operating expenses increased by CHF 164 million, or 7%, to
CHF 2,397 million, mostly driven by a CHF 76 million (USD 83
million) increase in litigation provisions for the French cross-border
matter, as well as higher investments in technology and higher
variable compensation.
Cost / income ratio
The cost / income ratio slightly increased to 61.4% from 61.2%,
reflecting higher operating expenses, partly offset by higher
income.
88
88
Financial and operating performance | Personal & Corporate Banking
2021 compared with 2020
Results
Net credit loss releases were CHF 79 million, compared with
net expenses of CHF 243 million. Stage 1 and 2 credit loss releases
were CHF 57 million, largely resulting from a partial release of a
post-model adjustment during the year, as well as model updates.
Profit before tax increased by CHF 412 million, or 35%, to
Prior-year stage 1 and 2 net credit loss expenses were CHF 123
CHF 1,587 million, reflecting higher operating income, partly
million, which mainly reflected expenses for selected exposures to
offset by higher operating expenses.
Operating income
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
Total operating income increased by CHF 577 million, or 17%, to
update to the forward-looking scenarios and their associated
CHF 3,984 million, reflecting net credit loss releases, compared
weightings, factoring in updated macroeconomic assumptions to
with net credit loss expenses in the prior year, as well as increases
reflect the effects of the COVID-19 pandemic. Stage 3 net
across all income lines.
releases were CHF 23 million, compared with net expenses of
Net interest income increased by CHF 25 million to CHF 1,941
CHF 120 million, which included expenses of CHF 54 million
million, mainly driven by proactive deposit management.
related to a case of fraud at a commodity trade finance
Recurring net fee income increased by CHF 98 million to
counterparty.
CHF 774 million, primarily driven by higher custody, mandate and
investment fund fees, resulting from an increase in average
Operating expenses
custody assets, reflecting net new investment product inflows and
Total operating expenses increased by CHF 164 million, or 7%, to
positive market performance.
CHF 2,397 million, mostly driven by a CHF 76 million (USD 83
Transaction-based income increased by CHF 94 million to
million) increase in litigation provisions for the French cross-border
CHF 1,079 million, largely driven by higher revenues from credit
matter, as well as higher investments in technology and higher
card and foreign exchange transactions, reflecting a continued
variable compensation.
increase in spending on travel and leisure by clients following the
easing of COVID-19-related restrictions in certain countries
Cost / income ratio
relative to 2020. The third quarter of 2020 included a CHF 17
The cost / income ratio slightly increased to 61.4% from 61.2%,
million gain related to the sale of an equity investment.
reflecting higher operating expenses, partly offset by higher
Other income increased by CHF 36 million to CHF 110 million,
income.
mostly driven by a gain of CHF 26 million from the sale of several
small properties in the second quarter of 2021.
Personal & Corporate Banking – in US dollars1
USD million, except where indicated
Results
Net interest income
Recurring net fee income2
Transaction-based income2
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)3
Return on attributed equity (%)2,3
Pre-tax profit growth (%) (year-on-year, %)2
Cost / income ratio (%)2
Net interest margin (bps)2
Risk-weighted assets (USD billion)3
Leverage ratio denominator (USD billion)3,4
Business volume for Personal Banking (USD billion)2
Net new business volume for Personal Banking (USD billion)2
Net new business volume growth for Personal Banking (%)2
Active Digital Banking clients in Personal Banking (%)2,5
Active Digital Banking clients in Corporate & Institutional Clients (%)2
Mobile Banking log-in share in Personal Banking (%)2
Client assets (USD billion)2
Loans, gross (USD billion)
As of or for the year ended
3311..1122..2211
31.12.20
% change from
31.12.20
22,,112200
884466
11,,117788
111199
44,,226633
8866
44,,334499
22,,661188
11,,773311
99..22
1188..99
3377..55
6611..44
114422
7733..22
224433..22
220022
55..88
22..99
7700..33
7799..33
7733..55
882244
2,049
725
1,054
79
3,908
(257)
3,651
2,392
1,259
8.9
14.2
(12.6)
61.2
143
72.1
248.3
202
12.3
7.1
66.1
77.9
68.0
793
115522..88
154.0
3
17
12
50
9
19
9
37
3
1
(2)
0
4
(1)
Customer deposits (USD billion)
Secured loan portfolio as a percentage of total loan portfolio, gross (%)2
Impaired loan portfolio as a percentage of total loan portfolio, gross (%)2,6
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 “Alternative performance measures” in the appendix to this report for the definition and calculation method. 33 Refer to the “Capital, liquidity and funding, and balance sheet”
section of this report for more information. 44 The leverage ratio denominator calculated as of the respective date in 2020 does not reflect the effects of the temporary exemption that applied from 25 March 2020
until 1 January 2021 and was granted by FINMA in connection with COVID-19. Refer to the “Regulatory and legal developments” section of our Annual Report 2020 for more information. 55 In 2021, 86.4% 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). 66 Refer to the “Risk management
and control” section of this report for more information about (credit-)impaired exposures.
117777..88
181.9
9922..77
92.9
1.1
00..99
(2)
88
89
89
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 an associate / a 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 (%)3,4
Pre-tax profit growth (year-on-year, %)4
Cost / income ratio (%)4
Risk-weighted assets (USD billion)3
Leverage ratio denominator (USD billion)3,5
Goodwill and intangible assets (USD billion)
Net margin on invested assets (bps)4
Gross margin on invested assets (bps)4
Information by business line / asset class
NNeett nneeww mmoonneeyy ((UUSSDD bbiilllliioonn))44
Equities
Fixed Income
of which: money market
Multi-asset & Solutions
Hedge Fund Businesses
Real Estate & Private Markets
TToottaall nneett nneeww mmoonneeyy
of which: net new money excluding money market
IInnvveesstteedd aasssseettss ((UUSSDD bbiilllliioonn))44
Equities
Fixed Income
of which: money market
Multi-asset & Solutions
Hedge Fund Businesses
Real Estate & Private Markets
TToottaall iinnvveesstteedd aasssseettss
of which: passive strategies
Information by region
IInnvveesstteedd aasssseettss ((UUSSDD bbiilllliioonn))44
Americas
Asia Pacific
Europe, Middle East and Africa (excluding Switzerland)
Switzerland
TToottaall iinnvveesstteedd aasssseettss
As of or for the year ended
3311..1122..2211
31.12.20
% change from
31.12.20
22,,332200
226600
3377
((11))
22,,661166
11,,558866
11,,003300
22..00
5511..88
((2299..22))
6600..66
66..99
22..99
11..22
99
2233
1100..33
2222..77
((33..11))
66..88
55..77
((00..66))
4444..99
4488..00
558800
228855
9922
119933
5555
9988
11,,221111
554400
228877
119900
333344
339999
11,,221111
1,950
455
571
(2)
2,974
1,519
1,455
2.0
74.2
173.6
51.0
6.9
5.8
1.2
16
32
65.1
7.3
(7.4)
6.6
(1.1)
2.3
80.1
87.5
506
274
97
172
48
93
1,092
457
254
181
294
363
1,092
19
(43)
(93)
(12)
4
(29)
1
(1)
(51)
(2)
(42)
(29)
15
4
(5)
12
15
5
11
18
13
5
14
10
11
Information by channel
IInnvveesstteedd aasssseettss ((UUSSDD bbiilllliioonn))44
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), distribution fees, incremental fund-related expenses, gains or losses from seed money and co-investments, funding costs, the negative pass-through impact of third-party performance fees, 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 Refer to “Alternative performance
measures” in the appendix to this report for the definition and calculation method. 55 The leverage ratio denominator calculated as of the respective date in 2020 does not reflect the effects of the temporary
exemption that applied from 25 March 2020 until 1 January 2021 and was granted by FINMA in connection with COVID-19. Refer to the “Regulatory and legal developments” section of our Annual Report 2020 for
more information.
648
128
316
1,092
770077
114455
335599
11,,221111
9
13
13
11
90
90
Financial and operating performance | Asset Management
Asset Management
Asset Management1
USD million, except where indicated
Results
Net management fees2
Performance fees
Credit loss (expense) / release
TToottaall ooppeerraattiinngg iinnccoommee
TToottaall ooppeerraattiinngg eexxppeennsseess
Net gain from disposal of an associate / a subsidiary
BBuussiinneessss ddiivviissiioonn ooppeerraattiinngg pprrooffiitt // ((lloossss)) bbeeffoorree ttaaxx
Performance measures and other information
Average attributed equity (USD billion)3
Return on attributed equity (%)3,4
Pre-tax profit growth (year-on-year, %)4
Cost / income ratio (%)4
Risk-weighted assets (USD billion)3
Leverage ratio denominator (USD billion)3,5
Goodwill and intangible assets (USD billion)
Net margin on invested assets (bps)4
Gross margin on invested assets (bps)4
Information by business line / asset class
NNeett nneeww mmoonneeyy ((UUSSDD bbiilllliioonn))44
of which: net new money excluding money market
Equities
Fixed Income
of which: money market
Multi-asset & Solutions
Hedge Fund Businesses
Real Estate & Private Markets
TToottaall nneett nneeww mmoonneeyy
IInnvveesstteedd aasssseettss ((UUSSDD bbiilllliioonn))44
Equities
Fixed Income
of which: money market
Multi-asset & Solutions
Hedge Fund Businesses
Real Estate & Private Markets
TToottaall iinnvveesstteedd aasssseettss
of which: passive strategies
Information by region
IInnvveesstteedd aasssseettss ((UUSSDD bbiilllliioonn))44
Americas
Asia Pacific
Switzerland
TToottaall iinnvveesstteedd aasssseettss
Information by channel
IInnvveesstteedd aasssseettss ((UUSSDD bbiilllliioonn))44
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..2211
31.12.20
% change from
31.12.20
22,,332200
226600
3377
((11))
22,,661166
11,,558866
11,,003300
22..00
5511..88
((2299..22))
6600..66
66..99
22..99
11..22
99
2233
1100..33
2222..77
((33..11))
66..88
55..77
((00..66))
4444..99
4488..00
558800
228855
9922
119933
5555
9988
11,,221111
554400
228877
119900
333344
339999
11,,221111
770077
114455
335599
11,,221111
1,950
455
571
(2)
2,974
1,519
1,455
2.0
74.2
173.6
51.0
6.9
5.8
1.2
16
32
65.1
7.3
(7.4)
6.6
(1.1)
2.3
80.1
87.5
506
274
97
172
48
93
1,092
457
254
181
294
363
1,092
648
128
316
1,092
19
(43)
(93)
(12)
4
(29)
1
(1)
(51)
(2)
(42)
(29)
(5)
15
4
12
15
5
11
18
13
5
14
10
11
9
13
13
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 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), distribution fees, incremental fund-related expenses, gains or losses from seed money and co-investments, funding costs, the negative pass-through impact of third-party performance fees, 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 Refer to “Alternative performance
measures” in the appendix to this report for the definition and calculation method. 55 The leverage ratio denominator calculated as of the respective date in 2020 does not reflect the effects of the temporary
exemption that applied from 25 March 2020 until 1 January 2021 and was granted by FINMA in connection with COVID-19. Refer to the “Regulatory and legal developments” section of our Annual Report 2020 for
more information.
2021 compared with 2020
Results
Profit before tax decreased by USD 425 million, or 29%, to
USD 1,030 million. This reflected a gain of USD 571 million from
the sale of a majority stake in Fondcenter AG (now Clearstream
Fund Centre AG) in the third quarter of 2020 and a gain of
USD 37 million related to the sale of our remaining minority
investment in Clearstream Fund Centre AG (previously Fondcenter
AG) to Deutsche Börse AG in the second quarter of 2021.
Excluding these gains, profit before tax increased by USD 109
million, or 12%, to USD 993 million, reflecting positive operating
leverage.
› Refer to “Note 30 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 aforementioned sales
Operating income
Total operating income decreased by USD 358 million, or 12%,
to USD 2,616 million. Excluding the aforementioned gains from
sales, total operating income increased by USD 176 million, or
7%.
Net management fees increased by USD 370 million, or 19%,
to USD 2,320 million on a higher average invested asset base,
reflecting a combination of a constructive market backdrop and
strong net new money generation.
Performance fees decreased by USD 195 million to USD 260
million, mainly in our Hedge Fund Businesses and our Equities
levels of
business, compared with the particularly high
performance fees in 2020.
Operating expenses
Total operating expenses increased by USD 67 million, or 4%, to
USD 1,586 million, mainly driven by higher personnel expenses
and foreign currency effects, partly offset by lower general and
administrative expenses.
Cost / income ratio
The cost / income ratio was 60.6%, compared with 51.0% in
2020. Excluding the aforementioned gains from sales, the cost /
income ratio was 61.5%, compared with 63.2% in 2020.
Invested assets
Invested assets increased to USD 1,211 billion from USD 1,092
billion, reflecting positive market performance of USD 102 billion
and net new money inflows of USD 45 billion, partly offset by
negative foreign currency effects of USD 28 billion. Excluding
money market flows, net new money was USD 48 billion.
Investment performance
2021 saw risk assets perform strongly and subdued market
volatility. Expansive monetary policy supported a continued,
broad economic recovery across the globe. Shortages in supplies
to meet heightened global demand led to higher energy prices
and strong inflation over the year, and central banks, led by the
US Federal Reserve, started to reconsider their future monetary
policy.
As of year-end 2021, Morningstar assigned a four- or five-star
rating to 64% of our retail and institutional funds (both actively
managed and passive), on an assets under management (AuM)-
weighted basis. Furthermore, 55% 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 2021
In %
% of UBS Asset Management fund assets rated as 4- or 5-star1,2
Total traditional
investments
64
Equities
66
Fixed income
65
Multi-asset
49
% of UBS Asset Management above peer median over a 3-year investment period2,3
65
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; © 2022 Morningstar). Universe is approximately 31% of all active and passive traditional assets of Asset Management (Equities, Fixed Income excluding money market, and Multi-asset) as of
31 December 2021. 22 Morningstar® Essentials Quantitative Star Rating & Rankings; © 2022 Morningstar. All Rights Reserved. The information contained herein: (i) is proprietary to Morningstar and / or its content
providers; (ii) may not be copied or distributed; and (iii) 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
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; © 2022 Morningstar) extract date 11 January 2022,
eVestment extract date 4 February 2022, KGAST extract date 4 February 2022. Universe is approximately 44% of all active traditional assets of Asset Management (Equities, Fixed Income excluding money market,
and Multi-asset) as of 31 December 2021.
information. Past performance
results. For more detailed
the Morningstar Rating,
is no guarantee of
information about
its methodology,
including
future
refer
this
55
48
61
90
91
91
Financial and operating performance
Financial and operating performance | Investment Bank
Investment Bank
Investment Bank1
USD million, except where indicated
Results
Advisory
Capital Markets
GGlloobbaall BBaannkkiinngg
Execution Services2
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..2211
31.12.20
% change from
31.12.20
998888
22,,117700
33,,115588
11,,889944
33,,442222
997799
66,,229966
44,,558811
11,,771155
99,,445544
3344
99,,448888
66,,885588
22,,663300
634
1,744
2,378
1,857
3,609
1,674
7,141
4,502
2,638
9,519
(305)
9,214
6,732
2,482
56
24
33
2
(5)
(42)
(12)
2
(35)
(1)
3
2
6
Performance measures and other information
Pre-tax profit growth (year-on-year, %)3
Average attributed equity (USD billion)4
Return on attributed equity (%)3,4
Cost / income ratio (%)3
Risk-weighted assets (USD billion)4
Return on risk-weighted assets, gross (%)3
Leverage ratio denominator (USD billion)4,5
Return on leverage ratio denominator, gross (%)3,5
Goodwill and intangible assets (USD billion)
(14)
(9)
Average VaR (1-day, 95% confidence, 5 years of historical data)
11 Comparative figures in this table 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 Execution & Platform, which was disclosed in previous periods, has been renamed Execution Services. 33 Refer to “Alternative performance measures” in the appendix to
this report for the definition and calculation method. 44 Refer to the “Capital, liquidity and funding, and balance sheet” section of this report for more information. 55 The leverage ratio denominators calculated as
of the respective dates in 2020 do not reflect the effects of the temporary exemption that applied from 25 March 2020 until 1 January 2021 and was granted by FINMA in connection with COVID-19. Refer to the
“Regulatory and legal developments” section of our Annual Report 2020 for more information.
55..99
1133..00
2200..33
7722..55
9922..22
1100..00
331199..22
22..99
00..11
1111
216.6
12.6
19.7
70.7
94.3
10.0
315.5
3.1
0.2
12
(2)
3
1
92
92
Financial and operating performance | Investment Bank
Investment Bank
Investment Bank1
USD million, except where indicated
Results
Advisory
Capital Markets
GGlloobbaall BBaannkkiinngg
Execution Services2
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 (year-on-year, %)3
Average attributed equity (USD billion)4
Return on attributed equity (%)3,4
Cost / income ratio (%)3
Risk-weighted assets (USD billion)4
Return on risk-weighted assets, gross (%)3
Leverage ratio denominator (USD billion)4,5
Return on leverage ratio denominator, gross (%)3,5
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..2211
31.12.20
% change from
31.12.20
998888
22,,117700
33,,115588
11,,889944
33,,442222
997799
66,,229966
44,,558811
11,,771155
99,,445544
3344
99,,448888
66,,885588
22,,663300
55..99
1133..00
2200..33
7722..55
9922..22
1100..00
331199..22
22..99
00..11
1111
634
1,744
2,378
1,857
3,609
1,674
7,141
4,502
2,638
9,519
(305)
9,214
6,732
2,482
216.6
12.6
19.7
70.7
94.3
10.0
315.5
3.1
0.2
12
56
24
33
2
(5)
(42)
(12)
2
(35)
(1)
3
2
6
3
(2)
1
(14)
(9)
11 Comparative figures in this table 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 Execution & Platform, which was disclosed in previous periods, has been renamed Execution Services. 33 Refer to “Alternative performance measures” in the appendix to
this report for the definition and calculation method. 44 Refer to the “Capital, liquidity and funding, and balance sheet” section of this report for more information. 55 The leverage ratio denominators calculated as
of the respective dates in 2020 do not reflect the effects of the temporary exemption that applied from 25 March 2020 until 1 January 2021 and was granted by FINMA in connection with COVID-19. Refer to the
“Regulatory and legal developments” section of our Annual Report 2020 for more information.
2021 compared with 2020
Results
Global Markets Equities revenues increased by USD 79 million,
or 2%, to USD 4,581 million. Equity derivatives and cash equities
products revenues increased, while Financing revenues included
the aforementioned loss in our prime brokerage business.
Profit before tax increased by USD 148 million, or 6%, to
USD 2,630 million, driven by higher operating income, partly
offset by higher operating expenses.
Global Markets Foreign Exchange, Rates and Credit revenues
decreased by USD 923 million, or 35%, to USD 1,715 million,
compared with strong revenues in 2020.
Credit loss expense / release
Net credit loss releases were USD 34 million, primarily related to
stage 1 and 2 positions, resulting from model updates, as well as
a partial net release of a post-model adjustment during the year.
Prior-year net credit loss expenses were USD 305 million, driven
by the effects of the COVID-19 pandemic.
Operating expenses
Total operating expenses increased by USD 126 million, or 2%, to
USD 6,858 million, largely driven by foreign currency effects.
Cost / income ratio
The cost / income ratio increased to 72.5% from 70.7%, as
income decreased by 1% compared with a strong prior year, and
operating expenses increased by 2%.
Risk-weighted assets
Risk-weighted assets (RWA) decreased by USD 2 billion, or 2%, to
USD 92 billion, primarily due to a USD 3 billion decrease in
operational risk RWA and a USD 1 billion decrease in market risk
RWA, partly offset by a USD 2 billion increase in credit risk RWA
due to higher loans and loan commitments.
› Refer to the “Capital, liquidity and funding, and balance sheet”
section of this report for more information
Leverage ratio denominator
The leverage ratio denominator increased by USD 4 billion, or 1%,
to USD 319 billion, mainly reflecting a USD 9 billion increase in
on-balance sheet exposures, partly offset by a USD 4 billion
decrease in derivative and securities financing transaction
exposures.
› Refer to the “Capital, liquidity and funding, and balance sheet”
section of this report for more information
Operating income
Total operating income increased by USD 274 million, or 3%, to
USD 9,488 million, reflecting higher revenues in Global Banking
and net credit loss releases compared with net credit loss expenses
in 2020, partly offset by lower revenues in Global Markets.
Global Banking
Global Banking revenues increased by USD 780 million, or 33%,
to USD 3,158 million, driven by Capital Markets and Advisory
revenues, and compared with an overall global fee pool increase
of 39%.
Advisory revenues increased by USD 354 million, or 56%, to
USD 988 million, largely due to higher revenues from an increased
number of merger and acquisition transactions that closed in
2021, and compared with a 64% increase in the global fee pool.
Capital Markets revenues increased by USD 426 million, or
24%, to USD 2,170 million, mainly reflecting a USD 358 million,
or 52%, increase in Equity Capital Markets (ECM) revenues,
compared with an increase in the global ECM fee pool of 34%.
Global Markets
Global Markets revenues decreased by USD 845 million, or 12%,
to USD 6,296 million, driven by lower revenues in our Financing
and Derivatives & Solutions businesses, partly offset by higher
revenues in Execution Services.
Execution Services revenues increased by USD 37 million, or
2%, to USD 1,894 million. Revenue increases in cash equities
were partly offset by decreases from other products.
Derivatives & Solutions revenues decreased by USD 187
million, or 5%, to USD 3,422 million, mainly due to the third
quarter of 2020 including a USD 215 million gain from the sale of
intellectual property rights associated with the Bloomberg
Commodity Index family. Excluding that gain, revenues increased
by USD 28 million, or 1%.
Financing revenues decreased by USD 695 million, or 42%, to
USD 979 million, predominantly due to an USD 861 million loss
incurred in the first half of 2021 on the default of a US-based
client of our prime brokerage business. Excluding that loss,
revenues increased by USD 166 million, or 10%.
› Refer to “Note 21 Fair value measurement” in the “Consolidated
financial statements” section of this report for more information
about the loss in the prime brokerage business
92
93
93
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..2211
31.12.20
% change from
31.12.20
((336600))
333300
((668899))
((444466))
((7799))
((116655))
(494)
567
(1,060)
(341)
(269)
(450)
(27)
(42)
(35)
31
(71)
(63)
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 calculated as of the respective date in 2020
does not reflect the effects of the temporary exemption that applied from 25 March 2020 until 1 January 2021 and was granted by FINMA in connection with COVID-19. Refer to the “Regulatory and legal
developments” section of our Annual Report 2020 for more information.
110044..00
96.2
28.7
3300..11
5
8
Non-core and Legacy Portfolio
The Non-core and Legacy Portfolio result was negative USD 79
million, compared with negative USD 269 million. This result was
partly due to valuation gains of USD 58 million on our USD 1.6
billion portfolio of auction rate securities (ARS), compared with
valuation losses of USD 9 million in 2020. Our remaining
exposures to ARS were all rated investment grade as of
31 December 2021. In addition, 2021 included income of USD 51
million related to a legacy bankruptcy claim, while 2020 included
a credit loss expense of USD 42 million on an energy-related
exposure.
Group Services
The Group Services result was negative USD 165 million,
compared with negative USD 450 million. There were lower
expenses relating to our legal entity transformation program and
decreased funding costs on deferred tax assets. Also, 2020
included real estate costs of USD 72 million related to early lease
terminations and associated provisions, an
impairment of
internally generated software of USD 67 million, and expenses of
USD 54 million related to the modification of certain outstanding
deferred compensation awards.
› 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
2021 compared with 2020
Results
Group Functions recorded a loss before tax of USD 689 million,
compared with a loss of USD 1,060 million.
Group Treasury
The Group Treasury result was negative USD 446 million,
compared with negative USD 341 million.
Income from accounting asymmetries,
including hedge
accounting ineffectiveness, was net negative USD 341 million,
compared with net positive of USD 6 million.
related
Revenues
to centralized Group Treasury
risk
management services were negative USD 63 million, compared
with negative USD 279 million. The increased expense in 2020
was driven by additional liquidity costs related to COVID-19
market stress in the first half of that year.
Operating expenses decreased by USD 30 million to USD 42
million.
94
94
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
Additional information
Risk-weighted assets (USD billion)2
Leverage ratio denominator (USD billion)2,3
As of or for the year ended
% change from
3311..1122..2211
31.12.20
31.12.20
((336600))
333300
((668899))
((444466))
((7799))
((116655))
3300..11
110044..00
(494)
567
(1,060)
(341)
(269)
(450)
28.7
96.2
(27)
(42)
(35)
31
(71)
(63)
5
8
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 calculated as of the respective date in 2020
does not reflect the effects of the temporary exemption that applied from 25 March 2020 until 1 January 2021 and was granted by FINMA in connection with COVID-19. Refer to the “Regulatory and legal
developments” section of our Annual Report 2020 for more information.
2021 compared with 2020
Results
Non-core and Legacy Portfolio
The Non-core and Legacy Portfolio result was negative USD 79
million, compared with negative USD 269 million. This result was
partly due to valuation gains of USD 58 million on our USD 1.6
Group Functions recorded a loss before tax of USD 689 million,
billion portfolio of auction rate securities (ARS), compared with
compared with a loss of USD 1,060 million.
Group Treasury
valuation losses of USD 9 million in 2020. Our remaining
exposures to ARS were all rated investment grade as of
31 December 2021. In addition, 2021 included income of USD 51
The Group Treasury result was negative USD 446 million,
million related to a legacy bankruptcy claim, while 2020 included
compared with negative USD 341 million.
a credit loss expense of USD 42 million on an energy-related
Income from accounting asymmetries,
including hedge
exposure.
accounting ineffectiveness, was net negative USD 341 million,
compared with net positive of USD 6 million.
Group Services
Revenues
related
to centralized Group Treasury
risk
The Group Services result was negative USD 165 million,
management services were negative USD 63 million, compared
compared with negative USD 450 million. There were lower
with negative USD 279 million. The increased expense in 2020
expenses relating to our legal entity transformation program and
was driven by additional liquidity costs related to COVID-19
decreased funding costs on deferred tax assets. Also, 2020
market stress in the first half of that year.
included real estate costs of USD 72 million related to early lease
Operating expenses decreased by USD 30 million to USD 42
terminations and associated provisions, an
impairment of
million.
Selected financial information of our business
divisions and Group Functions
Performance of our business divisions and Group Functions1
USD million
Operating income
of which: gain from the sale of UBS’s domestic wealth management business in Austria
Operating expenses
of which: net restructuring expenses 2
FFoorr tthhee yyeeaarr eennddeedd 3311..1122..2211
PPeerrssoonnaall &&
CCoorrppoorraattee
BBaannkkiinngg
44,,334499
AAsssseett
MMaannaaggee--
mmeenntt
22,,661166
IInnvveessttmmeenntt
BBaannkk
99,,448888
GGrroouupp
FFuunnccttiioonnss
((336600))
TToottaall
3355,,554422
110000
GGlloobbaall WWeeaalltthh
MMaannaaggeemmeenntt
1199,,444499
110000
1144,,666655
22,,661188
11,,558866
8877
1177
1177
66,,885588
7744
333300
2211
2266,,005588
221166
OOppeerraattiinngg pprrooffiitt // ((lloossss)) bbeeffoorree ttaaxx
44,,778833
11,,773311
11,,003300
22,,663300
((668899))
99,,448844
For the year ended 31.12.20
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
Global Wealth
Management
17,045
60
Personal &
Corporate
Banking
3,651
Asset
Manage-
ment
2,974
571
of which: valuation gain on auction rate securities in the fourth quarter of 2020 3
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
6
4
19
18
Investment
Bank
9,214
Group
Functions
(494)
Total
32,390
215
64
134
631
215
64
134
26
22
Operating expenses
13,026
2,392
1,519
6,732
567
24,235
of which: acceleration of expenses in relation to outstanding deferred compensation awards in
the third quarter of 2020 4
of which: expenses associated with terminated real estate leases
of which: impairment of internally generated software 5
of which: net restructuring expenses
46
3
22
229
72
5
6
24
58
72
67
0
359
72
67
107
OOppeerraattiinngg pprrooffiitt // ((lloossss)) bbeeffoorree ttaaxx
44,,001199
11,,225599
11,,445555
22,,448822
((11,,006600))
88,,115555
internally generated software of USD 67 million, and expenses of
USD 54 million related to the modification of certain outstanding
deferred compensation awards.
› 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
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
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
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 Includes curtailment gains of USD 80 million, which represent a reduction in the defined benefit obligation related to the Swiss pension plan resulting from a decrease in headcount following restructuring
activities. 33 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. This gain was more than offset
by valuation losses recognized earlier in the year. 44 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. 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). 55 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. 66 Relates to the disposal or closure of
foreign operations.
94
95
95
Financial and operating performance
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
99
100
102
103
105
Overview of risks arising from our business activities
Risk categories
Top and emerging risks
Risk governance
Risk appetite framework
Internal risk reporting
110
108
109 Model risk management
Risk measurement
Credit risk
113
131 Market risk
Country risk
Sustainability and climate risk
Non-financial risk
147
140
143
Risk management
and control
Overview of risks arising from our business activities
Table of contents
Risk categories
Top and emerging risks
Risk governance
Risk appetite framework
Internal risk reporting
109 Model risk management
Risk measurement
Credit risk
131 Market risk
Country risk
99
100
102
103
105
108
110
113
140
143
147
Sustainability and climate risk
Non-financial risk
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.
Despite our credit book growing over the course of 2021, our
overall credit risk profile was broadly unchanged, and we
continued to manage market risks at generally low levels.
Operational resilience, conduct and the prevention of financial
crime remain key focus topics.
Key risks by business division and Group Functions
Business divisions and Group Functions
Key risks arising from business activities
Global Wealth Management
Personal & Corporate Banking
Credit risk from lending against securities collateral, including derivative trading activity, and lending
against residential and commercial real estate collateral, as well as corporate and other lending
Market risk from municipal securities and taxable fixed-income securities
Credit risk from retail business, mortgages, secured and unsecured corporate lending, commodity trade
finance, lending to banks and other regulated clients, as well as a small amount of derivatives trading
activity
Minimal contribution to market risk
Asset Management
Small amounts of credit and market risk for on-balance sheet items
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
Non-financial risks, which include operational, financial crime, compliance, conduct, model, and reputational risks, are an inevitable consequence of being
in business and can arise as a result of our past and current business activities across all business divisions and Group Functions.
99
99
Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Risk categories
We categorize the risk exposures of our business divisions and Group Functions as outlined in the table below. Our risk appetite
framework is designed to capture all risk categories.
› Refer to “Risk appetite framework” in this section for more information
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
Risk managed by
Independent
oversight by
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.
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.
Business management
and Group Treasury
Risk Control
Country risk: the risk of losses resulting from country-specific events. Includes transfer risk, which
involves a country’s authorities preventing or restricting the payment of an obligation, as well as
systemic risk events arising from country-specific political or macroeconomic developments.
Business management
Risk Control
Sustainability and climate risk (previously known at UBS as environmental and social risk): the risk
that UBS is negatively impacted by or negatively impacts climate change, loss of biodiversity, human
rights infringements, or other environmental, social or governance (ESG) matters. Climate risks can arise
from either changing climate conditions (physical risks) or from efforts to mitigate climate change
(transition risks). Sustainability and climate risks may manifest as credit, market, liquidity and operational
risks for UBS, resulting in potential adverse financial, liability and reputation impacts. They may also
negatively impact the value of investments.
Business management
Risk Control
Treasury risk: the market risks that arise from structural exposures, including pension risks, and the risk
of insufficient funding or liquidity.
Group Treasury
Risk Control
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 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 and Risk Control
100
100
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Risk categories
framework is designed to capture all risk categories.
› Refer to “Risk appetite framework” in this section for more information
We categorize the risk exposures of our business divisions and Group Functions as outlined in the table below. Our risk appetite
Non-financial risks
Risk managed by
Independent
oversight by
Risk managed by
Independent
oversight by
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 Group Compliance,
Regulatory &
Governance (GCRG)
Financial risks
Audited | Credit risk: the risk of loss resulting from the failure of a client or counterparty to meet its
Business management
Risk Control
contractual obligations toward UBS. This includes settlement risk, loan underwriting risk and step-in risk.
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
Business management
Risk Control
market variables. Market variables include observable variables, such as interest rates, foreign exchange
and Group Treasury
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.
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, which
Business management
Risk Control
involves a country’s authorities preventing or restricting the payment of an obligation, as well as
systemic risk events arising from country-specific political or macroeconomic developments.
Sustainability and climate risk (previously known at UBS as environmental and social risk): the risk
Business management
Risk Control
that UBS is negatively impacted by or negatively impacts climate change, loss of biodiversity, human
rights infringements, or other environmental, social or governance (ESG) matters. Climate risks can arise
from either changing climate conditions (physical risks) or from efforts to mitigate climate change
(transition risks). Sustainability and climate risks may manifest as credit, market, liquidity and operational
risks for UBS, resulting in potential adverse financial, liability and reputation impacts. They may also
negatively impact the value of investments.
Treasury risk: the market risks that arise from structural exposures, including pension risks, and the risk
Group Treasury
Risk Control
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
Group Treasury and
from decreases in the fair value of assets held in defined benefit pension funds and / or changes in
Human Resources
Risk Control
and Finance
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.
Business risk: the potential negative impact on earnings from lower-than-expected business volumes
Business management
Finance and Risk Control
and / or margins, to the extent they are not offset by a decrease in expenses.
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.
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 Human Resources.
Legal
Human Resources
Cybersecurity and information security risk: the risk of a malicious internal or external act leading
to a material impact on confidentiality, integrity or availability of UBS data or information systems.
Cyberattacks are manifestations of a cyber threat into an act of aggression or criminal activity causing
financial, regulatory or reputational harm or loss.
Business management
and Chief Digital and
Information Office
(CDIO)
GCRG
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.
Business management GCRG
Compliance risk: the risk incurred by the firm by not adhering to the applicable laws, rules and
regulations, and our own internal standards.
Business management GCRG
Financial crime risk: the risk that UBS fails to detect criminal activities, including internal and external
theft and fraud, money laundering, bribery and corruption, and fails to comply with sanctions and
embargoes, or fails to report or respond to requests from relevant authorities related to these matters.
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.
Business management,
Financial Crime
Prevention (FCP), and
GCRG COO
GCRG
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 and staff, and the general public.
All businesses and
functions
All control functions
100
101
101
Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Top and emerging risks
– We are exposed to substantial changes in the regulation of our
businesses that could have a material adverse effect on our
business, as discussed
legal
developments” section of this report and in “Regulatory and
legal risks” in the “Risk factors” section of this report.
the “Regulatory and
in
– 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 similar
matters we consider significant is disclosed in “Note 18
Provisions and contingent liabilities” in the “Consolidated
financial statements” section of this report.
– Cyber threats continue to evolve at pace, not least due to the
Russian invasion of Ukraine, and can impact the industry, as
well as critical infrastructure which it relies on. More recently,
ransomware attacks with a possible widespread impact have
increased significantly. 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.
– 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 risk management framework.
– Financial crime – including money
laundering, terrorist
financing, sanctions violations, 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 “Non-financial risk” in this section and
“Strategy, management and operational risks” in the “Risk
factors” section of this report for more information.
– Environmental, social and governance (ESG) risks are a growing
area of focus for regulators and other stakeholders, in
particular climate risks and concerns about greenwashing,
where UBS may be subject to reputational risk if not fully
aligned with the stated purpose of the firm. New standards
and rules are developing in several jurisdictions with the risk of
divergent rules increasing and leading to an increased risk that
UBS may not comply with all relevant regulations. Refer to
“Non-financial risk” in this section.
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 COVID-19 pandemic, and
impact on growth,
employment, debt dynamics and supply chains, remains an
important driver of risk, and we expect this to be the case for
at least the near future. The Omicron variant continues to
spread, and there is uncertainty about when restrictions
introduced in many countries will be eased.
its
– There continue to be concerns regarding a resurgence in global
inflation, and the timing and extent of central bank policy
responses (i.e., interest rate hikes and the tapering of
quantitative easing) will be an area of focus in the coming
months. There are related concerns about increasing energy
and other commodity prices in a number of countries, while
mounting global supply chain stresses and tight labor markets
are creating negative pressure on growth. China is facing
several challenges, including a slowing economy following the
post-pandemic boom.
– We remain watchful of a range of geopolitical developments
in Europe and Asia and political changes in a number of
countries. Our current focus is on the Russian invasion of
Ukraine. Our current direct exposure to Russia, Ukraine and
Belarus is limited, as is our exposure to peripheral European
countries. However, market closures, the
imposition of
exchange controls, sanctions or other measures may limit our
ability to settle existing transactions or to realize on collateral,
which may result in unexpected increases in exposures. In
addition, we have significant country risk exposure to major
economies, which could also be affected, including the US,
China, Switzerland, Germany, the UK and France.
– 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
impairments and other valuation adjustments. Accordingly,
the
these macroeconomic
development of stress testing scenarios for our ongoing risk
management activities.
factors are considered
in
102
102
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.
measurement, aggregation and reporting, 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, control functions, is separate from
the business and reports directly to the Group CEO. Control
functions provide independent oversight, challenge financial and
non-financial risks arising from the firm’s business activities, and
risk assessment,
frameworks
establish
independent
for
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
internal governance
requirements.
requirements and
regulatory
The key roles and responsibilities for risk management and
control are shown in the chart below and described on the
following pages.
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
Head
Human Resources
Group Functions
Market and
Treasury CRO
Group Treasury* /
Non-core and
Legacy Portfolio
Divisional
Presidents
Central Risk
functions
Central GCRG
functions
Central Finance
functions
Central Legal
functions
HR functions
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
▲
103
103
The top and emerging risks disclosed below reflect those that we
– We are exposed to substantial changes in the regulation of our
currently think have the potential to materialize within one year
businesses that could have a material adverse effect on our
and which could significantly affect the Group. Investors should
business, as discussed
in
the “Regulatory and
legal
also carefully review all information set out in the “Risk factors”
developments” section of this report and in “Regulatory and
section of this report, where we discuss these and other material
legal risks” in the “Risk factors” section of this report.
risks that we consider could have an effect on our ability to
– As a global financial services firm, we are subject to many
execute our strategy and may affect our business activities,
different legal, tax and regulatory regimes and extensive
financial condition, results of operations and business prospects.
regulatory oversight. We are exposed to significant liability risk,
– The COVID-19 pandemic, and
its
impact on growth,
and we are subject to various claims, disputes,
legal
employment, debt dynamics and supply chains, remains an
proceedings and government investigations, as noted in
important driver of risk, and we expect this to be the case for
“Regulatory and legal risks” in the “Risk factors” section of
at least the near future. The Omicron variant continues to
this report. Information about litigation, regulatory and similar
spread, and there is uncertainty about when restrictions
matters we consider significant is disclosed in “Note 18
introduced in many countries will be eased.
Provisions and contingent liabilities” in the “Consolidated
– There continue to be concerns regarding a resurgence in global
financial statements” section of this report.
inflation, and the timing and extent of central bank policy
– Cyber threats continue to evolve at pace, not least due to the
responses (i.e., interest rate hikes and the tapering of
Russian invasion of Ukraine, and can impact the industry, as
quantitative easing) will be an area of focus in the coming
well as critical infrastructure which it relies on. More recently,
months. There are related concerns about increasing energy
ransomware attacks with a possible widespread impact have
and other commodity prices in a number of countries, while
increased significantly. Additionally, as a result of the
mounting global supply chain stresses and tight labor markets
operational complexity of all our businesses, we are continually
are creating negative pressure on growth. China is facing
exposed to operational resilience scenarios such as process
several challenges, including a slowing economy following the
error, failed execution, system failures and fraud.
post-pandemic boom.
– Conduct risks are inherent in our businesses. Achieving fair
– We remain watchful of a range of geopolitical developments
outcomes for our clients, upholding market integrity and
in Europe and Asia and political changes in a number of
cultivating the highest standards of employee conduct are of
countries. Our current focus is on the Russian invasion of
critical importance to UBS. Management of conduct risks is an
Ukraine. Our current direct exposure to Russia, Ukraine and
integral part of our risk management framework.
Belarus is limited, as is our exposure to peripheral European
– Financial crime – including money laundering, terrorist
countries. However, market closures, the
imposition of
financing, sanctions violations, fraud, bribery and corruption –
exchange controls, sanctions or other measures may limit our
presents significant risk. Heightened regulatory expectations
ability to settle existing transactions or to realize on collateral,
and attention require investment in people and systems, while
which may result in unexpected increases in exposures. In
emerging technologies and changing geopolitical risks further
addition, we have significant country risk exposure to major
increase the complexity of identifying and preventing financial
economies, which could also be affected, including the US,
crime. Refer to “Non-financial risk” in this section and
China, Switzerland, Germany, the UK and France.
“Strategy, management and operational risks” in the “Risk
– We are exposed to a number of macroeconomic issues, as well
factors” section of this report for more information.
as general market conditions. As noted in “Market, credit and
– Environmental, social and governance (ESG) risks are a growing
macroeconomic risks” in the “Risk factors” section of this
area of focus for regulators and other stakeholders, in
report, these external pressures may have a significant adverse
particular climate risks and concerns about greenwashing,
effect on our business activities and related financial results,
where UBS may be subject to reputational risk if not fully
primarily through reduced margins and revenues, asset
aligned with the stated purpose of the firm. New standards
impairments and other valuation adjustments. Accordingly,
and rules are developing in several jurisdictions with the risk of
these macroeconomic
factors are considered
in
the
divergent rules increasing and leading to an increased risk that
development of stress testing scenarios for our ongoing risk
UBS may not comply with all relevant regulations. Refer to
management activities.
“Non-financial risk” in this section.
102
Risk, capital, liquidity and funding, and balance sheet
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
sets
the general
for developing
the Group’s operational
requirements
is
The Group Chief Compliance and Governance Officer
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.
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 Chief Financial Officer
responsible
is
The Group General Counsel is responsible for managing the
Group’s legal affairs (including litigation involving UBS), ensuring
effective and timely assessment of legal matters impacting the Group
or its businesses, and managing and reporting all litigation matters.
The Head of Human Resources is responsible for independent
oversight and challenge of employment-related risks.
(GIA)
Group
Internal Audit
independently assesses the
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 (the CCRC) 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 assists 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 regions and are mandated to inform the GEB
about 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 sustainability and climate
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.
104
104
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Audited | The Board of Directors (the BoD) approves the risk
The Group Chief Compliance and Governance Officer
is
management and control framework of the Group, including the
responsible
for developing
the Group’s operational
Group and business division overall risk appetite. The BoD is
framework, which
sets
the general
requirements
risk
for
supported by its Risk Committee, which monitors and oversees
identification, management, assessment and mitigation of
the Group’s risk profile and the implementation of the risk
operational risk, and for ensuring that all non-financial risks are
framework approved by the BoD, and approves the Group’s risk
identified, owned and managed according to the operational risk
appetite methodology. The Corporate Culture and Responsibility
appetite objectives, supported by an effective control framework.
Committee (the CCRC) helps the BoD meet its duty to safeguard
The Group Chief Financial Officer
is
responsible
for
and advance UBS’s reputation for responsible and sustainable
transparency in assessing the financial performance of the Group
conduct, reviewing stakeholder concerns and expectations
and the business divisions, and for managing the Group’s
pertaining to UBS’s societal contribution and corporate culture.
financial accounting, controlling, forecasting, planning and
The Audit Committee assists the BoD with its oversight duty
reporting. Additional responsibilities include managing UBS’s tax
relating to financial reporting and internal controls over financial
affairs, as well as treasury and capital management, including
reporting, and the effectiveness of whistleblowing procedures
funding and liquidity risk and UBS’s regulatory capital ratios.
and the external and internal audit functions.
The Group General Counsel is responsible for managing the
The Group Executive Board (the GEB) has overall responsibility
Group’s legal affairs (including litigation involving UBS), ensuring
for establishing and implementing a risk management and control
effective and timely assessment of legal matters impacting the Group
framework in the Group, managing the risk profile of the Group
or its businesses, and managing and reporting all litigation matters.
as a whole.
The Head of Human Resources is responsible for independent
The Group Chief Executive Officer has responsibility and
oversight and challenge of employment-related risks.
accountability for the management and performance of the Group,
Group
Internal Audit
(GIA)
independently assesses the
has risk authority over transactions, positions and exposures, and
effectiveness of processes to define strategy and risk appetite and
allocates business divisions and Group Functions risk limits
overall adherence to the approved strategy. It also assesses the
approved by the BoD.
effectiveness of governance processes and risk management,
The business division Presidents and Group function heads are
including compliance with legal and regulatory requirements and
responsible for the operation and management of their business
internal governance documents. The Head GIA reports to the
divisions, including controlling the dedicated financial resources
Chairman of the BoD. GIA also has a functional reporting line to
and risk appetite of the business division.
the BoD Audit Committee.
The regional Presidents are responsible for cross-divisional
Some of these roles and responsibilities are replicated for
collaboration in their regions and are mandated to inform the GEB
certain significant legal entities of the Group. The legal entity risk
about any activities / issues that may give rise to actual or
officers are responsible for independent oversight and control of
potentially material regulatory or reputational concerns.
financial and non-financial risks for certain significant legal
The Group Chief Risk Officer (the Group CRO) is responsible
entities of the Group as part of the legal entity control framework,
for developing the Group’s risk management and control
which complements the Group’s risk management and control
framework (including risk principles and risk appetite) for credit,
framework.
market, country, treasury, model and sustainability and climate
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.
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.
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 level and is embedded
throughout our business divisions and legal entities by Group,
business division and legal entity policies, limits and authorities.
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 the
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 framework” chart
below shows the key elements of the framework, described in
detail in this section.
Qualitative risk appetite statements aim to ensure we maintain
the desired risk culture. Quantitative risk appetite objectives are
designed to enhance UBS’s resilience against the effects 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 yearly business planning process.
These objectives are complemented by operational risk
appetite objectives, which are set for each of our non-financial
risk categories, including market conduct, theft, 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 to monitor
specific portfolios and to control potential risk concentrations.
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.
Our risk appetite framework is governed by a single overarching
policy and conforms to the Financial Stability Board’s Principles for
an Effective Risk Appetite Framework.
› Refer to “Risk principles and risk culture” and “Quantitative risk
appetite objectives” on the following pages for more
information
(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)
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(cid:115)(cid:2)(cid:52)(cid:75)(cid:85)(cid:77)(cid:2)(cid:79)(cid:71)(cid:67)(cid:85)(cid:87)(cid:84)(cid:71)(cid:79)(cid:71)(cid:80)(cid:86)(cid:2)(cid:72)(cid:84)(cid:67)(cid:79)(cid:71)(cid:89)(cid:81)(cid:84)(cid:77)(cid:85)
(cid:115)(cid:2)(cid:35)(cid:87)(cid:86)(cid:74)(cid:81)(cid:84)(cid:75)(cid:86)(cid:75)(cid:71)(cid:85)(cid:2)(cid:67)(cid:80)(cid:70)(cid:2)(cid:78)(cid:75)(cid:79)(cid:75)(cid:86)(cid:85)(cid:2)
(cid:52)(cid:75)(cid:85)(cid:77)(cid:2)(cid:84)(cid:71)(cid:82)(cid:81)(cid:84)(cid:86)(cid:75)(cid:80)(cid:73)(cid:2)(cid:67)(cid:80)(cid:70)(cid:2)(cid:70)(cid:75)(cid:85)(cid:69)(cid:78)(cid:81)(cid:85)(cid:87)(cid:84)(cid:71)(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:86)(cid:71)(cid:84)(cid:80)(cid:67)(cid:78)(cid:14)(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:67)(cid:80)(cid:70)(cid:2)(cid:71)(cid:90)(cid:86)(cid:71)(cid:84)(cid:80)(cid:67)(cid:78)(cid:2)(cid:84)(cid:71)(cid:82)(cid:81)(cid:84)(cid:86)(cid:75)(cid:80)(cid:73)
104
105
105
Risk, capital, liquidity and funding, and balance sheet (cid:20)(cid:18)(cid:20)(cid:19)(cid:2)(cid:83)(cid:87)(cid:67)(cid:80)(cid:86)(cid:75)(cid:86)(cid:67)(cid:86)(cid:75)(cid:88)(cid:71)(cid:2)(cid:84)(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:81)(cid:68)(cid:76)(cid:71)(cid:69)(cid:86)(cid:75)(cid:88)(cid:71)(cid:85)
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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 has three
principal 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-taking
Risk management and control principles
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
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.
responsibilities, specifically:
to
› 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
for and
communication to staff and legal entity representatives are
available on an ongoing basis, including with regard to new
regulatory requirements.
to ensuring appropriate
training
Mandatory training programs cover various compliance and
risk-related topics, including operational risk and anti-money
laundering. 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.
106
106
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.
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
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Risk principles and risk culture
and the establishing of robust risk management and control
processes. These principles are supported by a range of initiatives
Maintaining a strong risk culture is a prerequisite for success in
covering employees at all levels, for example the UBS House View
today’s highly complex operating environment and a source of
on Leadership, which is a set of explicit expectations for leaders
sustainable competitive advantage. Placing prudent and
that establishes consistent leadership standards across UBS.
disciplined risk-taking at the center of every decision has three
Another example is our Principles of Good Supervision, which
principal goals: delivering unrivaled client satisfaction; creating
establish clear expectations of managers and employees
long-term value for stakeholders; and making UBS one of the
regarding supervisory
responsibilities, specifically:
to
take
world’s most attractive companies to work for.
responsibility; to know and organize their business; to know their
Our risk appetite framework combines all the important
employees and what they do; to create a good risk culture; and
elements of our risk culture, expressed in our Pillars, Principles and
to respond to and resolve issues.
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,
› 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
principles and risk appetite. They help create a solid foundation
for more information
for promoting risk awareness, leading to appropriate risk-taking
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
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
Quantitative risk appetite objectives
environment where staff are comfortable raising concerns. There
are multiple channels via which individuals may, either openly or
Our quantitative risk appetite objectives aim to ensure that our
anonymously, escalate suspected breaches of laws, regulations,
aggregate risk exposure remains within desired risk capacity,
rules and other legal requirements, our Code of Conduct and
based on capital and business plans. The specific definition of risk
Ethics, policies, or relevant professional standards. Our program is
capacity for each objective is aimed at ensuring we have sufficient
designed to ensure that whistleblowing concerns are investigated
capital, earnings, funding and liquidity to protect our businesses
and that appropriate and consistent action is taken. We are
and exceed minimum regulatory requirements under a severe
committed
to ensuring appropriate
training
for and
stress event. The risk appetite objectives are evaluated during the
communication to staff and legal entity representatives are
annual business planning process and approved by the BoD. The
available on an ongoing basis, including with regard to new
comparison of risk exposure with risk capacity is a key
regulatory requirements.
consideration in decisions on potential adjustments to the
Mandatory training programs cover various compliance and
business strategy and risk profile of UBS and capital returns to
risk-related topics, including operational risk and anti-money
shareholders.
laundering. Additional specialized training is provided depending
The annual business planning process reviews UBS’s business
on employees’ specific roles and responsibilities, e.g., credit risk
strategy, assesses the risk profile our operations and activities
and market risk training for those working in trading areas. Failure
result in, and stress tests that risk profile. We use both scenario-
to complete mandatory training sessions within an appropriate
based stress tests and statistical risk measurement techniques to
timeframe can lead to consequences, including disciplinary action.
assess effects of severe stress events at a firm-wide level. These
Our operational risk and conduct risk frameworks aim to identify
complementary frameworks capture exposures to all material risks
and manage financial, regulatory and reputational risks, as well as
across our business divisions and Group Functions.
risks to clients and markets.
› Refer to “Risk measurement” in this section for more
information about our stress testing and statistical stress
frameworks
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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
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(cid:52)(cid:75)(cid:85)(cid:77)(cid:2)(cid:71)(cid:90)(cid:82)(cid:81)(cid:85)(cid:87)(cid:84)(cid:71)
(cid:50)(cid:84)(cid:81)(cid:76)(cid:71)(cid:69)(cid:86)(cid:71)(cid:70)(cid:2)(cid:71)(cid:67)(cid:84)(cid:80)(cid:75)(cid:80)(cid:73)(cid:85)
(cid:53)(cid:86)(cid:67)(cid:86)(cid:75)(cid:85)(cid:86)(cid:75)(cid:69)(cid:67)(cid:78)(cid:2)(cid:79)(cid:71)(cid:67)(cid:85)(cid:87)(cid:84)(cid:71)(cid:85)
level across all risk types
our Code of Conduct and Ethics
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(cid:47)(cid:67)(cid:84)(cid:77)(cid:71)(cid:86)(cid:2)(cid:84)(cid:75)(cid:85)(cid:77)
(cid:48)(cid:81)(cid:80)(cid:15)(cid:386)(cid:80)(cid:67)(cid:80)(cid:69)(cid:75)(cid:67)(cid:78)(cid:2)(cid:84)(cid:75)(cid:85)(cid:77)
(cid:53)(cid:86)(cid:84)(cid:87)(cid:69)(cid:86)(cid:87)(cid:84)(cid:67)(cid:78)(cid:2)(cid:72)(cid:81)(cid:84)(cid:71)(cid:75)(cid:73)(cid:80)(cid:15)
(cid:71)(cid:90)(cid:69)(cid:74)(cid:67)(cid:80)(cid:73)(cid:71)(cid:2)(cid:84)(cid:75)(cid:85)(cid:77)
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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. 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.
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Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Internal risk reporting
Comprehensive and transparent reporting of risks is central to our
risk governance 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. This
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 governance framework’s control and oversight responsibilities
business division CROs and business division Presidents. This
and required by our risk management and control principles.
monthly reporting is supplemented with daily or weekly reports,
Accordingly, risks are reported at a frequency and level of detail
at various levels of granularity, covering market and credit risks
commensurate with the extent and variability of the risk and the
for the business divisions to enable risk officers and senior
needs of the various governance bodies, regulators and risk
management to monitor and control the Group’s risk profile.
authority holders.
Our internal risk reporting covers financial and non-financial risks
The Group Risk Report provides a detailed qualitative and
and is supported by risk data and measurement systems that are
quantitative monthly overview of developments in financial and
also used for external disclosure and regulatory reporting.
non-financial risks at the firm-wide level, along with breakdowns
Dedicated units within Risk Control assume responsibility for
of risks at the divisional level, including the status of our risk
measurement, analysis and reporting of risk and for overseeing the
appetite objectives and the results of firm-wide stress testing. The
quality and integrity of risk-related data. Our risk data and
Group Risk Report is distributed internally to the BoD and the GEB,
measurement systems are subject to periodic review by GIA,
reports are also produced for significant Group entities (entities
subject to enhanced standards of corporate governance) and
significant branches.
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Internal risk reporting
Model risk management
Comprehensive and transparent reporting of risks is central to our
Granular divisional risk reports are provided to the respective
Introduction
and senior members of Risk Control, GIA, Finance and Legal. Risk
following a risk-based audit approach.
Model governance framework
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.
Model risk is defined as the risk of adverse consequences (e.g.,
financial losses or reputational damage) resulting from incorrect
models.
Our model governance framework establishes requirements for
identifying, measuring, monitoring, reporting, controlling and
mitigating model risks. All the models that we use are subject to
governance and controls throughout their life cycles. This is
designed to ensure that risks arising from model use are
identified, understood, managed, monitored, controlled and
reported on both a model-specific and an aggregated level.
Before they can be granted approval for use from the model
sponsor, all our models are independently validated across four
model risk dimensions: (i) model input; (ii) model methodology;
(iii) model implementation; and (iv) model use.
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 continues
to be found 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.
Our model risk governance framework follows our overarching
risk governance framework, with the three lines of defense (LoD)
assigned as follows.
– First LoD: model sponsors, model owners, model developers,
and model users
– Second LoD: Chief Model Risk Officer, Model Risk
Management & Control
– Third LoD: Group Internal Audit
An important difference as compared with how LoD are usually
defined in financial and non-financial risk is that some models are
owned by traditionally second LoD functions, such as risk control,
finance or compliance.
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 committees and forums 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 Committee is our most senior
oversight and escalation body for all models in scope of our model
governance framework. It is co-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.
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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 measurement
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 “Non-financial risk” in
this section for more information about model confirmation
Our Enterprise-wide Stress Forum (the ESF) aims to ensure the
consistency and adequacy of the assumptions and scenarios used
for firm-wide stress measures. As part of its responsibilities, the
ESF with input from the Think Tank, a panel of senior
representatives from the business divisions, Risk Control and
economic research, 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.
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
these
unemployment. We use
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.
In 2021, the binding scenario for CST was the internal Global
Crisis scenario, which is characterized by a deterioration of global
economic conditions leading to sovereign defaults in Europe and
a global recession. The scenario was updated over the course of
2021 to incorporate current risks related to COVID-19, in
particular macroeconomic assumptions, such as deteriorating
GDP and rising unemployment. Continued weakness in economic
data and tensions between European countries about debt
mutualization undermines market confidence in the sustainability
of peripheral debt, leading to a sharp spike in bond yields. Italy,
Spain, Portugal and Cyprus receive bailout packages, on the
condition of substantial debt restructuring, while Greece leaves
the Eurozone. In addition to the effects of COVID-19, the
macroeconomic impact is severe, as is the immediate market
impact. Weak consumer and business confidence and a fall in
global trade as a result of protectionism lead to a global recession.
China is hit severely by trade protectionism and a confidence
shock, which lead to a hard landing.
procedures
Stress testing
We perform stress testing to estimate losses that could result from
extreme yet plausible macroeconomic and geopolitical stress
events 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 testing (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.”
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.
110
110
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Risk measurement
Audited | We apply a variety of methodologies and measurements
Our Enterprise-wide Stress Forum (the ESF) aims to ensure the
to quantify the risks of our portfolios and potential risk
consistency and adequacy of the assumptions and scenarios used
concentrations. Risks that are not fully reflected within standard
for firm-wide stress measures. As part of its responsibilities, the
measures are subject to additional controls, which may include
ESF with input from the Think Tank, a panel of senior
preapproval of specific transactions and the application of specific
representatives from the business divisions, Risk Control and
restrictions. Models to quantify risk are generally developed by
economic research, seeks to ensure that the set of stress scenarios
dedicated units within control functions and are subject to
adequately reflects current and potential developments in the
independent validation.
› Refer to “Credit risk,” “Market risk” and “Non-financial risk” in
this section for more information about model confirmation
procedures
Stress testing
macroeconomic and geopolitical environment, current and
planned business activities, and actual or potential risk
concentrations and vulnerabilities in our portfolios.
Each scenario captures a wide range of macroeconomic
variables, including GDP, equity prices, interest rates, foreign
exchange
rates, commodity prices, property prices and
unemployment. We use
assumed
changes
in
these
We perform stress testing to estimate losses that could result from
macroeconomic and market variables in each scenario to stress
extreme yet plausible macroeconomic and geopolitical stress
the key risk drivers of our portfolios. For example, lower GDP
events to identify, better understand and manage our potential
growth and rising interest rates may reduce the income of clients
vulnerabilities and risk concentrations. Stress testing has a key role
we have lent money to, which changes the credit risk parameters
in our limits framework at the firm-wide, business division, legal
for probability of default, loss given default and exposure at
entity and portfolio levels. Stress test results are regularly reported
default, and results in higher predicted credit losses within the
to the BoD and the GEB. As described in “Risk appetite
stress scenario. We also capture the business risk resulting from
framework,” stress testing, along with statistical loss measures,
lower fee, interest and trading income net of lower expenses.
has a central role in our risk appetite and business planning
These effects are measured for all businesses and material risk
processes.
types to calculate the aggregate estimated effect of the scenario
Our stress testing framework has three pillars: (i) combined
on profit or loss, other comprehensive income, RWA, LRD and,
stress tests; (ii) an extensive set of portfolio- and risk type-specific
ultimately, capital and leverage ratios. The assumed changes in
stress tests; and (iii) reverse stress testing.
macroeconomic variables are updated periodically to account for
Our combined stress testing (CST) framework is scenario-based
changes in the current and possible future market environment.
and aims to quantify overall firm-wide losses that could result
In 2021, the binding scenario for CST was the internal Global
from various potential global systemic events. The framework
Crisis scenario, which is characterized by a deterioration of global
captures all material risks, as covered in “Risk categories.”
economic conditions leading to sovereign defaults in Europe and
Scenarios are forward-looking and encompass macroeconomic
a global recession. The scenario was updated over the course of
and geopolitical stress events calibrated to different levels of
2021 to incorporate current risks related to COVID-19, in
severity. We implement each scenario through the expected
particular macroeconomic assumptions, such as deteriorating
evolution of market indicators and economic variables under that
GDP and rising unemployment. Continued weakness in economic
scenario and then estimate the overall loss and capital implications
data and tensions between European countries about debt
were the scenario to occur. At least once a year, the Risk
mutualization undermines market confidence in the sustainability
Committee approves the most relevant scenario, known as the
of peripheral debt, leading to a sharp spike in bond yields. Italy,
binding scenario, for use as the main scenario for regular CST
Spain, Portugal and Cyprus receive bailout packages, on the
reporting and for monitoring risk exposure against our minimum
condition of substantial debt restructuring, while Greece leaves
capital, earnings and leverage ratio objectives in our risk appetite
the Eurozone. In addition to the effects of COVID-19, the
We provide detailed stress loss analyses to FINMA and
impact. Weak consumer and business confidence and a fall in
regulators of our legal entities in accordance with their
global trade as a result of protectionism lead to a global recession.
macroeconomic impact is severe, as is the immediate market
framework.
requirements.
China is hit severely by trade protectionism and a confidence
shock, which lead to a hard landing.
As part of the CST framework, we routinely monitored three
additional stress scenarios throughout 2021:
– The US Monetary Crisis scenario explores a loss of confidence
in the US, which leads to a sell-off of US dollar-denominated
assets, sparking an abrupt and substantial depreciation of the
US dollar. The US economy is hit hard, financial markets enter
a period of high volatility and other industrialized countries
replicate the cyclical pattern of the US. Regional inflation
trends diverge as the US experiences significant inflationary
pressures while other developed markets experience deflation.
– The Severe Global Interest Rate Steepening scenario explores a
sharp and persistent rise in inflation leading to a significant rise
in long-term interest rates and a period of market turbulence.
Economic activity slows across the globe as both business and
household sentiment collapse, while credit conditions
deteriorate. Despite weakness in activity, inflation remains
stubbornly high, forcing central banks to begin hiking their
policy rates and thereby prolonging the weakness in economic
activity and asset prices.
– The Extreme Coronavirus scenario explores a resurgence of
COVID-19 and subsequent containment policies, which lead to
a severe global downturn with long-term scarring impacts. The
lack of adherence to containment measures leads to rapid
resurgences in the number of cases and fatalities, which force
countries to enforce increasingly stringent lockdown policies.
Vaccines prove to be ineffective in the near term, due to either
logistical constraints of vaccine distribution, vaccine hesitancy
or virus variants undermining the efficacy of current vaccines.
We have updated the binding stress scenario in our CST
framework for 2022. The updated Global Crisis scenario reflects
the weaker fiscal conditions resulting from the COVID-19
pandemic, which leads to sovereign defaults in several emerging
markets. The scenario continues to assume a Eurozone crisis and
a hard landing in China.
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 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, enabling 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
We complement the scenario-based CST measures with our
statistical stress framework to calculate and aggregate risks using
statistical techniques to derive stress events at chosen confidence
levels.
This framework is used to derive a loss distribution, considering
effects on both income and expenses, based on the simulation of
historically observed financial and economic risk factors in
combination with the firm’s actual earnings and relevant risk
exposures. 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.
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
common equity tier 1 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 the 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
attribution framework
110
111
111
Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Portfolio and position limits
Risk concentrations
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 and treasury risk controls on a daily basis.
Counterparty measures capture the current and potential future
exposure to an individual counterparty, considering collateral and
legally enforceable netting agreements.
› Refer to “Credit risk” in this section for more information about
counterparty limits
Audited | Risk concentrations may exist where one or several
positions within or across different risk categories could result in
significant losses relative to UBS’s financial strength. Identifying
such risk concentrations and assessing their potential impact is a
critical component of our risk management and control process.
For financial risks, we consider a number of elements, such as
shared characteristics of positions, the size of the portfolio and
the sensitivity of positions to changes in the underlying risk
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. This includes an assessment of the provider of the hedge
and market liquidity where the hedge might be traded. Particular
attention is given to identification of wrong-way risk and risk on
risk. Wrong-way risk is defined as a positive correlation between
the size of the exposure and the likelihood of a loss. Risk on risk
is when a position and its risk mitigation can be impacted by the
same event.
For non-financial risks, risk concentrations may result from, for
example, a single operational risk 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 risk
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 the available means to do so. It is
possible that material losses could occur on financial or non-
financial risks, particularly if the correlations that emerge in a
stressed environment differ markedly from those envisaged by risk
models.
› Refer to “Risk appetite framework” in this section for more
› Refer to “Credit risk” and “Market risk” in this section for more
information about the risk appetite framework
information about the composition of our portfolios
› Refer to the “Risk factors” section of this report for more
information
112
112
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Portfolio and position limits
Risk concentrations
UBS maintains a comprehensive set of risk limits across its major
Audited | Risk concentrations may exist where one or several
risk portfolios. These portfolio limits are set based on our risk
positions within or across different risk categories could result in
appetite and periodically reviewed and adjusted as part of the
significant losses relative to UBS’s financial strength. Identifying
business planning process.
such risk concentrations and assessing their potential impact is a
Firm-wide stress and statistical metrics are complemented by
critical component of our risk management and control process.
more granular portfolio and position limits, triggers and targets.
For financial risks, we consider a number of elements, such as
Combining these measures provides a comprehensive control
shared characteristics of positions, the size of the portfolio and
framework to apply to our business divisions, as well as the
the sensitivity of positions to changes in the underlying risk
significant legal entities, as relevant to the key risks arising from
factors. Also important in our assessment is the liquidity of the
their businesses.
markets where the positions are traded, as well as the availability
We apply limits to a variety of exposures at portfolio level,
and effectiveness of hedges or other potential risk-mitigating
using statistical and stress-based measures, such as value-at-risk,
factors. This includes an assessment of the provider of the hedge
liquidity-adjusted stress, loan underwriting limits, economic value
and market liquidity where the hedge might be traded. Particular
sensitivity and portfolio default simulations for loan books. These
attention is given to identification of wrong-way risk and risk on
are complemented with a set of controls for net interest income
risk. Wrong-way risk is defined as a positive correlation between
sensitivity, mark-to-market losses on available-for-sale portfolios,
the size of the exposure and the likelihood of a loss. Risk on risk
and the effect of foreign exchange movements on capital and
is when a position and its risk mitigation can be impacted by the
capital ratios.
same event.
Portfolio measures are supplemented with position-level
For non-financial risks, risk concentrations may result from, for
controls. Risk measures for position controls are based on market
example, a single operational risk issue that is large on its own
risk sensitivities and counterparty-level credit risk exposures.
(i.e., has the potential to produce a single high-impact loss or a
Market risk sensitivities include sensitivities to changes in general
number of losses that together are high impact) or related risk
market risk factors (e.g., equity indices, foreign exchange rates
issues that may link together to create a high impact.
and interest rates) and sensitivities to issuer-specific factors (e.g.,
Risk concentrations are subject to increased oversight by Group
changes in an issuer’s credit spread or default risk). We monitor
Risk Control and Group Compliance, Regulatory & Governance,
numerous market and treasury risk controls on a daily basis.
and assessed to determine whether they should be reduced or
Counterparty measures capture the current and potential future
mitigated, depending on the available means to do so. It is
exposure to an individual counterparty, considering collateral and
possible that material losses could occur on financial or non-
legally enforceable netting agreements.
› Refer to “Credit risk” in this section for more information about
financial risks, particularly if the correlations that emerge in a
stressed environment differ markedly from those envisaged by risk
counterparty limits
models.
› Refer to “Risk appetite framework” in this section for more
› Refer to “Credit risk” and “Market risk” in this section for more
information about the risk appetite framework
information about the composition of our portfolios
› Refer to the “Risk factors” section of this report for more
information
112
Credit risk
Key developments
In Global Wealth Management, the Lombard and mortgage
books showed significant growth primarily in the Americas over
the course of 2021, while keeping a stable risk profile with regard
to concentrations and with no material losses.
Across the firm, our lending portfolios performed well, with
credit loss expenses below expectations. Nevertheless, we
continue to be exposed to the development of the global economy
and the effects of the ongoing and highly uncertain COVID-19
pandemic.
We incurred a loss of USD 861 million in the first half of 2021
on the default of a US-based client of our prime brokerage
business. We have conducted a thorough review and put in place
appropriate measures
relevant client
onboarding and risk management and control processes. Across
the items identified for remediation and beyond, we have made
changes to our organization to drive wider improvements in both
first and second lines of defense. Our prime brokerage business
remains a strategic element of UBS’s offering.
to strengthen our
Credit loss expense / release
Total net credit loss releases were USD 148 million in 2021,
compared with net credit loss expenses of USD 694 million in the
prior year, reflecting net releases of USD 123 million related to
stage 1 and 2 positions and net releases of USD 25 million related
to credit-impaired (stage 3) positions.
Stage 1 and 2 net credit loss releases of USD 123 million in
2021 included a partial net release of a post-model adjustment of
in
USD 68 million, due to the continued positive trend
macroeconomic scenario input data during the year, a USD 45
Credit loss (expense) / release
million net release from a number of model and methodology
changes, a
from
residual USD 10 million net
remeasurements within the loan book, and derecognized
transactions, partially offset by expenses from new transactions.
Stage 3 net releases of USD 25 million were recognized across a
number of defaulted positions, primarily corporate lending
positions in Personal & Corporate Banking.
release
› Refer to “Note 1 Summary of material 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 and securitized positions.
USD million
FFoorr tthhee yyeeaarr eennddeedd 3311..1122..2211
Stages 1 and 2
Stage 3
TToottaall ccrreeddiitt lloossss ((eexxppeennssee)) // rreelleeaassee
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
Global
Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group
Functions
2288
11
2299
(48)
(40)
((8888))
3
(23)
((2200))
6622
2244
8866
(129)
(128)
((225577))
23
(44)
((2211))
00
((11))
((11))
0
(2)
((22))
0
0
00
3344
00
3344
(88)
(217)
((330055))
(4)
(26)
((3300))
00
00
00
0
(42)
((4422))
0
(7)
((77))
Total
112233
2255
114488
(266)
(429)
((669944))
22
(100)
((7788))
113
113
Risk, capital, liquidity and funding, and balance sheet
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Audited | Overview of measurement, monitoring and
management techniques
Credit risk profile of the Group
The exposures detailed in 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.
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 (OTC) derivatives, exchange-
traded derivatives (ETDs) and securities financing transactions
(SFTs), consisting of securities borrowing and lending, and
repurchase and reverse repurchase agreements.
Banking products
Breakdowns of banking products exposures in the “Banking and
traded products exposure in our business divisions and Group
Functions” table on the next page reflect the total exposures
within the scope of ECL requirements and are gross before
allowances and provisions for ECL and credit hedges. Guarantees
and loan commitments are shown on a notional basis, without
applying credit conversion factors.
› Refer to “Note 1 Summary of material accounting policies” in the
“Consolidated financial statements” section of this report for
more information about our accounting policy for allowances
and provisions for ECL
› 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
– 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 for losses.
– 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 for sector exposure, country risk and specific
product exposures.
114
114
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
management techniques
The exposures detailed in this section are based on management’s
– Credit risk from transactions with individual counterparties is
view of credit risk, which differs in certain respects from the
based on our estimates of probability of default (PD), exposure
expected credit loss (ECL) measurement requirements of IFRS.
at default (EAD) and loss given default (LGD). Limits are
Internally, we put credit risk exposures into two broad
established for individual counterparties and groups of related
categories: banking products and traded products. Banking
counterparties covering banking and traded products, and for
products
include drawn
loans, guarantees and
loan
settlement amounts. Risk authorities are approved by the BoD
commitments, amounts due from banks, balances at central
and are delegated to the Group CEO, the Group CRO and
banks, and other financial assets at amortized cost. Traded
divisional CROs, based on risk exposure amounts, internal
products include over-the-counter (OTC) derivatives, exchange-
credit rating and potential for losses.
traded derivatives (ETDs) and securities financing transactions
– Limits apply not only to the current outstanding amount but
(SFTs), consisting of securities borrowing and lending, and
also to contingent commitments and the potential future
repurchase and reverse repurchase agreements.
exposure of traded products.
– The Investment Bank monitoring, measurement and limit
Banking products
framework distinguishes between exposures intended to be
held to maturity (take-and-hold exposures) and those intended
Breakdowns of banking products exposures in the “Banking and
for distribution or risk transfer (temporary exposures).
traded products exposure in our business divisions and Group
– We use models to derive portfolio credit risk measures of
Functions” table on the next page reflect the total exposures
expected loss, statistical loss and stress loss at Group-wide and
within the scope of ECL requirements and are gross before
business division levels, and to establish portfolio limits.
allowances and provisions for ECL and credit hedges. Guarantees
– Credit risk concentrations can arise if clients are engaged in
and loan commitments are shown on a notional basis, without
similar activities, located in the same geographical region or
applying credit conversion factors.
have comparable economic characteristics, e.g., if their ability
› Refer to “Note 1 Summary of material accounting policies” in the
to meet contractual obligations would be similarly affected by
“Consolidated financial statements” section of this report for
changes in economic, political or other conditions. To avoid
more information about our accounting policy for allowances
credit risk concentrations, we establish limits / operational
and provisions for ECL
controls that constrain risk concentrations at portfolio and sub-
› Refer to “Note 9 Financial assets at amortized cost and other
portfolio levels for sector exposure, country risk and specific
positions in scope of expected credit loss measurement” and
product exposures.
“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
Audited | Overview of measurement, monitoring and
Credit risk profile of the Group
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
333377,,226666
222288,,559988
1100,,777722
99,,558822
77,,118866
00
22,,339966
1122,,994477
772299
226644
8899
4411
113355
PPeerrssoonnaall &&
CCoorrppoorraattee
BBaannkkiinngg
222299,,333344
115522,,884477
2299,,773377
778833
776666
00
1177
2244,,117744
11,,661177
770099
112266
114466
443388
3311..1122..2211
AAsssseett
MMaannaaggeemmeenntt
IInnvveessttmmeenntt
BBaannkk
GGrroouupp
FFuunnccttiioonnss
11,,552200
00
00
5599,,335522
1133,,772200
1144,,999944
6655,,551144
33,,444455
44,,994477
00
00
00
00
00
00
00
00
00
00
3355,,995500
99,,776677
1188,,556666
77,,661177
33,,662299
226644
118888
6644
3344
9900
2288
00
44
44
00
00
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group
Functions
31.12.20
300,368
208,324
10,153
9,919
6,946
0
2,973
12,201
227,139
153,975
28,814
1,201
1,182
0
19
24,950
3,374
1
0
56,237
13,964
15,936
52,199
4,324
3,550
0
0
0
0
0
40,215
11,236
21,753
7,227
2,952
31
TToottaall
669922,,998855
339988,,661111
6600,,445500
4466,,331144
1177,,771199
1188,,556666
1100,,003300
4400,,777788
22,,661100
11,,116655
228822
222200
666622
Total
639,317
380,589
58,453
51,335
19,364
21,753
10,218
40,134
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)
3,778
1,468
306
333
829
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.
1,997
842
130
216
497
1,324
318
103
54
160
450
298
70
63
165
7
10
3
0
6
0
1
0
0
1
Global Wealth Management
Gross banking products exposure within Global Wealth
Management increased to USD 337 billion from USD 300 billion.
Our Global Wealth Management loan portfolio is mainly
secured by securities (Lombard loans) and by residential real
estate. Most Lombard loans were of high quality, with 93% rated
as investment grade based on our internal ratings, and are
typically short term in nature, with an average loan-to-value (LTV)
of 46%. Moreover, Lombard loans can be canceled immediately
if the collateral quality deteriorates and margin calls are not met.
In 2021, the Lombard book, including traded products, increased
approximately 10%, while keeping a stable risk profile with
regard to collateral concentrations with no material losses. The
increase was mainly driven by higher loan volumes in the US that
are collateralized by highly liquid and diversified securities. The
share of non-standard Lombard loans, for example with less liquid
or concentrated collateral, was stable at approximately 4% of the
total Lombard book.
The mortgage book increased by approximately 8%, driven by
higher volumes of mortgage loans in the US residential real estate
portfolios (average LTV 51%).
Other
financings and non-standard
represent
approximately 3% of the total banking products exposures and
are consolidated in a corporate and other portfolio that increased
approximately 57% in 2021, mainly driven by private equity
subscription facilities in the US, which are mostly investment
grade rated.
loans
114
115
115
Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Global Wealth Management and Personal & Corporate Banking loans and advances to customers, gross1
USD million
Secured by residential real estate
Secured by commercial / industrial real estate
Secured by cash
Secured by securities
Secured by guarantees and other collateral
Unsecured loans and advances to customers
Global Wealth Management
Personal & Corporate Banking
3311..1122..2211
5588,,665555
33,,333388
3344,,117755
111155,,990011
1144,,113388
22,,339911
31.12.20
60,021
3,273
22,722
104,652
15,605
2,051
3311..1122..2211
111100,,004411
1188,,887788
33,,111144
22,,221144
77,,443355
1111,,116666
31.12.20
111,554
19,623
2,860
2,003
6,942
10,994
TToottaall llooaannss aanndd aaddvvaanncceess ttoo ccuussttoommeerrss,, ggrroossss
AAlllloowwaanncceess
TToottaall llooaannss aanndd aaddvvaanncceess ttoo ccuussttoommeerrss,, nneett ooff aalllloowwaanncceess
11 Collateral arrangements generally incorporate a range of collateral, including cash, securities, real estate and other collateral. UBS applies a risk-based approach that generally prioritizes collateral according to its
liquidity profile. In 2021, the collateral allocation was refined to reflect additional cash collateral and custody accounts that are also available as security for certain on-balance sheet lending. This resulted in an increase
in loans secured by cash, with an offsetting reduction in loans secured by residential real estate and loans secured by securities.
115522,,884477
((557744))
115522,,227733
208,324
(190)
208,134
222288,,559988
((116688))
222288,,443311
153,975
(676)
153,299
Personal & Corporate Banking
Gross banking products exposure (excluding exposure re-
allocated from Group Treasury) within Personal & Corporate
Banking was largely unchanged in our reporting currency at
USD 186 billion (CHF 170 billion), compared with USD 187
billion (CHF 165 billion). Net banking products exposure was
USD 186 billion (CHF 169 billion), compared with USD 186
billion (CHF 165 billion), of which approximately 65% was
classified as investment grade, unchanged from 2020. Around
50% of the exposure is categorized in the lowest LGD bucket,
i.e., 0–25%, similar to 2020. Personal & Corporate Banking’s
gross loan portfolio was USD 153 billion (CHF 139 billion)
compared with USD 154 billion (CHF 136 billion) in 2020. This
portfolio is predominantly denominated in Swiss francs and the
increase in Swiss franc terms was more than offset by the effect
of the US dollar appreciating. As of 31 December 2021, 93% of
this portfolio was secured by collateral, mainly residential and
commercial property. Of the total unsecured amount, 83%
related to cash flow-based lending to corporate counterparties
and 4% related to lending to public authorities. Based on our
internal ratings, 50% of the unsecured loan portfolio was rated
as investment grade, compared with 45% in 2020.
The improved macroeconomic environment for most industries
along with the supporting measures of the Swiss Government and
Cantons, such as COVID-19 loans, short-time work compensation
and subsidies, as well as our careful risk management, led to
numerous credit loss releases during 2021.
Our Swiss corporate banking products portfolio, which was
USD 36 billion (CHF 33 billion) compared with USD 35 billion
(CHF 31 billion) in 2020, consists of loans, guarantees and loan
commitments to multi-national and domestic counterparties. 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.
Our commodity trade finance portfolio focuses on energy and
base-metal trading companies, where the related commodity price
risk is hedged to a large extent by the commodity trader. The
majority of limits in this business are uncommitted, transactional
and short-term in nature. Our portfolio size was USD 8 billion
(CHF 7 billion) as of 31 December 2021, compared with USD 6
billion (CHF 5 billion) in 2020, with the increase in exposure mainly
driven by the strong appreciation of commodity prices in 2021.
Our exposure to banks consists primarily of contingent claims
and was USD 6 billion (CHF 5 billion), unchanged compared with
2020.
The delinquency ratio was 0.3% for the corporate portfolio,
compared with 0.4% at the end of 2020.
› Refer to “Credit risk models” in this section for more information
about loss given default, rating grades and rating agency
mappings
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 167 billion
(CHF 152 billion), mainly originate from Personal & Corporate
Banking, but also from Global Wealth Management Region
Switzerland. Of these mortgage loans, USD 152 billion (CHF 138
billion) related to residential properties that the borrower was
either occupying or renting out, with full recourse to the
borrower. Of this USD 152 billion (CHF 138 billion), USD 110
billion (CHF 100 billion) is related to properties occupied by the
borrower, with an average LTV ratio of 52%, compared with 54%
as of 31 December 2020. The average LTV for newly originated
loans for this portfolio was 64%, compared with 67% in 2020.
The remaining USD 42 billion (CHF 38 billion) of the Swiss
residential mortgage loan portfolio related to properties rented
out by the borrower and the average LTV of that portfolio was
52%, compared with 53% as of 31 December 2020. The average
LTV for newly originated Swiss residential mortgage loans for
properties rented out by the borrower was 55%, compared with
56% in 2020.
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 following 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 20%, and
more than 98% would remain covered by the real estate collateral
even if the value assigned to that collateral were to decrease 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.
116
116
(795)
((667744))
118855,,660044
185,853
31.12.20
3311..1122..2211
LLGGDD bbuucckkeettss
11,,888888
11,,770066
118811
00
33,,777777
2266––5500%% 5511––7755%%
99,,334477
4411,,773388
7766––110000%%
11,,888899
2255,,330066
1111,,664466
2233,,119955
1100,,551133
22,,111100
11,,333322
11,,113333
225522
Total exposure before deduction of allowances and provisions
118866,,227788
9922,,888800
6688,,337766
2211,,224455
WWeeiigghhtteedd
aavveerraaggee
LLGGDD ((%%))
2277
3344
3344
3366
4422
2299
Weighted
average
LGD (%)
26
33
33
35
41
29
Exposure
121,386
63,266
58,141
5,125
1,997
186,648
Personal & Corporate Banking: distribution of banking products exposure across internal UBS ratings and loss given
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
EExxppoossuurree
112211,,552200
6633,,114411
5577,,995555
55,,118855
11,,661177
00––2255%%
6688,,554477
2244,,330011
2222,,554400
11,,776600
3322
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.
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Global Wealth Management and Personal & Corporate Banking loans and advances to customers, gross1
USD million
Secured by residential real estate
Secured by commercial / industrial real estate
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
Global Wealth Management
Personal & Corporate Banking
3311..1122..2211
31.12.20
5588,,665555
33,,333388
3344,,117755
111155,,990011
1144,,113388
22,,339911
222288,,559988
((116688))
222288,,443311
60,021
3,273
22,722
104,652
15,605
2,051
208,324
(190)
208,134
3311..1122..2211
111100,,004411
1188,,887788
33,,111144
22,,221144
77,,443355
1111,,116666
115522,,884477
((557744))
115522,,227733
31.12.20
111,554
19,623
2,860
2,003
6,942
10,994
153,975
(676)
153,299
11 Collateral arrangements generally incorporate a range of collateral, including cash, securities, real estate and other collateral. UBS applies a risk-based approach that generally prioritizes collateral according to its
liquidity profile. In 2021, the collateral allocation was refined to reflect additional cash collateral and custody accounts that are also available as security for certain on-balance sheet lending. This resulted in an increase
in loans secured by cash, with an offsetting reduction in loans secured by residential real estate and loans secured by securities.
Personal & Corporate Banking
Our exposure to banks consists primarily of contingent claims
Gross banking products exposure (excluding exposure re-
and was USD 6 billion (CHF 5 billion), unchanged compared with
allocated from Group Treasury) within Personal & Corporate
2020.
Banking was largely unchanged in our reporting currency at
The delinquency ratio was 0.3% for the corporate portfolio,
USD 186 billion (CHF 170 billion), compared with USD 187
compared with 0.4% at the end of 2020.
billion (CHF 165 billion). Net banking products exposure was
USD 186 billion (CHF 169 billion), compared with USD 186
› Refer to “Credit risk models” in this section for more information
about loss given default, rating grades and rating agency
billion (CHF 165 billion), of which approximately 65% was
mappings
classified as investment grade, unchanged from 2020. Around
50% of the exposure is categorized in the lowest LGD bucket,
Swiss mortgage loan portfolio
i.e., 0–25%, similar to 2020. Personal & Corporate Banking’s
Our Swiss mortgage loan portfolio secured by residential and
gross loan portfolio was USD 153 billion (CHF 139 billion)
commercial real estate in Switzerland continues to be our largest
compared with USD 154 billion (CHF 136 billion) in 2020. This
loan portfolio. These mortgage loans, totaling USD 167 billion
portfolio is predominantly denominated in Swiss francs and the
(CHF 152 billion), mainly originate from Personal & Corporate
increase in Swiss franc terms was more than offset by the effect
Banking, but also from Global Wealth Management Region
of the US dollar appreciating. As of 31 December 2021, 93% of
Switzerland. Of these mortgage loans, USD 152 billion (CHF 138
this portfolio was secured by collateral, mainly residential and
billion) related to residential properties that the borrower was
commercial property. Of the total unsecured amount, 83%
either occupying or renting out, with full recourse to the
related to cash flow-based lending to corporate counterparties
borrower. Of this USD 152 billion (CHF 138 billion), USD 110
and 4% related to lending to public authorities. Based on our
billion (CHF 100 billion) is related to properties occupied by the
internal ratings, 50% of the unsecured loan portfolio was rated
borrower, with an average LTV ratio of 52%, compared with 54%
as investment grade, compared with 45% in 2020.
as of 31 December 2020. The average LTV for newly originated
The improved macroeconomic environment for most industries
loans for this portfolio was 64%, compared with 67% in 2020.
along with the supporting measures of the Swiss Government and
The remaining USD 42 billion (CHF 38 billion) of the Swiss
Cantons, such as COVID-19 loans, short-time work compensation
residential mortgage loan portfolio related to properties rented
and subsidies, as well as our careful risk management, led to
out by the borrower and the average LTV of that portfolio was
numerous credit loss releases during 2021.
52%, compared with 53% as of 31 December 2020. The average
Our Swiss corporate banking products portfolio, which was
LTV for newly originated Swiss residential mortgage loans for
USD 36 billion (CHF 33 billion) compared with USD 35 billion
properties rented out by the borrower was 55%, compared with
(CHF 31 billion) in 2020, consists of loans, guarantees and loan
56% in 2020.
commitments to multi-national and domestic counterparties. The
As illustrated in the “Swiss mortgages: distribution of net
small and medium-sized entity (SME) portfolio, in particular, is
exposure at default (EAD) across exposure segments and loan-to-
well diversified across industries. However, such companies are
value (LTV) buckets” table on the following page, more than 99%
reliant on the domestic economy and the economies to which
of the aggregate amount of Swiss residential mortgage loans
they export, in particular the EU and the US. In addition, the
would continue to be covered by the real estate collateral even if
change in the EUR / CHF exchange rate is an important risk factor
the value assigned to that collateral were to decrease 20%, and
for Swiss corporate clients.
more than 98% would remain covered by the real estate collateral
Our commodity trade finance portfolio focuses on energy and
even if the value assigned to that collateral were to decrease 30%.
base-metal trading companies, where the related commodity price
In this table, the amount of each mortgage loan is allocated across
risk is hedged to a large extent by the commodity trader. The
the LTV buckets to indicate the portion at risk at the various value
majority of limits in this business are uncommitted, transactional
levels shown; for example, a loan of 75 with an LTV ratio of 75%
and short-term in nature. Our portfolio size was USD 8 billion
(i.e., a collateral value of 100) would result in allocations of 30 in
(CHF 7 billion) as of 31 December 2021, compared with USD 6
the less-than-30% LTV bucket, 20 in the 31–50% bucket, 10 in
billion (CHF 5 billion) in 2020, with the increase in exposure mainly
the 51–60% bucket, 10 in the 61–70% bucket and 5 in the 71–
driven by the strong appreciation of commodity prices in 2021.
80% bucket.
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..2211
UUSSDD mmiilllliioonn
116666
22,,778866
111199
11,,555555
11,,448888
441199
557744
11,,997711
11,,990088
118800
%%
11..55
2255..00
11..11
1133..99
1133..33
33..88
55..11
1177..77
1177..11
11..66
31.12.20
USD million
157
2,553
133
1,572
1,648
472
498
1,756
1,896
309
%
1.4
23.2
1.2
14.3
15.0
4.3
4.5
16.0
17.3
2.8
1111,,116666
110000..00
10,994
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 31.12.20
3311..1122..2211
LLTTVV bbuucckkeettss
31.12.20
≤≤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
8899..00
6622
1144..55
6655
77..11
6655
00..66
6688
111111..22
6633
108.8
61
3388..66
1100..22
2277
55..77
2255
22..66
2233
00..22
2200
4477..00
2266
47.3
27
77
11..33
66
00..77
66
00..00
55
1122..22
77
13.0
7
44..66
33
00..55
22
00..44
33
00..00
33
55..55
33
6.4
4
11..22
11
00..22
11
00..22
11
00..00
22
11..55
11
2.0
1
00..22
00
00..00
00
00..11
11
00..00
22
00..33
00
0.5
0
00..11
00
00..00
00
00..00
00
00..00
00
00..11
00
0.2
0
114433..99
143.9
2222..22
22.8
1100..99
10.8
00..99
0.8
117777..99
178.3
178.3
100
Asset Management
Gross banking products exposure within Asset Management was
USD 1.5 billion as of 31 December 2021, compared with USD 3.4
billion as of 31 December 2020. The reduction was driven by
lower allocated balances at central banks.
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.
116
117
117
Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Risk management and control
The gross banking products exposure including balances at
central banks and Group Treasury reallocations was USD 59
billion as of 31 December 2021, compared with USD 56 billion as
of 31 December 2020. Gross banking products exposure
excluding balances at central banks and Group Treasury
reallocations decreased to USD 35 billion from USD 37 billion,
mostly driven by decreases in irrevocable loan commitments.
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%.
Our loan underwriting business’s overall ability to distribute risk
remained sound. Total mandated temporary loan underwriting
exposure ended 2021 at USD 6.6 billion, compared with USD 4.9
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 2021.
› Refer to “Credit risk models” in this section for more information
about LGD, rating grades and rating agency mappings
Investment Bank: distribution of banking products exposure across internal UBS ratings and loss given default (LGD)
buckets1
USD million, except where indicated
31.12.20
3311..1122..2211
LLGGDD bbuucckkeettss
Internal UBS rating2
Investment grade
Sub-investment grade
of which: 6−9
of which: 10−13
Defaulted / Credit-impaired
EExxppoossuurree
1188,,330022
00––2255%%
66,,448866
2266––5500%%
77,,667733
5511––7755%%
33,,006699
7766––110000%%
11,,007733
1166,,225500
1100,,446677
55,,778833
226644
55,,002222
33,,226699
11,,775533
5588
66,,111111
22,,116633
33,,994488
119966
55,,002200
44,,993388
8822
99
9977
9977
00
00
WWeeiigghhtteedd
aavveerraaggee
LLGGDD ((%%))
3366
2200
1144
3311
3333
Weighted
average
LGD (%)
36
17
11
30
53
Exposure
19,303
16,785
12,030
4,756
450
BBaannkkiinngg pprroodduuccttss eexxppoossuurree11
27
1111,,556666
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.
36,538
3344,,881155
1133,,998811
88,,009988
11,,117700
2288
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..2211
UUSSDD mmiilllliioonn
55,,115544
11,,332277
221122
1166,,228822
445533
1111,,338877
3344,,881155
3311..1122..2211
UUSSDD mmiilllliioonn
44,,990088
664455
335599
1133,,335533
11,,669922
11,,002244
661199
11,,558811
22,,779933
33,,773366
441144
33,,669911
%%
1144..88
33..88
00..66
4466..88
11..33
3322..77
110000..00
%%
1144..11
11..99
11..00
3388..44
44..99
22..99
11..88
44..55
88..00
1100..77
11..22
1100..66
31.12.20
USD million
7,216
1,584
428
15,462
720
11,129
36,538
31.12.20
USD million
5,846
876
448
14,570
1,681
1,558
1,273
1,421
2,041
3,443
445
2,937
%
19.7
4.3
1.2
42.3
2.0
30.5
100.0
%
16.0
2.4
1.2
39.9
4.6
4.3
3.5
3.9
5.6
9.4
1.2
8.0
EExxppoossuurree11
11 Excluding balances at central banks and Group Treasury reallocations. Clearing houses are now classified under Financial institutions, excluding banks (31 December 2021: USD 1,196 million; 31 December 2020:
USD 1,440 million).
36,538
3344,,881155
100.0
110000..00
118
118
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
The gross banking products exposure including balances at
Our loan underwriting business’s overall ability to distribute risk
central banks and Group Treasury reallocations was USD 59
remained sound. Total mandated temporary loan underwriting
billion as of 31 December 2021, compared with USD 56 billion as
exposure ended 2021 at USD 6.6 billion, compared with USD 4.9
of 31 December 2020. Gross banking products exposure
billion at the end of the prior year. Loan underwriting exposures
excluding balances at central banks and Group Treasury
are classified as held for trading, with fair values reflecting market
reallocations decreased to USD 35 billion from USD 37 billion,
conditions at the end of 2021.
› Refer to “Credit risk models” in this section for more information
about LGD, rating grades and rating agency mappings
mostly driven by decreases in irrevocable loan commitments.
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%.
Investment Bank: distribution of banking products exposure across internal UBS ratings and loss given default (LGD)
3311..1122..2211
LLGGDD bbuucckkeettss
EExxppoossuurree
00––2255%%
2266––5500%%
5511––7755%%
7766––110000%%
1188,,330022
1166,,225500
1100,,446677
55,,778833
226644
66,,448866
55,,002222
33,,226699
11,,775533
5588
77,,667733
66,,111111
22,,116633
33,,994488
119966
33,,006699
55,,002200
44,,993388
8822
99
11,,007733
9977
9977
00
00
3344,,881155
1111,,556666
1133,,998811
88,,009988
11,,117700
WWeeiigghhtteedd
aavveerraaggee
LLGGDD ((%%))
31.12.20
Weighted
average
LGD (%)
Exposure
19,303
16,785
12,030
4,756
450
36,538
3366
2200
1144
3311
3333
2288
36
17
11
30
53
27
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.
Investment Bank: banking products exposure by geographical region1
3311..1122..2211
UUSSDD mmiilllliioonn
31.12.20
USD million
11 Excluding balances at central banks and Group Treasury reallocations.
Investment Bank: banking products exposure by industry sector1
3311..1122..2211
UUSSDD mmiilllliioonn
31.12.20
USD million
55,,115544
11,,332277
221122
1166,,228822
445533
1111,,338877
3344,,881155
44,,990088
664455
335599
1133,,335533
11,,669922
11,,002244
661199
11,,558811
22,,779933
33,,773366
441144
33,,669911
3344,,881155
%%
1144..88
33..88
00..66
4466..88
11..33
3322..77
110000..00
%%
1144..11
11..99
11..00
3388..44
44..99
22..99
11..88
44..55
88..00
1100..77
11..22
1100..66
110000..00
7,216
1,584
428
15,462
720
11,129
36,538
5,846
876
448
14,570
1,681
1,558
1,273
1,421
2,041
3,443
445
2,937
%
19.7
4.3
1.2
42.3
2.0
30.5
100.0
%
16.0
2.4
1.2
39.9
4.6
4.3
3.5
3.9
5.6
9.4
1.2
8.0
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
BBaannkkiinngg pprroodduuccttss eexxppoossuurree11
Middle East and Africa
Asia Pacific
Latin America
North America
Switzerland
Rest of Europe
EExxppoossuurree11
Electricity, gas, water supply
Financial institutions, excluding banks
Banks
Chemicals
Manufacturing
Mining
Public authorities
Real estate and construction
Retail and wholesale
Technology and communications
Transport and storage
Other
EExxppoossuurree11
USD 1,440 million).
118
11 Excluding balances at central banks and Group Treasury reallocations. Clearing houses are now classified under Financial institutions, excluding banks (31 December 2021: USD 1,196 million; 31 December 2020:
36,538
100.0
Group Functions
Gross banking products exposure within Group Functions, which
arises primarily in connection with treasury activities, increased by
USD 13 billion to USD 66 billion from balances at central banks.
The cash inflow was generated mainly from lower funding
consumption by the Investment Bank, shifts within the high-
quality liquid asset (HQLA) portfolio from securities into cash, and
net new issuances of long-term debt issued measured at
amortized cost.
› 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
| Counterparty credit risk (CCR) arising from traded
Audited
products, which include OTC derivatives, ETD exposures and 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
counterparty’s creditworthiness (as determined by Risk Control).
Limit frameworks are also used to control overall exposure to
specific classes or categories of collateral on a portfolio level. Such
portfolio
to senior
management.
limits are monitored and
reported
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
collateral permitted by applicable regulations. For certain
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.
In the tables on the following page, OTC derivatives exposures
are generally presented 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.
The “Banking and traded products exposure in our business
divisions and Group Functions” table in this section provides
information on the split by divisions and products, and the tables
on the next page provide information about the OTC derivatives,
SFT and ETD exposures of the Investment Bank, Non-core and
Legacy Portfolio, and Group Treasury.
› 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
119
119
Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Investment Bank, Non-core and Legacy Portfolio and Group Treasury: traded products exposure
USD million
OOTTCC ddeerriivvaattiivveess
EETTDDss
SSFFTTss
3311..1122..2211
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
99,,776677
((3344))
((111199))
99,,661155
1188,,556666
00
00
1188,,556666
77,,661177
00
00
77,,661177
TToottaall
3355,,995500
((3344))
((111199))
3355,,779977
TToottaall
31.12.20
40,215
(54)
(126)
40,035
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
31.12.20
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..2211
LLGGDD bbuucckkeettss
EExxppoossuurree
00––2255%% 2266––5500%% 5511––7755%% 7766––110000%%
99,,229977
227722
77,,777700
331177
224499
4466
2222
4444
2255
00
1199
5544
5533
11
00
770044
113311
9900
3399
33
99,,661155
331177
77,,882244
883355
555522
8888
8811
77
00
663399
WWeeiigghhtteedd
aavveerraaggee
LLGGDD ((%%))
4477
5599
6622
6644
1144
4488
Weighted
average
LGD (%)
49
55
55
62
12
49
Exposure
10,436
620
487
114
19
11,056
1177,,993377
115599
1155,,665555
11,,881122
331100
4400
21,155
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.
662299
1188,,556666
598
21,753
229966
1155,,995511
5500
11,,886622
00
115599
228833
559933
59
40
6699
4411
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..2211
31.12.20
3311..1122..2211
31.12.20
UUSSDD mmiilllliioonn
11,,558866
111111
111122
11,,883300
668888
55,,228888
99,,661155
%%
1166..55
11..22
11..22
1199..00
77..22
5555..00
110000..00
USD million
2,139
162
263
2,539
667
5,286
11,056
%
19.3
1.5
2.4
23.0
6.0
47.8
100.0
UUSSDD mmiilllliioonn
55,,338800
2200
336600
44,,447733
555599
77,,777744
1188,,556666
%%
2299..00
00..11
11..99
2244..11
33..00
4411..99
110000..00
USD million
5,123
18
939
4,778
1,329
9,566
21,753
Investment Bank, Non-core and Legacy Portfolio and Group Treasury: net OTC derivatives and SFT exposure
by industry sector
NNeett OOTTCC ddeerriivvaattiivveess eexxppoossuurree
NNeett SSFFTT eexxppoossuurree
3311..1122..2211
31.12.20
3311..1122..2211
31.12.20
Banks1
Chemicals
Electricity, gas, water supply
Financial institutions, excluding banks1
Manufacturing
Mining
Public authorities
Retail and wholesale
Transport, storage and communication
Other
EExxppoossuurree
11 Clearing houses have been reclassified from Banks to Financial institutions, excluding banks. Prior-period numbers have been restated accordingly
USD million
1,877
10
127
6,742
68
12
1,339
44
481
356
11,056
UUSSDD mmiilllliioonn
998866
1144
110033
77,,117744
5500
5511
881100
2222
225555
115500
99,,661155
%%
1100..33
00..11
11..11
7744..66
00..55
00..55
88..44
00..22
22..66
11..66
110000..00
%
17.0
0.1
1.2
61.0
0.6
0.1
12.1
0.4
4.3
3.2
100.0
UUSSDD mmiilllliioonn
11,,665544
00
00
1155,,886666
00
00
992266
00
00
112200
1188,,556666
%%
88..99
00..00
00..00
8855..55
00..00
00..00
55..00
00..00
00..00
00..66
110000..00
USD million
1,653
0
0
18,049
0
0
2,050
0
0
1
21,753
%
23.6
0.1
4.3
22.0
6.1
44.0
100.0
%
7.6
0.0
0.0
83.0
0.0
0.0
9.4
0.0
0.0
0.0
100.0
120
120
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
USD million
Total exposure, before deduction of credit valuation adjustments and hedges
Less: credit valuation adjustments and allowances
Less: credit protection bought (credit default swaps, notional)
OOTTCC ddeerriivvaattiivveess
EETTDDss
TToottaall
SSFFTTss
3311..1122..2211
99,,776677
((3344))
((111199))
99,,661155
1188,,556666
77,,661177
3355,,995500
00
00
00
00
((3344))
((111199))
TToottaall
31.12.20
40,215
(54)
(126)
NNeett eexxppoossuurree aafftteerr ccrreeddiitt vvaalluuaattiioonn aaddjjuussttmmeennttss,, aalllloowwaanncceess aanndd hheeddggeess
1188,,556666
77,,661177
3355,,779977
40,035
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
3311..1122..2211
LLGGDD bbuucckkeettss
WWeeiigghhtteedd
aavveerraaggee
LLGGDD ((%%))
31.12.20
Weighted
average
LGD (%)
EExxppoossuurree
00––2255%% 2266––5500%% 5511––7755%% 7766––110000%%
TToottaall nneett OOTTCC ddeerriivvaattiivveess eexxppoossuurree,, aafftteerr ccrreeddiitt vvaalluuaattiioonn aaddjjuussttmmeennttss
99,,229977
227722
77,,777700
331177
224499
4466
2222
4444
2255
00
1199
5544
5533
11
00
770044
113311
9900
3399
33
99,,661155
331177
77,,882244
883355
1177,,993377
662299
1188,,556666
115599
00
115599
1155,,665555
229966
1155,,995511
11,,881122
5500
11,,886622
555522
8888
8811
77
00
663399
331100
228833
559933
Exposure
10,436
620
487
114
19
11,056
21,155
598
21,753
4477
5599
6622
6644
1144
4488
4400
6699
4411
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.
Investment Bank, Non-core and Legacy Portfolio and Group Treasury: net OTC derivatives and SFT exposure
by geographical region
NNeett OOTTCC ddeerriivvaattiivveess eexxppoossuurree
NNeett SSFFTT eexxppoossuurree
3311..1122..2211
UUSSDD mmiilllliioonn
31.12.20
USD million
3311..1122..2211
UUSSDD mmiilllliioonn
31.12.20
USD million
Investment Bank, Non-core and Legacy Portfolio and Group Treasury: net OTC derivatives and SFT exposure
110000..00
21,753
100.0
11,,558866
111111
111122
11,,883300
668888
55,,228888
99,,661155
998866
1144
110033
5500
5511
881100
2222
225555
115500
%%
1166..55
11..22
11..22
1199..00
77..22
5555..00
110000..00
%%
1100..33
00..11
11..11
7744..66
00..55
00..55
88..44
00..22
22..66
11..66
2,139
162
263
2,539
667
5,286
11,056
1,877
10
127
6,742
68
12
1,339
44
481
356
11,056
%
19.3
1.5
2.4
23.0
6.0
47.8
100.0
%
17.0
0.1
1.2
61.0
0.6
0.1
12.1
0.4
4.3
3.2
100.0
55,,338800
2200
336600
44,,447733
555599
77,,777744
1188,,556666
00
00
00
00
00
00
992266
112200
1188,,556666
%%
2299..00
00..11
11..99
2244..11
33..00
4411..99
%%
88..99
00..00
00..00
00..00
00..00
55..00
00..00
00..00
00..66
5,123
18
939
4,778
1,329
9,566
0
0
0
0
0
0
1
2,050
NNeett OOTTCC ddeerriivvaattiivveess eexxppoossuurree
NNeett SSFFTT eexxppoossuurree
3311..1122..2211
UUSSDD mmiilllliioonn
31.12.20
USD million
3311..1122..2211
31.12.20
UUSSDD mmiilllliioonn
11,,665544
USD million
1,653
Financial institutions, excluding banks1
77,,117744
1155,,886666
8855..55
18,049
83.0
11 Clearing houses have been reclassified from Banks to Financial institutions, excluding banks. Prior-period numbers have been restated accordingly
99,,661155
110000..00
110000..00
21,753
100.0
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
aanndd hheeddggeess
NNeett SSFFTT eexxppoossuurree
Investment grade
Sub-investment grade
TToottaall nneett SSFFTT eexxppoossuurree
Middle East and Africa
Asia Pacific
Latin America
North America
Switzerland
Rest of Europe
EExxppoossuurree
by industry sector
Banks1
Chemicals
Electricity, gas, water supply
Manufacturing
Mining
Public authorities
Retail and wholesale
Other
EExxppoossuurree
Transport, storage and communication
49
55
55
62
12
49
40
59
40
%
23.6
0.1
4.3
22.0
6.1
44.0
%
7.6
0.0
0.0
0.0
0.0
9.4
0.0
0.0
0.0
Investment Bank, Non-core and Legacy Portfolio and Group Treasury: traded products exposure
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 originating or modifying
Swiss mortgage loans. The model’s two key factors are the LTV
ratio and an affordability calculation relative to gross income.
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 in the context of the current environment.
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, an asset value for income-producing real estate
(IPRE), and, in some cases, an additional external valuation for
owner-occupied residential properties (ORPs).
Two separate models provided by a market-leading external
vendor are used to derive property valuations for ORPs and 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 value of a property 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. A portfolio-specific monitoring system
considers these along with other risk measures (e.g., rating and
behavioral information) to identify higher-risk loans and triggers
an assessment and reappraisal by client advisors and credit officers
as needed.
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). Updated
information regarding rental income from IPRE is requested from
the client at least once every three years. Our portfolio-specific
monitoring system alerts us to changes in rental income and other
risk measures (e.g., LTV, rating, behavioral information), and
triggers an assessment and reappraisal by client advisors and
credit officers as needed.
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.
For our mortgage loan portfolio in the Global Wealth
Management regions of EMEA and Asia Pacific, we apply global
underwriting guidelines with regional variations to allow for
regulatory and market differentials. As in other regions, the
underwriting guidelines take into account affordability and
collateral sufficiency. Affordability is assessed at a stressed interest
rate using, for residential real estate, the borrowers’ sustainable
income and declared liabilities, and for commercial real estate the
quality and sustainability of rental income. For interest-only loans,
a declared and evidenced repayment strategy must be in place.
The applicable LTV for each mortgage is based on the quality and
liquidity of the property and assessed against valuations from
bank-appointed third-party valuers. Maximum LTV varies from
30% to 70%, depending on the type and location of the
property, as well as other factors. Collateral sufficiency is often
further supported by personal guarantees from the borrower. The
overall portfolio is centrally assessed against a number of stress
scenarios to ensure that exposures remain within predefined
stress limits.
› Refer to “Swiss mortgage loan portfolio” in this section for more
information about LTV in our Swiss mortgage portfolio
120
121
121
Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Risk management and control
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.
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 to reduce concentrations of risk from
specific counterparties, sectors or portfolios and, for CCR, 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 may
reduce the effectiveness of the credit protection. Mismatches are
routinely reported to credit officers and mitigating actions are
taken when necessary.
› Refer to “Note 10 Derivative instruments” in the “Consolidated
financial statements” section of this report for more information
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 ratings-
based (A-IRB) approach of the Basel III framework. We also use
models to derive the portfolio credit risk measures of expected
loss, statistical loss and stress loss.
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 2021 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
122
122
NNuummbbeerr ooff
mmaaiinn mmooddeellss MMaaiinn ddrriivveerrss
NNuummbbeerr ooff
yyeeaarrss ooff lloossss
ddaattaa11
1 Political, institutional and economic indicators
>10
Lombard lending
credit-index CDSs, to reduce counterparty exposures. Buying
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
Credit cards in Switzerland
Corporates: other lending Scorecard
Retail: qualifying
revolving retail and other
retail,
Corporates: other lending Scorecard
Banks
Commodity traders
Banks and securities
dealers
Corporates: specialized
lending
Scorecard
Scorecard
Aircraft financing
Corporates: other lending Scorecard
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 /
market data
Scorecard /
pooled rating
approach /
rating
template
Statistical
model
Statistical
model
Statistical
model,
simulation
Statistical
model
Statistical
model
Statistical
model
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Audited | Lombard loans are secured by pledges of marketable
credit protection also creates credit exposure with regard to the
securities, guarantees and other forms of collateral. Eligible
protection provider. We monitor and limit exposures to credit
financial securities are primarily liquid and actively traded
protection providers, and also monitor the effectiveness of credit
transferable securities (such as bonds and equities), and other
hedges as part of our overall credit exposures to the relevant
transferable securities, such as approved structured products for
counterparties. Trading with such counterparties is typically
which regular prices are available and the issuer of the security
collateralized. For credit protection purchased to hedge the
provides a market. To a lesser degree, less liquid collateral is also
lending portfolio, this includes monitoring mismatches between
used.
the maturity of credit protection purchased and the maturity of
We derive lending values by applying discounts (haircuts) to
the associated loan. Such mismatches result in basis risk and may
the pledged collateral’s market value. Haircuts for marketable
reduce the effectiveness of the credit protection. Mismatches are
securities are calculated to cover possible change in value over a
routinely reported to credit officers and mitigating actions are
given close-out period and confidence level. Less liquid or more
taken when necessary.
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
› Refer to “Note 10 Derivative instruments” in the “Consolidated
financial statements” section of this report for more information
counterparties. We also perform targeted Group-wide reviews of
Mitigation of settlement risk
concentration. Concentration of collateral in single securities,
To mitigate settlement risk, we reduce actual settlement volumes
issuers or issuer groups, industry sectors, countries, regions or
by using multi-lateral and bilateral agreements with
currencies may result in higher risk and reduced liquidity. In such
counterparties, including payment netting.
cases, the lending value of the collateral, margin call and close-
Foreign exchange transactions are our most significant source
out levels are adjusted accordingly.
of settlement risk. We are a member of Continuous Linked
Exposures and collateral values are monitored daily, with the
Settlement (CLS), an industry utility that provides a multi-lateral
aim of ensuring that the credit exposure is always within the
framework to settle transactions on a delivery-versus-payment
established risk tolerance. A shortfall occurs when the lending
basis, thus reducing foreign exchange-related settlement risk
value drops below the exposure; if it exceeds a defined trigger
relative to the volume of business. However, mitigation of
level, a margin call is initiated, requiring the client to provide
settlement risk through CLS and other means does not fully
additional collateral, reduce the exposure or take other action to
eliminate credit risk in foreign exchange transactions resulting
bring exposure in line with the agreed lending value of the
from changes in exchange rates prior to settlement, which is
collateral. If a shortfall increases and exceeds a further trigger
managed as part of our overall credit risk management of OTC
level, or the shortfall is not corrected within the required period,
derivatives.
a close-out is initiated, through which collateral is liquidated,
open derivative positions are closed and guarantees are called.
Credit risk models
We conduct stress testing of collateralized exposures to
simulate market events that reduce collateral value, increase
Basel III – A-IRB credit risk models
exposure of traded products, or do both. For certain classes of
Audited | We have developed tools and models to estimate future
counterparties, limits on such calculated stress exposures are
credit losses that may be implicit in our current portfolio.
applied and controlled at a counterparty level. Also, portfolio
Exposures to individual counterparties are measured using
limits are applied across certain businesses or collateral types.
three generally accepted parameters: PD, EAD and LGD. For a
› Refer to “Stress loss” in this section for more information about
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 ratings-
our stress testing
Credit hedging
Audited | We use single-name credit default swaps (CDSs), credit-
based (A-IRB) approach of the Basel III framework. We also use
index CDSs, bespoke protection and other instruments to actively
models to derive the portfolio credit risk measures of expected
manage credit risk in the Investment Bank and Non-core and
loss, statistical loss and stress loss.
Legacy Portfolio. The aim is to reduce concentrations of risk from
The “Key features of our main credit risk models” table on the
specific counterparties, sectors or portfolios and, for CCR, the
next page shows the number and key features of the models we
profit or loss effect arising from changes in credit valuation
use to derive PD, LGD and EAD for our main portfolios and asset
adjustments (CVAs).
classes, and is followed by more detailed explanations of these
We have strict guidelines with regard to taking credit hedges
models and parameters.
into account for credit risk mitigation purposes. For example,
› Refer to the 31 December 2021 Pillar 3 Report, available under
when monitoring exposures against counterparty limits, we do
“Pillar 3 disclosures” at ubs.com/investors, for more information
not usually apply certain credit risk mitigants, such as proxy
about the regulatory capital calculation under the advanced
hedges (credit protection on a correlated but different name) or
internal ratings-based approach
122
Across the asset classes
Statistical
model
2
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
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
Client type and characteristics (revolver, transactor,
new client, dormant client), and behavioral data
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
Loan-to-value, AuM, strength of legal framework of
source of wealth, and behavioral factors
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, debt REITs, 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
2
1
1
1
1
4
1
1
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
27
27
15
27
14
14
23
15
14
14
11
11
13
11–17
5–10
>10
n/a
123
123
Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Risk management and control
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
Caa1 to Caa3
Ca to C
S&P 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.
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 when
developing rating tools. 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 consistent assessment of
default probabilities across 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.
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 S&P, 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 S&P
ratings. For each external rating category, the average default rate
is compared with our internal PD bands to derive a mapping to
our internal rating 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.
Exposure at default
EAD is the amount we expect to be owed by a counterparty at
the time of 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.
124
124
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Audited |
IInntteerrnnaall UUBBSS rraattiinngg
00 aanndd 11
22
33
44
55
66
77
88
99
1100
1111
1122
1133
Internal UBS rating scale and mapping of external ratings
1-year PD range in %
Description
Investment grade
Sub-investment grade
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
Moody’s Investors
Service mapping
Aaa
Aa1 to Aa3
A1 to A3
Baa1 to Baa2
Baa3
Ba1
Ba2
Ba3
B1
B2
B3
Caa1 to Caa3
Ca to C
S&P mapping
Fitch mapping
AAA
AA+ to AA–
A+ to A–
BBB+ to BBB
AAA
AA+ to AA–
A+ to A–
BBB+ to BBB
BBB–
BB+
BB
BB–
B+
B
B–
CCC to C
D
BBB–
BB+
BB
BB–
B+
B
B–
CCC to C
D
CCoouunntteerrppaarrttyy iiss iinn ddeeffaauulltt
Defaulted
Probability of default
our internal rating scale. Our internal rating of a counterparty may
PD estimates the likelihood of a counterparty defaulting on its
thus diverge from one or more of the correlated external ratings
contractual obligations over the next 12 months. PD ratings are
shown in the table. Observed defaults by rating agencies may vary
used for credit risk measurement and are an important input for
through economic cycles, and we do not necessarily expect the
determining credit risk approval authorities. For calculating RWA, a
actual number of defaults in our equivalent rating band to equal
three-basis-point PD floor is applied to banks, corporates and retail
the rating agencies’ average in any given period. We periodically
exposures, as required under the Basel III framework. We apply an
assess the long-term average default rates of credit rating
eight-basis-point PD floor for Swiss owner-occupied mortgages and
agencies’ ratings and adjust their mapping to our masterscale as
a four-basis-point PD floor for Lombard loans.
needed to reflect any material changes.
PD is assessed using rating tools tailored to the various
categories of counterparties. Statistically developed scorecards,
Exposure at default
based on key attributes of the obligor, are used to determine PD
EAD is the amount we expect to be owed by a counterparty at
for many corporate clients and loans secured by real estate.
the time of possible default. We derive EAD from current exposure
Where available, market data may also be used to derive the PD
to the counterparty and possible future exposure development.
for large corporate counterparties. For low-default portfolios, we
The EAD of an on-balance sheet loan is its notional amount. For
take into account available relevant external default data when
off-balance sheet commitments that are not drawn, credit
developing rating tools. For Lombard loans, our rating approach
conversion factors (CCFs) are used in order to obtain an expected
uses Merton-type historical return-based model simulations
on-balance sheet amount. Such CCFs are based on historical
taking into account potential changes in securities collateral value.
observations. To comply with regulatory guidance, we floor
These categories are also calibrated to our internal credit rating
individual observed CCF values at zero in the CCF model; i.e., we
scale (masterscale), designed to ensure a consistent assessment of
assume that the drawn EAD will be no less than the drawn amount
default probabilities across counterparties. Our masterscale
one year prior to default.
expresses one-year default probabilities determined using our
For traded products, we derive EAD by modeling the range of
various rating tools by means of distinct classes, with each class
possible exposure outcomes at various points in time using scenario
incorporating a range of default probabilities. Counterparties
and statistical techniques. We assess the net amount that may be
move between rating classes as our assessment of their PD
owed to us or that we may owe to others, taking into account the
changes.
effect of market movements over the potential time it would take
The ratings of major credit rating agencies, and their mapping
to close out positions. For ETDs, calculation of EAD takes into
to our masterscale and internal PD bands, are shown in the
account collateral margin calls. When measuring individual
“Internal UBS rating scale and mapping of external ratings” table
counterparty exposure against credit limits, we consider the
above. For Moody’s and S&P, the mapping is based on the long-
maximum likely exposure measured to a high level of confidence.
term average of one-year default rates available from these rating
However, when aggregating exposures to different counterparties
agencies, with Fitch ratings being mapped to the equivalent S&P
for portfolio risk measurement purposes, we use the expected
ratings. For each external rating category, the average default rate
exposure to each counterparty at a given time period (usually one
is compared with our internal PD bands to derive a mapping to
year) generated by the same model.
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 releases in 2021 were USD 123 million and
respective allowances and provisions as of 31 December 2021
were USD 503 million. This includes ECL allowances and
provisions of USD 436 million related to positions under the
Basel III advanced internal ratings-based approach. Basel III EL for
non-defaulted positions increased by USD 34 million to USD 919
million.
› Refer to “Note 1 Summary of material 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
ECL 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.
We assess exposures where there is a material correlation
between the factors driving the credit quality of 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.
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 25% LGD floor
for Lombard loans in Global Wealth Management outside Region
Americas and a 20% 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 expected loss for
individual counterparties to derive 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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Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Risk management and control
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 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.
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 CCR 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 management and control
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)
The IFRS 9 ECL calculation mainly applies to financial assets
approach applies to most credit risk exposures. It includes
measured at amortized cost and debt instruments measured at fair
transactions measured at amortized cost, at fair value
value through OCI, as well as loan commitments and financial
through profit or loss and at fair value through OCI,
guarantees not at fair value through profit or loss.
including loan commitments and financial guarantees.
12-month versus
lifetime expected
loss
within the next 12 months.
The Basel III A-IRB approach takes into account expected
In the absence of a significant increase in credit risk (SICR), a
losses resulting from expected default events occurring
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.
Exposure at default
EAD is the amount we expect a counterparty to owe us at
EAD is generally calculated on the basis of the cash flows that are
(EAD)
the time of a possible default. For banking products, EAD
expected to be outstanding at the individual points in time during
equals book value as of the reporting date; for traded
the life of the transaction, discounted to the reporting date using
products, such as securities financing transactions, EAD is
the effective interest rate. For loan commitments, a credit
modeled. EAD is expected to remain constant over a 12-
conversion factor is applied to model expected future drawdowns
month period. For loan commitments, a credit conversion
over the life of the transaction without including downturn
factor is applied to model expected future drawdowns over
assumptions. In both cases, the time period is capped at 12
the 12-month period, irrespective of the actual maturity of a
months, unless an SICR has occurred.
particular transaction. The credit conversion factor includes
downturn adjustments.
Probability of
PD estimates are determined on a through-the-cycle (TTC)
PD estimates will be determined on a point-in-time (PIT) basis,
default
(PD)
basis. They represent historical average PDs, taking into
based on current conditions and incorporating forecasts for future
account observed losses over a prolonged historical period,
economic conditions at the reporting date.
and therefore are less sensitive to movements in the
underlying economy.
Loss given default
LGD includes prudential adjustments, such as downturn LGD
LGD should reflect the losses that are reasonably expected and
(LGD)
assumptions and floors. Similar to PD, LGD is determined on
prudential adjustments should therefore not be applied. Similar to
a TTC basis.
PD, LGD is determined on the basis of a PIT approach.
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
market conditions significantly worsen, and credit quality
deteriorates. Similarly, for Lombard lending we use a range of
scenarios representing instantaneous market shocks to all
We complement our statistical modeling approach with scenario-
collateral and exposure positions, taking into consideration
based stress loss measures. Stress tests are run regularly to
liquidity and potential concentration. The portfolio-specific stress
monitor potential effects of extreme, but nevertheless plausible,
test for our mortgage lending business in Switzerland reflects a
events on our portfolios, under which key credit risk parameters
multi-year event, and the overarching stress test for global
are assumed to deteriorate substantially. Where we consider it
wholesale and CCR exposure to corporations uses a one-year
appropriate, we apply limits on this basis.
global stress event and takes into account exposure concentration
Stress scenarios and methodologies are tailored to portfolios’
to single counterparties.
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,
› Refer to “Stress testing” in this section for more information
about our stress testing framework
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 risk 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
2021 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
0.13
0.04
0.36
0.27
0.22
0.02
0.19
18.12
0.58
1.77
0.00
0.00
0.00
0.14
0.20
0.16
0.00
0.00
0.46
0.00
0.00
0.00
0.53
0.21
0.60
0.33
0.28
0.10
0.92
27.00
0.92
17.90
21.06
6.93
37.91
0.22
0.69
0.21
1.24
0.46
0.54
0.25
42.49
48.69
24.55
22.77
38.28
21.34
26.64
38.72
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, capital, liquidity and funding, and balance sheet | Risk management and control
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 risk 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
As part of our continuous efforts to enhance models to reflect
market developments and newly available data, we updated
several models in 2021.
In Personal & Corporate Banking, we introduced a new model
for credit card exposures, new rating models for the public-sector
entities portfolio and a new LGD and CCF model for the industrial
goods leasing portfolio.
In Global Wealth Management, a new model was introduced
for the aircraft financing portfolio.
For
the
income-producing
real estate mortgages, we
recalibrated the risk parameters and for mortgages in Switzerland,
we updated the LGD model.
In the Investment Bank, a new LGD model for leveraged
finance was introduced and the multi-nationals and financials
LGD was recalibrated.
In Group Functions, we extended the use of internal Group
models to the sovereign portfolio of the Group Liquidity Reserve
(GLR). Additionally, further exposures in GLR (e.g., covered bonds)
have been moved to the standardized approach.
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,
with an implementation date of 1 January 2023. We expect the
Swiss regulations to come into force in 2024. 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 credit
valuation adjustment (CVA) framework were published, including
the removal of the advanced CVA approach. UBS has a close
dialogue 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
For CCR models, we recalibrated the market parameters in the
SFT model. The transition from LIBOR required a number of model
changes for CCR models, for traded products to be able to
consume the new alternative reference rate curves.
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.
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
to
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
restructuring proceedings, where preferential
subject
conditions concerning interest rates, subordination, tenor, etc.
have been granted in order to avoid default of the counterparty
(forbearance); (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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Risk, capital, liquidity and funding, and balance sheet | Risk management and control
CCFs, used for the calculation of EAD for undrawn facilities
Future credit risk-related regulatory capital developments
with corporate counterparties, are dependent on several credit
In December 2017, the Basel Committee on Banking Supervision
facility contractual dimensions. We compare the predicted
(the BCBS) announced the finalization of the Basel III framework,
amount drawn with observed historical use of such facilities by
with an implementation date of 1 January 2023. We expect the
defaulted counterparties. If any statistically significant deviation is
Swiss regulations to come into force in 2024. The updated
observed, the relevant CCFs are redefined.
framework makes a number of revisions to the internal ratings-
The “Main credit risk models backtesting by regulatory asset
based (IRB) approaches, namely: (i) removing the option of using
class” table on the previous page compares the current model
the A-IRB approach for certain asset classes (including large and
calibration for PD, LGD and CCFs with historical observed values
medium-sized corporate clients, and banks and other financial
over the last five years.
institutions); (ii) placing floors on certain model inputs under the
IRB approach, e.g., PD and LGD; and (iii) introducing various
Changes to models and model parameters during the period
requirements to reduce RWA variability (e.g., for LGD).
As part of our continuous efforts to enhance models to reflect
The published framework has a number of requirements that
market developments and newly available data, we updated
are subject to national discretion. Also, revisions to the credit
several models in 2021.
valuation adjustment (CVA) framework were published, including
In Personal & Corporate Banking, we introduced a new model
the removal of the advanced CVA approach. UBS has a close
for credit card exposures, new rating models for the public-sector
dialogue with FINMA to discuss in detail the implementation
entities portfolio and a new LGD and CCF model for the industrial
objectives and prepare for a smooth transition of the capital
goods leasing portfolio.
regime for credit risk.
In Global Wealth Management, a new model was introduced
for the aircraft financing portfolio.
› Refer to “Capital management objectives, planning and
activities” in the “Capital, liquidity and funding, and balance
For
the
income-producing
real estate mortgages, we
sheet” section of this report for more information about the
recalibrated the risk parameters and for mortgages in Switzerland,
development of RWA
we updated the LGD model.
In the Investment Bank, a new LGD model for leveraged
finance was introduced and the multi-nationals and financials
procedures
› Refer to “Risk measurement” in this section for more
information about our approach to model confirmation
LGD was recalibrated.
In Group Functions, we extended the use of internal Group
models to the sovereign portfolio of the Group Liquidity Reserve
› Refer to the “Regulatory and legal developments” and “Risk
factors” sections of this report for more information
(GLR). Additionally, further exposures in GLR (e.g., covered bonds)
Credit policies for distressed assets
have been moved to the standardized approach.
For CCR models, we recalibrated the market parameters in the
The “Exposure categorization” chart on the next page shows how
SFT model. The transition from LIBOR required a number of model
we categorize banking products and securities financing
changes for CCR models, for traded products to be able to
transactions as non-performing, defaulted / credit-impaired and
consume the new alternative reference rate curves.
purchased or originated credit-impaired.
Where required, changes to models and model parameters
were approved by FINMA before being made.
Non-performing
› 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
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); (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.
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 contractual payments
if
An
is classified as credit-impaired
have been made when due. If one claim against a counterparty is
defaulted on, generally all claims against the counterparty are
treated as defaulted.
instrument
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 2021, we had
no instruments classified as POCI on our books.
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(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:2)
(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:2)(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)
128
129
129
Risk, capital, liquidity and funding, and balance sheet 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 2017, the amounts are based on IAS 37 and
IAS 39; for 2018 and onward, the amounts are based on IFRS 9.
› The majority of the credit-impaired exposure relates to loans
and advances in our Swiss domestic business. 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
› Refer to “Note 14a Other financial assets measured at amortized
cost” in the “Consolidated financial statements” section of this
report for more details
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
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 that supersede the preferential conditions,
or the counterparty has recovered and the preferential conditions
no longer exceed our risk tolerance.
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 (for example 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
3311..1122..2211
IIFFRRSS 99
441144,,009999
22,,115500
22,,338877
11,,116655
885577
113377
111188
114488
31.12.20
IFRS 9
396,049
2,945
3,176
1,468
1,076
356
348
(694)
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)
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 for 31 December 2017. Until 31 December 2017 did not include allowances for other receivables (USD 19 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..22
00..66
00..00
00..55
0.6
0.7
0.7
0.2
0.2
0.3
0.7
0.3
0.7
0.7
0.8
0.1
0.0
0.0
0.2
0.1
130
130
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Forbearance (credit restructuring)
The “Loss history statistics” table below provides a five-year
Audited | If payment default is imminent or default has already
history of credit loss experience for loans and advances to banks
occurred, we may grant concessions to borrowers in financial
and customers, and ratios of those credit losses relative to credit-
difficulties that we would otherwise not consider in the normal
impaired and non-performing loans and advances to banks and
course of business, such as offering preferential interest rates,
customers. For 2017, the amounts are based on IAS 37 and
extending maturity, modifying the schedule of repayments, debt /
IAS 39; for 2018 and onward, the amounts are based on IFRS 9.
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 that supersede the preferential conditions,
or the counterparty has recovered and the preferential conditions
› The majority of the credit-impaired exposure relates to loans
and advances in our Swiss domestic business. 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
no longer exceed our risk tolerance.
measurement
Contractual adjustments when there is no evidence of
imminent payment default, or where changes to terms and
› Refer to “Note 14a Other financial assets measured at amortized
cost” in the “Consolidated financial statements” section of this
conditions are within our usual risk tolerance, are not considered
report for more details
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 (for example 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
of which: write-offs for loans and advances to banks and customers
Write-offs
Credit loss (expense) / release3
RRaattiiooss
and customers (gross)
and customers (gross)
banks and customers (gross)
the period
transactions.
Credit-impaired loans and advances to banks and customers as a percentage of loans and advances to banks
Non-performing loans and advances to banks and customers as a percentage of loans and advances to banks
ECL allowances for loans and advances to banks and customers as a percentage of loans and advances to
Write-offs as a percentage of average loans and advances to banks and customers (gross) outstanding during
3311..1122..2211
31.12.20
31.12.19
31.12.18
31.12.17
IIFFRRSS 99
IFRS 9
IFRS 9
IFRS 9
IAS 37, IAS 39
441144,,009999
396,049
340,003
338,000
342,604
22,,115500
22,,338877
11,,116655
885577
113377
111188
114488
00..55
00..66
00..22
00..00
2,945
3,176
1,468
1,076
356
348
(694)
0.7
0.8
0.3
0.1
2,309
2,466
1,029
770
142
122
(78)
0.7
0.7
0.2
0.0
2,300
2,419
1,054
780
210
192
(118)
0.7
0.7
0.2
0.1
1,104
2,149
712
678
101
101
(131)
0.3
0.6
0.2
0.0
11 Includes collective loan loss allowances for 31 December 2017. Until 31 December 2017 did not include allowances for other receivables (USD 19 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
Market risk
Key developments
Market risk remained at low levels as a result of our continued
focus on managing tail risks. Average management value-at-risk
(VaR) (1-day, 95% confidence level) decreased to USD 11 million
from USD 13 million in 2020, mainly as a result of the Investment
Bank’s equities trading business. The number of negative
backtesting exceptions within a 250-business-day window
increased to 4 from 3 by the end of 2021. As these backtesting
exceptions remained below 5, the FINMA VaR multiplier for
market risk RWA remained unchanged at 3.0 as of 31 December
2021.
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
business, our Swiss personal and corporate banking business,
the Investment Bank’s lending business, and 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
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. This 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
130
131
131
Risk, capital, liquidity and funding, and balance sheet
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
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
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 our trading
positions are sensitive to, 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 risk 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.
132
132
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Market risk stress loss
We calculate VaR daily. The profit or loss distribution VaR is
derived from our internally developed VaR model, which simulates
We measure and manage market risks through a comprehensive
returns over the holding period for those risk factors our trading
framework of non-statistical measures and related limits, as well
positions are sensitive to, and subsequently quantifies the profit /
as VaR. This includes an extensive set of stress tests and scenario
loss effect of these risk factor returns on trading positions. Risk
analyses, continuously evaluated to ensure that losses resulting
factor returns associated with general interest rate, foreign
from an extreme yet plausible event do not exceed our risk
exchange and commodities risk factor classes are based on a pure
appetite.
Liquidity-adjusted stress
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
LAS is our primary stress loss measure for Group-wide market risk.
residual
issuer-specific components using a factor model
The LAS framework captures the economic losses that could arise
approach. Systematic returns are based on historical simulation,
under specified stress scenarios. This is partially done by replacing
and residual returns on a Monte Carlo simulation. VaR model
the standard 1-day and 10-day holding period assumptions used
profit or loss distribution is derived from the sum of systematic
for management and regulatory VaR with liquidity-adjusted
and residual returns in such a way that we consistently capture
holding periods, as explained below. Shocks are applied to
systematic and residual risk. Correlations among risk factors are
positions based on expected market movements in the liquidity-
implicitly captured via a historical simulation approach. When
adjusted holding periods resulting from the specified scenario.
modeling risk factor returns we consider the stationarity
The holding periods used for LAS are calibrated to reflect the
properties of the historical time series of risk factor changes.
time needed to reduce or hedge the risk of positions in each major
Depending on the stationarity properties of the risk factors within
risk factor in a stressed environment, assuming maximum
a given factor class, we model the factor returns using absolute
utilization of the relevant position limits. We apply minimum
returns or logarithmic returns. Risk factor return distributions are
holding periods, regardless of observed liquidity levels, as
updated fortnightly.
identification of and reaction to a crisis may not always be
Our VaR model does not have full revaluation capability, but
immediate.
we source full revaluation grids and sensitivities from front-office
The expected market movements are derived using historical
systems, enabling us to capture material non-linear profit or loss
market behavior (based on analysis of historical events) and
effects.
forward-looking analysis including consideration of defined
We use a single VaR model for both internal management
scenarios that have not occurred in the past.
purposes and determining market risk RWA, although we
LAS-based limits apply at several levels: Group, business
consider different confidence levels and time horizons. For
division, Group Treasury and Non-core and Legacy Portfolio;
internal management purposes, we establish risk limits and
business area; and sub-portfolio. LAS is also the core market risk
measure exposures using VaR at a 95% confidence level with a
component of our combined stress test framework and therefore
1-day holding period, aligned to the way we consider the risks
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
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
Value-at-risk
VaR definition
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.
Audited | VaR is a statistical measure of market risk, representing the
Management VaR includes a broader range of positions. For
potential market risk losses over a set time horizon (holding
example, regulatory VaR excludes credit spread risks from the
period) at an established level of confidence. VaR assumes no
securitization portfolio, which are treated instead under the
change in the Group’s trading positions over the set time horizon.
securitization approach for regulatory purposes.
132
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
covering 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 2021 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 decreasing to
USD 11 million from USD 13 million in 2020.
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..2211
USD million
TToottaall mmaannaaggeemmeenntt VVaaRR,, GGrroouupp
Global Wealth Management
Personal & Corporate Banking
Asset Management
Investment Bank
Group Functions
Diversification effect2,3
USD million
MMiinn..
44
11
00
00
33
44
Min.
MMaaxx..
AAvveerraaggee
3366
33
00
00
3366
88
3311..1122..2211
1122
22
00
00
1111
44
((55))
1111
11
00
00
1111
55
((66))
EEqquuiittyy
11
3355
77
88
00
00
00
77
00
00
IInntteerreesstt
rraatteess
77
1133
99
1111
CCrreeddiitt
sspprreeaaddss
55
1111
77
77
AAvveerraaggee ((ppeerr bbuussiinneessss ddiivviissiioonn aanndd rriisskk ttyyppee))
FFoorreeiiggnn
eexxcchhaannggee
11
99
33
66
CCoommmmooddiittiieess
22
55
33
33
11
00
00
99
44
((55))
22
00
00
77
44
((55))
00
00
00
33
11
((11))
00
00
00
33
00
00
For the year ended 31.12.20
Max.
Average
31.12.20
11
Equity
3
29
10
6
Interest
rates
6
11
8
8
Credit
spreads
5
11
7
8
Average (per business division and risk type)
Foreign
exchange
2
7
4
3
Commodities
2
6
4
3
8
31
13
TToottaall mmaannaaggeemmeenntt VVaaRR,, GGrroouupp
Global Wealth Management
0
Personal & Corporate Banking
0
Asset Management
0
Investment Bank
4
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
4
1
(1)
1
0
0
6
3
(4)
1
0
0
7
4
(4)
0
0
0
10
0
0
1
0
0
12
5
(5)
1
0
0
10
6
(8)
2
0
0
32
7
0
0
0
7
4
133
133
Risk, capital, liquidity and funding, and balance sheet 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
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
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.
indicate potential losses beyond this confidence level.
– The 1-day time horizon used for VaR for 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.
– 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 longer history of potential loss events. Therefore,
although the significant period of stress during the 2007–2009
We recognize that no single measure can encompass all risks
associated with a position or portfolio. Thus we use a set of
metrics with both overlapping and complementary 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.
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.
(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:149)(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:142)(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:143)
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(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)
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(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)
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(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)
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(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)
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(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: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)
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134
134
150
150
125
125
100
100
75
75
50
50
0
0
-25
-25
-50
-50
25
25
25
25
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
VaR limitations
financial crisis is no longer contained in the historical five-year
Audited | Actual realized market risk losses may differ from those
period used for management and regulatory VaR, SVaR continues
implied by VaR for a variety of reasons.
to use that data. This approach aims to reduce the procyclicality
– VaR is calibrated to a specified level of confidence and may not
of the regulatory capital requirements for market risks.
indicate potential losses beyond this confidence level.
We recognize that no single measure can encompass all risks
– The 1-day time horizon used for VaR for internal management
associated with a position or portfolio. Thus we use a set of
purposes (10-day for regulatory VaR) may not fully capture
metrics with both overlapping and complementary characteristics
market risk of positions that cannot be closed out or hedged
to create a holistic framework that aims to ensure material
within the specified period.
completeness of risk identification and measurement. As a
– In some cases, VaR calculations approximate the effect of
statistical aggregate risk measure, VaR supplements our liquidity-
changes in risk factors on the values of positions and portfolios.
adjusted stress and comprehensive stress testing frameworks.
This may happen due to the number of risk factors included in
We also have a framework to identify and quantify potential
the VaR model needing to be limited.
risks not fully captured by our VaR model and refer to such risks
– Effects of extreme market movements are subject to estimation
as risks not in VaR. The framework underpins these potential risks
errors, which may result from non-linear risk sensitivities, and
with regulatory capital, calculated as a multiple of regulatory VaR
the potential for actual volatility and correlation levels to differ
and stressed VaR.
from assumptions implicit in VaR calculations.
– Using a five-year window means sudden increases in market
Backtesting of VaR
volatility will tend not to increase VaR as quickly as the use of
VaR backtesting is a performance measurement process in which
shorter historical observation periods, but such increases will
a 1-day VaR prediction is compared with the realized 1-day profit
affect VaR for a longer period of time. Similarly, after periods
or loss (P&L). We compute backtesting VaR using a 99%
remain more conservative for a period of time influenced by
population. Since 99% VaR at UBS is defined as a risk measure
the length of the historical observation period.
that operates on the lower tail of the P&L distribution, 99%
backtesting VaR is a negative number. Backtesting revenues
SVaR is subject to the limitations noted for VaR above, but the
exclude non-trading revenues, such as valuation reserves, fees
use of one-year data sets avoids the smoothing effect of the five-
and commissions, and revenues from intraday trading, to provide
year data set used for VaR and the absence of the five-year
for a like-for-like comparison. A backtesting exception occurs
window gives a longer history of potential loss events. Therefore,
when backtesting revenues are lower than the previous day’s
although the significant period of stress during the 2007–2009
backtesting VaR.
(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:149)(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:142)(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:143)
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(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: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: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:89)(cid:74)(cid:75)(cid:69)(cid:74)(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)
(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)
134
Statistically, given the 99% confidence level, 2 or 3 backtesting
exceptions a year can be expected. More than 4 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. Therefore, Group-level
backtesting exceptions are investigated, as are exceptional
positive backtesting revenues, with the 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.
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 2021. 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 actual trading revenues include backtesting and intraday
of increased volatility, as markets stabilize, VaR predictions will
confidence level and 1-day holding period for the regulatory VaR
revenues.
The number of negative backtesting exceptions within a 250-
business-day window increased to 4 from 3 by the end of the
year. As these backtesting exceptions remained below 5, the
FINMA VaR multiplier for market risk RWA remained unchanged
at 3.0 as of 31 December 2021.
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 dialogue with FINMA to
discuss the implementation objectives in more detail and to
provide a smooth transition of the capital regime for market risk.
In September 2021 FINMA mandated UBS to hold an RWA
add-on for the omission of time decay in regulatory VaR and
SVaR. The add-on reflects the outcome of discussions with FINMA
regarding our regulatory VaR model, which started in late 2019.
The integration of time decay into the regulatory VaR model,
which would replace the add-on, is subject to further discussions
between FINMA and UBS.
› 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 including the
regulatory add-on
› 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
Interest rate risk in the banking book
VaR model confirmation
As well as for regulatory-purposes backtesting described above,
we conduct extended backtesting for 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
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.
VaR model developments in 2021
Audited | There were no material changes to the VaR model
in 2021.
Future market risk-related regulatory capital developments
In January 2019, the Basel Committee on Banking Supervision
(the BCBS) published the final standards on 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 July 2024.
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
subject to hedge accounting. Fair value changes to these positions
may affect other comprehensive income (OCI) or the income
statement, depending on their accounting treatment.
150
150
125
125
100
100
75
75
50
50
0
0
-25
-25
-50
-50
135
135
25
25
25
25
Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Risk management and control
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 are
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 additional tier 1 (AT1) capital instruments and
modeled interest rate duration assigned to equity, goodwill
and real estate.
– 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. This internally calculated NII sensitivity,
which, unlike the FINMA Pillar 3 disclosure requirements,
includes the contribution from cash held at central banks, 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 Group Asset and Liability Committee (ALCO) and, where
relevant, ALCOs at a legal entity level perform independent
oversight over the management of IRRBB, which 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.
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136
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Our largest banking book interest rate exposures arise from
We actively manage IRRBB, aiming to reduce the volatility of
customer deposits and lending products in Global Wealth
NII, while keeping the EVE sensitivity within set internal risk limits.
Management and Personal & Corporate Banking. The inherent
EVE and NII sensitivity are monitored against limits and triggers,
interest rate risks are generally transferred from Global Wealth
at consolidated and significant legal entity levels. We also assess
Management and Personal & Corporate Banking to Group
the sensitivity of EVE and NII under stressed market conditions by
Treasury, to manage them centrally. This enables the netting of
applying a suite of parallel and non-parallel interest rate scenarios,
interest rate risks across different sources, while leaving the
as well as specific economic scenarios.
originating businesses with commercial margin and volume
The Group Asset and Liability Committee (ALCO) and, where
management. The residual interest rate risk is mainly hedged with
relevant, ALCOs at a legal entity level perform independent
interest rate swaps, to the vast majority of which we apply hedge
oversight over the management of IRRBB, which is also subject to
accounting. Short-term exposures and high-quality liquid assets
Group Internal Audit and model governance.
classified as Financial assets at fair value not held for trading are
hedged with derivatives accounted for on a mark-to-market basis.
› Refer to “Group Internal Audit” in the “Corporate governance”
section of this report and to “Risk measurement” in this section
Long-term fixed-rate debt issued is hedged with interest rate
for more information
swaps designated in fair value hedge accounting relationships.
Key modeling assumptions
Risk management and governance
The cash flows from customer deposits and lending products used
IRRBB is measured using several metrics, the most relevant of
in calculation of EVE sensitivity exclude commercial margins and
which are the following.
other spread components, are aggregated by daily time buckets
– Interest rate sensitivities to changes in yield curves are
and are discounted using risk-free rates. Our external issuances
calculated as changes in the present value of future cash flows
are discounted using UBS’s senior debt curve, and capital
irrespective of accounting treatment. These are also the key
instruments are modeled to the first call date. NII sensitivity, which
risk factors for statistical and stress-based measures, e.g.,
includes commercial margins, is calculated over a one-year time
value-at-risk and stress scenarios (including EVE sensitivity),
horizon, assuming constant balance sheet structure and volumes,
and are measured and reported daily. EVE sensitivity is the
and considers the flooring effect of embedded interest rate
exposure arising from the most adverse regulatory interest rate
options.
scenario after netting across currencies. As well as the
The average repricing maturity of non-maturing deposits and
regulatory measure, we apply an internal EVE sensitivity metric
loans is determined via replication portfolio strategies designed to
that includes additional tier 1 (AT1) capital instruments and
protect product margin. Optimal replicating portfolios are
modeled interest rate duration assigned to equity, goodwill
determined at granular currency- and product-specific levels by
and real estate.
simulating and applying a real-world market rate model to
– Net interest income (NII) sensitivity assesses NII change over a
historically calibrated client rate and volume models.
set time horizon compared with baseline NII, which we
We use an econometric prepayment model to forecast
internally calculate by assuming interest rates in all currencies
prepayment rates on US mortgage loans in UBS Bank USA and
develop according to their market-implied forward rates and
agency mortgage-backed securities (MBSs) held in various
assuming constant business volumes and no specific
liquidity portfolios of UBS Americas Holding LLC consolidated.
management actions. This internally calculated NII sensitivity,
These prepayment rates are used to forecast both mortgage loan
which, unlike the FINMA Pillar 3 disclosure requirements,
and MBS balances under various macroeconomic scenarios. The
includes the contribution from cash held at central banks, is
prepayment model is used for a variety of purposes, including risk
measured and reported monthly.
management and regulatory stress testing. Swiss mortgages and
fixed-term deposits generally do not carry similar optionality, due
to prepayment and early redemption penalties.
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
Accounting and capital effect of changes in interest rates1
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.
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 2021, the projected NII was approximately
14% lower than the baseline NII under a parallel shock of –200
basis points, whereas under a parallel +200-basis-point shock it
was approximately 57% higher than the baseline NII.
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
low and negative
Moreover, should the
rate-linked product pricing. The loss of such equilibrium 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.
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.
136
137
137
Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Risk management and control
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 2021, the interest rate sensitivity of our
banking book to a +1-basis-point parallel shift in yield curves was
negative USD 29.9 million, compared with negative USD 27.2
million as of 31 December 2020. The change in the interest rate
sensitivity was driven by the execution of transactions in the first
quarter of 2021 that were aimed at protecting our net interest
income should interest rates decrease. The reported interest rate
sensitivity excludes the AT1 capital instruments, as per FINMA
Pillar 3 disclosure requirements, with a sensitivity of USD 4.5
million per basis point, and our equity, goodwill and real estate,
with a modeled sensitivity of USD 22.1 million per basis point, of
which USD 15.6 million and USD 5.5 million are attributable to
the US dollar and the Swiss franc 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 6.0
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 2021 would be a
reduction of 1.8%, or USD 1.1 billion, arising from the part of our
banking book that is measured at fair value through profit or loss
and from Financial assets measured at fair value through other
comprehensive income. Over time this scenario would 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..2211
Additional tier 1 (AT1) capital instruments
TToottaall iinncclluuddiinngg AATT11 ccaappiittaall iinnssttrruummeennttss aass ooff 3311..1122..2211
++11 bbpp
((55..11))
((11..11))
00..11
((2233..55))
((00..44))
((2299..99))
44..55
((2255..44))
PPaarraalllleell uupp11 PPaarraalllleell ddoowwnn11
880066..33
223311..99
((3322..88))
44,,112244..22
1199..99
((772244..11))
((119966..66))
3333..33
((55,,006688..33))
((8855..88))
SStteeeeppeenneerr22
((225544..33))
((6699..00))
((3311..11))
((882211..44))
((33..77))
FFllaatttteenneerr33 SShhoorrtt--tteerrmm uupp44 SShhoorrtt--tteerrmm ddoowwnn55
116622..55
((115588..77))
2277..44
((2244..11))
((4433..77))
4455..44
22,,331155..66
((22,,116655..99))
33..88
((5599..66))
111177..11
3377..44
3355..33
((336622..33))
((3344..55))
((66,,004411..44))
885533..44
((55,,118888..00))
55,,114499..55
((992288..44))
44,,222211..11
((11,,117799..66))
((99..66))
((11,,118899..22))
((220077..00))
119977..11
((1100..00))
((22,,336622..99))
553311..55
((11,,883311..44))
22,,446655..66
((555533..33))
11,,991122..33
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
about own credit
Structural foreign exchange risk
in foreign
Upon consolidation, assets and
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 | 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.
138
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Risk, capital, liquidity and funding, and balance sheet | Risk management and control
The NII impact of a net decrease in deposits would depend on
income should interest rates decrease. The reported interest rate
various factors, including the currency, its interest rate level and
sensitivity excludes the AT1 capital instruments, as per FINMA
the balance sheet situation, as the impact could be offset by a
Pillar 3 disclosure requirements, with a sensitivity of USD 4.5
reduction in negative-yielding liquidity portfolios or require
million per basis point, and our equity, goodwill and real estate,
alternative funding. If funding were required, the cost would also
with a modeled sensitivity of USD 22.1 million per basis point, of
significantly depend on term and nature of replacement funding,
which USD 15.6 million and USD 5.5 million are attributable to
whether such funding is raised in wholesale markets or from
the US dollar and the Swiss franc portfolios, respectively.
swapping with available other currency-denominated funding.
The most adverse of the six FINMA interest rate scenarios
Furthermore, imbalances leading to an excess deposit position
would be the “Parallel up” scenario, which would result in a
could require additional investments at negative yields, which our
change in the economic value of equity of negative USD 6.0
excess deposit balance charging mechanisms might not be able
billion, representing a pro forma reduction of 10.0% of tier 1
to sufficiently compensate for.
Economic value sensitivity
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 2021 would be a
Audited | Interest rate risk in the banking book is subject to a
reduction of 1.8%, or USD 1.1 billion, arising from the part of our
regulatory EVE sensitivity threshold of 15% of tier 1 capital. The
banking book that is measured at fair value through profit or loss
exposure is calculated as the theoretical change in the present
and from Financial assets measured at fair value through other
value of the banking book under the most adverse of the six
comprehensive income. Over time this scenario would have a
FINMA interest rate scenarios.
As of 31 December 2021, the interest rate sensitivity of our
banking book to a +1-basis-point parallel shift in yield curves was
negative USD 29.9 million, compared with negative USD 27.2
million as of 31 December 2020. The change in the interest rate
sensitivity was driven by the execution of transactions in the first
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
quarter of 2021 that were aimed at protecting our net interest
movements
Interest rate risk – banking book
Audited |
USD million
CHF
EUR
GBP
USD
Other
3311..1122..2211
TToottaall eeffffeecctt oonn eeccoonnoommiicc vvaalluuee ooff eeqquuiittyy aass ppeerr PPiillllaarr 33 rreeqquuiirreemmeenntt aass ooff
Additional tier 1 (AT1) capital instruments
TToottaall iinncclluuddiinngg AATT11 ccaappiittaall iinnssttrruummeennttss aass ooff 3311..1122..2211
++11 bbpp
PPaarraalllleell uupp11 PPaarraalllleell ddoowwnn11
SStteeeeppeenneerr22
FFllaatttteenneerr33 SShhoorrtt--tteerrmm uupp44 SShhoorrtt--tteerrmm ddoowwnn55
((55..11))
((11..11))
00..11
((2233..55))
((00..44))
((2299..99))
44..55
((2255..44))
((772244..11))
((119966..66))
3333..33
((55,,006688..33))
((8855..88))
((66,,004411..44))
885533..44
((55,,118888..00))
((225544..33))
111177..11
880066..33
223311..99
((3322..88))
44,,112244..22
1199..99
((6699..00))
((3311..11))
((882211..44))
((33..77))
55,,114499..55
((11,,117799..66))
((992288..44))
((99..66))
44,,222211..11
((11,,118899..22))
3377..44
3355..33
((336622..33))
((3344..55))
((220077..00))
119977..11
((1100..00))
((115588..77))
((2244..11))
4455..44
((22,,116655..99))
((5599..66))
((22,,336622..99))
553311..55
((11,,883311..44))
116622..55
2277..44
((4433..77))
22,,331155..66
33..88
22,,446655..66
((555533..33))
11,,991122..33
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.
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
› Refer to “Note 21 Fair value measurement” in the “Consolidated
financial statements” section of this report for more information
Equity investments
about own credit
Structural foreign exchange risk
Upon consolidation, assets and
liabilities held
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.
Audited | 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.
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 limits, and regular
monitoring and reporting to senior management. They are also
included in our Group-wide statistical and stress testing metrics,
which flow into our risk appetite framework.
As of 31 December 2021, we held equity investments and
investment fund units totaling USD 3.0 billion, of which USD 1.8
billion was classified as Financial assets at fair value not held for
trading and USD 1.2 billion as Investments in associates.
› Refer to “Note 21 Fair value measurement” and “Note 29
Interests in subsidiaries and other entities” in the “Consolidated
financial statements” section of this report for more information
› Refer to “Note 1 Summary of material accounting policies” in the
“Consolidated financial statements” section of this report for
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.
Pension risk is the risk that defined benefit plans’ funded status
might decrease, negatively affecting our 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 pension 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 capital ratio
calculations.
› Refer to “Note 1 Summary of material accounting policies” and
“Note 27 Post-employment benefit plans” in the “Consolidated
more information about the classification of financial
financial statements” section of this report for more information
instruments
about defined benefit plans
to
related
UBS own share exposure
Group Treasury holds UBS Group AG shares to hedge future share
share-based
delivery obligations
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.
employee
› Refer to “UBS shares” in the “Capital, liquidity and funding, and
balance sheet” section of this report for more information
Debt investments
Audited | Debt investments classified as Financial assets measured at
fair value through OCI as of 31 December 2021 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 8.8 billion as of
31 December 2021 compared with USD 8.3 billion as of
31 December 2020.
› 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 material accounting policies” in the
“Consolidated financial statements” section of this report for
more information about the classification of financial
instruments
138
139
139
Risk, capital, liquidity and funding, and balance sheet
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
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 / or 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 on 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 the 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 are 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 where 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 an 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.
140
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Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Country risk
Country risk framework
Country risk exposure
Country risk includes all country-specific events occurring in a
Country risk exposure measure
sovereign jurisdiction that may lead to impairment of UBS’s
The presentation of country risk follows our internal risk view,
exposures. It may take the form of: sovereign risk, which is the
where the basis for measuring exposures depends on the product
ability and willingness of a government to honor its financial
category in which we classified the exposures. In addition to the
commitments; transfer risk, which arises if a counterparty or issuer
classification of exposures into banking products and traded
cannot acquire foreign currencies following a moratorium by a
products, covered in “Credit risk profile of the Group” in this
central bank on foreign exchange transfers; or “other” country
section, in the trading inventory we classify issuer risk on securities
risk. “Other” country risk may manifest itself through, on the one
such as bonds and equities, as well as risk relating to underlying
hand, increased and multiple counterparty and issuer default risk
reference assets for derivative positions.
(systemic risk) and, on the other hand, events that may affect a
As we manage the trading inventory on a net basis, we net the
country’s standing, such as adverse shocks affecting political
value of long positions against short positions with the same
stability or institutional and / or legal frameworks. We have a well-
underlying issuer. Net exposures are, however, floored at zero per
established risk control framework to assess the risk profiles of all
issuer in the figures presented in the following tables. As a result,
countries where we have exposure.
we do not recognize potentially offsetting benefits of certain
We assign a country rating to each country, which reflects our
hedges and short positions across issuers.
view of the country’s creditworthiness and of the probability of a
We do not recognize any expected recovery values when
country risk event occurring. Country ratings are mapped to
reporting country exposures as exposure before hedges, except
statistically derived default probabilities, described under
for risk-reducing effects of master netting agreements and
“Probability of default” in this section. We use this internal
collateral held in either cash or portfolios of diversified marketable
analysis to set the credit ratings of governments and central
securities, which we deduct from the positive exposure values.
banks, estimate the probability of a transfer event occurring, and
Within banking products and traded products, risk-reducing
establish rules on how aspects of country risk should be
effects of credit protection are taken into account on a notional
incorporated in counterparty ratings of non-sovereign entities
basis when determining the net of hedge exposures.
domiciled in the respective country.
Country ratings are also used to define our risk appetite and
Country risk exposure allocation
risk exposure to foreign countries. A country risk limit (i.e.,
In general, exposures are shown against the country of domicile
maximum aggregate exposure) applies
to exposures
to
of the contractual counterparty or the issuer of the security. For
counterparties or issuers of securities and financial investments in
some counterparties whose economic substance in terms of
the given foreign country. We may limit the extension of credit,
assets or source of revenues is primarily located in a different
transactions in traded products or positions in securities based on
country, the exposure is allocated to the risk domicile of those
a country risk ceiling even if our exposure to a counterparty is
assets or revenues.
otherwise acceptable.
We apply a specific approach for banking products exposures
For internal measurement and control of country risk, we also
to branches of banks that are located in a country other than the
consider the financial effect of market disruptions arising prior to,
legal entity’s domicile. In such cases, exposures are recorded in
during and after a country crisis. These may take the form of a
full against the country of domicile of the counterparty and
severe deterioration in a country’s debt, equity or other asset
additionally in full against the country where the branch is
markets or a sharp depreciation of its currency. We use stress
located.
testing to assess potential financial effects of severe country or
In the case of derivatives, we show counterparty risk
sovereign crises. This involves the developing of plausible stress
associated with positive replacement value (PRV) against the
scenarios for combined stress testing and the identification of
counterparty’s country of domicile (presented within traded
countries that may potentially be subject to a crisis event,
products). In addition, risk associated with an instantaneous fall
determining potential losses and making assumptions about
in value of underlying reference assets to zero (assuming no
recovery rates depending on the types of credit transactions
recovery) is shown against the country of domicile of the issuer
involved and their economic importance to the affected countries.
of the reference asset (presented within trading inventory). This
Our exposures to market risks are subject to regular stress tests
approach allows us to capture both counterparty and, where
covering major global scenarios, which are also used for
applicable, issuer elements of risk arising from derivatives and
combined stress testing, where we apply market shock factors to
applies comprehensively for all derivatives, including single-name
equity indices, interest rates and currency rates in all relevant
credit default swaps (CDSs) and other credit derivatives.
countries and consider the potential liquidity of the instruments.
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). 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 given CDS was written. Generally, only the
occurrence of credit events as defined by the CDS contract’s terms
(which may include, among other events, failure to pay,
restructuring or bankruptcy) results 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
committees
(composed of various ISDA member firms) based on the terms of
the CDS and the facts and circumstances surrounding the event.
(ISDA) determination
Top 20 country risk exposures
The table below shows our 20 largest country exposures by
product type, excluding our home country, as of 31 December
2021 compared with 31 December 2020.
Compared with the prior year, our net exposure to the UK
increased by USD 8.8 billion, driven by central bank exposures due
to treasury activities. Net exposure to the US increased by USD 6.3
billion, solely driven by banking products, largely related to nostro
balances at the Federal Reserve due to treasury activities,
mortgages and Investment Bank loans. Those increases in the US
were partly offset by tradable assets related to treasury activities.
increased by USD 2.9 billion,
Net exposure to Australia
predominantly driven by trading
loan
inventory due to
underwriting projects and central bank exposures. Net exposure
to Germany decreased by USD 2.8 billion, driven by trading
inventory due to loan underwriting projects and sovereign issuer
risk. Net exposure to China decreased by USD 2.0 billion,
predominantly driven by trading inventory across issuer risk and
margin loans, as well as banking products. Net exposure to France
decreased by USD 1.0 billion, driven by trading inventory due to
treasury activities.
Based on the sovereign rating categories, as of 31 December
2021, 84% of our emerging market country exposure was rated
investment grade, compared with 83% as of 31 December 2020.
Russia
Our direct country risk exposure to Russia contributed USD 634
million to our total emerging market exposure of USD 20.9 billion
as of 31 December 2021. This includes trade finance exposures in
Personal & Corporate Banking, a single loan in the Investment
Bank with a non-Russian entity with key facilities spread globally
including Russia and the Commonwealth of Independent States,
Nostro and cash accounts balances, issuer risk on trading
inventory within the Investment Bank, and derivatives within the
Investment Bank. These exposures have been reduced since year-
end 2021. Not included in this figure are net assets held in our
Russian subsidiary, with a net asset value of USD 51 million. UBS
is also currently monitoring settlement risk on certain open
transactions with Russian banks and non-bank counterparties or
Russian underlyings, as market closures, the imposition of
exchange controls, sanctions or other measures may limit our
ability to settle existing transactions or to realize on collateral,
which may result in unexpected increases in exposures.
As of 3 March 2022, UBS also had approximately USD 0.2
billion exposure arising from reliance on Russian assets as
collateral on Lombard lending and other secured financing in
Global Wealth Management.
As of 3 March 2022, we identified a small number of Global
Wealth Management clients subject to the recently introduced
sanctions, with total loans outstanding of under USD 10 million.
Our market risk exposure to Russia as of 3 March 2022 was
limited.
We had no material direct country risk exposures to Ukraine or
to Belarus as of 31 December 2021 and no material reliance on
Ukrainian or to Belarusian collateral within our Lombard portfolio.
140
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Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Top 20 country risk net exposures by product type
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
3311..1122..2211
31.12.20
3311..1122..2211
31.12.20
USD million
United States
United Kingdom
Japan
Germany
Singapore
Australia
France
China
Canada
Luxembourg
Hong Kong SAR
Netherlands
South Korea
Sweden
Thailand
Austria
Norway
India
Monaco
TToottaall
Net of hedges1
3311..1122..2211
111166,,338888
3344,,883377
1144,,776644
1100,,556644
31.12.20
110,041
26,083
14,974
13,336
88,,999933
66,,339977
66,,330011
55,,334444
33,,993333
33,,445533
33,,338888
33,,002200
22,,447799
11,,661177
11,,446699
11,,222200
11,,221155
11,,111199
11,,002222
8,950
3,465
7,344
7,392
3,792
3,292
2,840
3,048
2,259
2,326
1,494
1,664
1,669
903
1,016
7799,,664477
2244,,778888
1100,,557722
33,,339977
33,,111100
22,,667744
11,,335566
11,,882233
11,,119999
22,,443388
11,,991144
11,,118833
446622
664477
220088
226655
2255
999911
998844
62,950
16,154
5,625
2,447
3,875
1,475
1,306
2,553
1,483
2,128
1,498
656
426
657
146
197
22
727
994
Trading inventory
(securities and potential
benefits / remaining
exposure from derivatives)
Net long per issuer
3311..1122..2211
2288,,337711
31.12.20
37,305
22,,558855
668844
55,,993344
33,,332266
11,,993377
33,,223355
22,,669911
11,,668899
995588
11,,110077
11,,000077
11,,559999
777766
11,,223355
885588
998833
4411
1100
338877
1,388
6,378
9,672
2,644
661
4,628
3,828
1,477
1,019
946
1,610
1,307
1,410
1,306
851
1,310
90
5
557
88,,337711
77,,446655
33,,550088
11,,223322
22,,555577
11,,778866
11,,771111
883300
11,,004444
5588
336677
883300
441188
119944
2266
9977
220066
8877
2288
4400
9,786
8,541
2,972
1,217
2,431
1,329
1,409
1,010
832
145
395
782
526
260
41
616
337
86
17
88
Brazil
TToottaall22
11 Before deduction of IFRS 9 ECL allowances and provisions. 22 Excluding Switzerland, supranationals and global funds.
217,006
113388,,117711
222288,,443388
105,793
1,119
991155
448888
474
Emerging markets¹ net exposure² by internal UBS country rating category
USD million
Investment grade
Sub-investment grade
TToottaall
3300,,885533
32,819
5599,,441144
78,394
3311..1122..2211
31.12.20
1177,,660088
33,,226611
2200,,886699
19,580
4,005
23,585
11 We classify countries as emerging markets based on per capita GDP, historical real GDP growth, alignment with international institutions (such as BIS, World Bank, IMF, MSCI) and other factors. 22 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.
142
142
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Banking products
commitments)
Net of hedges1
Traded products
(counterparty risk from derivatives
and securities financing)
and net of collateral
Net of hedges
(loans, guarantees, loan
after master netting agreements
3311..1122..2211
31.12.20
3311..1122..2211
31.12.20
Trading inventory
(securities and potential
benefits / remaining
exposure from derivatives)
Net long per issuer
3311..1122..2211
2288,,337711
31.12.20
37,305
TToottaall
Net of hedges1
3311..1122..2211
111166,,338888
3344,,883377
1144,,776644
1100,,556644
31.12.20
110,041
26,083
14,974
13,336
88,,999933
66,,339977
66,,330011
55,,334444
33,,993333
33,,445533
33,,338888
33,,002200
22,,447799
11,,661177
11,,446699
11,,222200
11,,221155
11,,111199
11,,002222
991155
8,950
3,465
7,344
7,392
3,792
3,292
2,840
3,048
2,259
2,326
1,494
1,664
1,669
903
1,016
1,119
7799,,664477
2244,,778888
1100,,557722
33,,339977
33,,111100
22,,667744
11,,335566
11,,882233
11,,119999
22,,443388
11,,991144
11,,118833
446622
664477
220088
226655
2255
999911
998844
448888
62,950
16,154
5,625
2,447
3,875
1,475
1,306
2,553
1,483
2,128
1,498
656
426
657
146
197
22
727
994
474
88,,337711
77,,446655
33,,550088
11,,223322
22,,555577
11,,778866
11,,771111
883300
11,,004444
5588
336677
883300
441188
119944
220066
2266
9977
8877
2288
4400
9,786
8,541
2,972
1,217
2,431
1,329
1,409
1,010
832
145
395
782
526
260
41
616
337
86
17
88
22,,558855
668844
55,,993344
33,,332266
11,,993377
33,,223355
22,,669911
11,,668899
995588
11,,110077
11,,000077
11,,559999
777766
11,,223355
885588
998833
4411
1100
338877
1,388
6,378
9,672
2,644
661
4,628
3,828
1,477
1,019
946
1,610
1,307
1,410
1,306
851
1,310
90
5
557
3311..1122..2211
31.12.20
1177,,660088
33,,226611
2200,,886699
19,580
4,005
23,585
11 Before deduction of IFRS 9 ECL allowances and provisions. 22 Excluding Switzerland, supranationals and global funds.
222288,,443388
217,006
113388,,117711
105,793
3300,,885533
32,819
5599,,441144
78,394
Emerging markets¹ net exposure² by internal UBS country rating category
USD million
United States
United Kingdom
Japan
Germany
Singapore
Australia
France
China
Canada
Luxembourg
Hong Kong SAR
Netherlands
South Korea
Sweden
Thailand
Austria
Norway
India
Monaco
Brazil
TToottaall22
USD million
Investment grade
Sub-investment grade
TToottaall
11 We classify countries as emerging markets based on per capita GDP, historical real GDP growth, alignment with international institutions (such as BIS, World Bank, IMF, MSCI) and other factors. 22 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.
Top 20 country risk net exposures by product type
Sustainability and climate risk
Sustainability risk
Climate risk
Sustainability and climate risk (SCR, previously known at UBS as
environmental and social risk, or ESR) is defined as the risk that
UBS is negatively impacted by or negatively impacts climate
change, loss of biodiversity, human rights infringements, or other
environmental, social or governance (ESG) matters. Sustainability
and climate risks may manifest as credit, market, liquidity or
operational risks for UBS and can result in financial or reputational
impacts for the firm. They may also negatively impact the value of
investments. The management of sustainability and climate risks
is gaining importance amid a global drive to meet the Sustainable
Development Goals (the SDGs) and transition to net zero, as
defined by the Paris Agreement. In addition, regulators across
jurisdictions increasingly seek to understand the potential
financial impacts of climate change. Our broad and wide-ranging
SCR policy framework governs client and supplier relationships,
applies firm-wide to all activities, and is integrated in management
practices and control principles. The SCR framework is embedded
in our standard risk, compliance and operations processes and
applied through:
– risk identification and measurement;
– risk monitoring and appetite setting;
– risk management and control; and
– risk reporting.
The aforementioned processes 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 standards or otherwise subject to significant controversies
related to sustainability, human rights or climate change.
› Refer to “Sustainability and climate risk policy framework” in
appendix 6 to the Sustainability Report 2021, available from
11 March 2022 under “Annual reporting” at ubs.com/investors,
for more information
Climate risk can arise either from changing climate conditions
(physical risks) or from efforts to mitigate climate change
(transition risks). The physical and transition risks from a changing
climate contribute to a structural change across economies and
consequently can affect banks and the financial sector as a whole
through financial and non-financial impacts.
In order to protect our clients’ assets and our own assets from
climate-related risks, we have established a climate risk program
to further integrate climate risk into the firm’s risk management
framework and standard processes. The program follows a multi-
year roadmap to address regulatory expectations and is engaging
with stakeholders and experts across the firm and externally to
further develop climate risk methodologies, deliver on climate
stress test exercises, and build capacity to respond to climate risk
management expectations.
We currently identify and manage climate risk in our own
operations, our balance sheet, client assets and the supply chain.
We have continually reduced our exposure to carbon-related
assets and advanced our multi-year efforts
to develop
methodologies that enable robust and transparent disclosure of
climate metrics. This work supports our efforts to ensure that we
are prepared to respond to increased climate risk-related
regulatory requirements, align our disclosure with the Financial
Stability Board’s Task Force on Climate-related Financial
Disclosures (the TCFD) recommendations and collaborate within
the financial sector to close gaps.
We approach climate risk identification through climate risk
heatmaps, developed in collaboration with the United Nations
Environment Programme Finance Initiative (UNEP FI) TCFD
working group.
As part of this effort, we have defined an inventory of climate-
sensitive sectors based on elevated climate risk ratings defined by
the TCFD, regulators and rating agencies. We initially disclosed
our exposure to climate sensitive sectors (transition risks) in our
Annual Report 2020. Over the course of 2021, we have refined
the disclosure of transition risks and introduced an initial
disclosure of physical risks. We summarize our current exposure
to climate-sensitive sectors for both risk types in the table on the
next page.
Exposures may appear either under one or under both of the
risk types, as the physical and transition risk methodologies are
distinct in their approach and application and should not be
added up as one total exposure figure. Climate risk analysis is a
novel area of research, and, as the methodologies, tools and data
availability improve, we will further develop our risk identification
and measurement approaches.
› Refer to “Taking action on a net-zero future – our climate
report” in the Sustainability Report 2021, available from
11 March 2022 under “Annual reporting” at ubs.com/investors,
for more information
142
143
143
Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Risk management and control
UBS lending to climate-sensitive sectors1
USD million, except where indicated
CClliimmaattee--sseennssiittiivvee sseeccttoorr44
Aerospace and defense
Automotive
Business services
Chemicals
Constructions and materials
Consumer products and retail
Entertainment, leisure and services
Food and beverage
Industrial materials
Information technology
Machinery and equipment
Medical equipment and services
Mining
Oil and gas
Pharmaceuticals/biotechnology
Plastic and rubber
Primary materials
Real estate management
Sovereigns and financials
Transportation and equipment
Utilities
TToottaall,, cclliimmaattee--sseennssiittiivvee sseeccttoorrss22
TToottaall,, aallll sseeccttoorrss
CClliimmaattee--sseennssiittiivvee eexxppoossuurree::
eelleevvaatteedd ttrraannssiittiioonn rriisskkss,,
aass ooff 3311..1122..221122
CClliimmaattee--sseennssiittiivvee eexxppoossuurree::
eelleevvaatteedd pphhyyssiiccaall rriisskkss,,
aass ooff 3311..1122..221122
Trend (%) 2019–2021
Gross exposure3
Share of total in % Trend (%) 2019–2021
Gross exposure3
Share of total in %
883311
770033
11,,111122
33,,663377
335555
22
112211
11,,004400
22,,992200
55,,882233
11,,440000
229999
1133
1188,,002299
884499
337755
3377,,551100
445599,,006611
00..1188
00..1155
00..2244
00..7799
00..0088
00..0000
00..0033
00..2233
00..6644
11..2277
00..3300
00..0077
00..0000
33..9933
00..1188
00..0088
88..1177
110000..0000
333388
11,,004422
885533
999911
330022
665500
11,,330088
11,,333344
224433
227744
22,,773322
440088
11,,115533
55,,553388
881144
228800
332200
552288
44,,337711
441199
11,,557799
2255,,447766
445599,,006611
00..0077
00..2233
00..1199
00..2222
00..0077
00..1144
00..2288
00..2299
00..0055
00..0066
00..6600
00..0099
00..2255
11..2211
00..1188
00..0066
00..0077
00..1122
00..9955
00..0099
00..3344
55..5555
110000..0000
11 Not additive across transition risks and physical risks. 22 Global Wealth Management corporate lending to customers represents 1.1% of all on- and off-balance sheet loans and advances to customers, and is not
rated. 33 Reported as IFRS9 expected credit loss (ECL) calculation, and represents both on-balance sheet: total loans and advances to customers and off-balance sheet: guarantees and irrevocable loan commitments
(within the scope of ECL). Physical risk exposures include USD ~4 billion in loans backed by real estate. 44 The table includes only those sector exposures that are defined as climate-sensitive. Climate-sensitive sectors
defined as business activities rated as having high, moderately high or moderate vulnerability to transition and physical risks. Transition risk methodology was initially developed in collaboration with UNEP FI TCFD
working group and disclosed in Phase II “From disclosure to action – a guide to implementing the TCFD framework within financial institutions” report. Physical risk methodology is based on country, sectoral and
value chain risk factors derived from a range of academic and expert sources. Both methodologies have been adapted internally and enhanced.
Climate risk heatmaps enable us to use a materiality-driven
approach when defining our climate risk management strategy
by:
– helping us to identify concentrations of exposure with high
climate risk vulnerability, which, in turn, enables resource
prioritization for detailed risk analysis and management action;
– supporting a client-centric strategy in order to best assist clients
that may benefit from UBS products and services to support
their climate strategies; and
– providing information to senior management to support
decision making and the provision of external disclosure to
stakeholders.
Our climate risk heatmaps rate cross-sectoral credit risk
exposure to climate sensitivity, from high to low, through a risk
segmentation process. The transition risk methodology, reflected
in the climate risk heatmap on the next page, divides economic
sectors into segments with similar risk characteristics and rates
those segments according to their vulnerability to mitigative
climate policies, low-carbon technology risks and revenue or
demand shifts under an aggressive approach to meeting the well-
below-2˚C Paris goal. The physical risk methodology groups
corporate counterparties based on exposure to key physical risk
factors, through rating sectoral, geographic, and value chain
vulnerabilities in a climate change trajectory in which no
additional policy action is taken. Counterparties are assigned a
climate vulnerability rating based on the primary industry code
(Global Industry Classification Standard, GICS) and risk domicile
in UBS data systems.
› For our physical risk heatmap, refer to “Taking action on a net-
zero future – our climate report” in the Sustainability Report
2021, available from 11 March 2022 under “Annual reporting” at
ubs.com/investors
144
144
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
UBS lending to climate-sensitive sectors1
USD million, except where indicated
Trend (%) 2019–2021
Gross exposure3
Share of total in % Trend (%) 2019–2021
Gross exposure3
Share of total in %
CClliimmaattee--sseennssiittiivvee eexxppoossuurree::
eelleevvaatteedd ttrraannssiittiioonn rriisskkss,,
aass ooff 3311..1122..221122
CClliimmaattee--sseennssiittiivvee eexxppoossuurree::
eelleevvaatteedd pphhyyssiiccaall rriisskkss,,
aass ooff 3311..1122..221122
Climate risk heatmap (transition risks)
in USD million
265 High
4,741 Moderately high
32,503 Moderate
17,593 Moderately low
192,189 Low
459,061
Total exposure
211,769
Non-sensitive1
CClliimmaattee--sseennssiittiivvee sseeccttoorr44
Aerospace and defense
Automotive
Business services
Chemicals
Constructions and materials
Consumer products and retail
Entertainment, leisure and services
Food and beverage
Industrial materials
Information technology
Machinery and equipment
Medical equipment and services
Mining
Oil and gas
Pharmaceuticals/biotechnology
Plastic and rubber
Primary materials
Real estate management
Sovereigns and financials
Transportation and equipment
Utilities
TToottaall,, cclliimmaattee--sseennssiittiivvee sseeccttoorrss22
TToottaall,, aallll sseeccttoorrss
883311
770033
11,,111122
33,,663377
335555
22
112211
11,,004400
22,,992200
55,,882233
11,,440000
229999
1133
1188,,002299
884499
337755
3377,,551100
445599,,006611
00..1188
00..1155
00..2244
00..7799
00..0088
00..0000
00..0033
00..2233
00..6644
11..2277
00..3300
00..0077
00..0000
33..9933
00..1188
00..0088
88..1177
333388
11,,004422
885533
999911
330022
665500
11,,330088
11,,333344
224433
227744
22,,773322
440088
11,,115533
55,,553388
881144
228800
332200
552288
44,,337711
441199
11,,557799
2255,,447766
445599,,006611
00..0077
00..2233
00..1199
00..2222
00..0077
00..1144
00..2288
00..2299
00..0055
00..0066
00..6600
00..0099
00..2255
11..2211
00..1188
00..0066
00..0077
00..1122
00..9955
00..0099
00..3344
55..5555
11 Not additive across transition risks and physical risks. 22 Global Wealth Management corporate lending to customers represents 1.1% of all on- and off-balance sheet loans and advances to customers, and is not
rated. 33 Reported as IFRS9 expected credit loss (ECL) calculation, and represents both on-balance sheet: total loans and advances to customers and off-balance sheet: guarantees and irrevocable loan commitments
(within the scope of ECL). Physical risk exposures include USD ~4 billion in loans backed by real estate. 44 The table includes only those sector exposures that are defined as climate-sensitive. Climate-sensitive sectors
defined as business activities rated as having high, moderately high or moderate vulnerability to transition and physical risks. Transition risk methodology was initially developed in collaboration with UNEP FI TCFD
working group and disclosed in Phase II “From disclosure to action – a guide to implementing the TCFD framework within financial institutions” report. Physical risk methodology is based on country, sectoral and
value chain risk factors derived from a range of academic and expert sources. Both methodologies have been adapted internally and enhanced.
110000..0000
110000..0000
Climate risk heatmaps enable us to use a materiality-driven
Our climate risk heatmaps rate cross-sectoral credit risk
approach when defining our climate risk management strategy
exposure to climate sensitivity, from high to low, through a risk
by:
segmentation process. The transition risk methodology, reflected
– helping us to identify concentrations of exposure with high
in the climate risk heatmap on the next page, divides economic
climate risk vulnerability, which, in turn, enables resource
sectors into segments with similar risk characteristics and rates
prioritization for detailed risk analysis and management action;
those segments according to their vulnerability to mitigative
– supporting a client-centric strategy in order to best assist clients
climate policies, low-carbon technology risks and revenue or
that may benefit from UBS products and services to support
demand shifts under an aggressive approach to meeting the well-
their climate strategies; and
below-2˚C Paris goal. The physical risk methodology groups
– providing information to senior management to support
corporate counterparties based on exposure to key physical risk
decision making and the provision of external disclosure to
factors, through rating sectoral, geographic, and value chain
stakeholders.
vulnerabilities in a climate change trajectory in which no
additional policy action is taken. Counterparties are assigned a
climate vulnerability rating based on the primary industry code
(Global Industry Classification Standard, GICS) and risk domicile
in UBS data systems.
› For our physical risk heatmap, refer to “Taking action on a net-
zero future – our climate report” in the Sustainability Report
2021, available from 11 March 2022 under “Annual reporting” at
ubs.com/investors
144
1 Non-sensitive is mostly composed of private Lombard lending. 2 Includes pharmaceuticals.
t
e
e
h
s
l
e
c
n
a
a
b
d
n
a
High 265
Coal 233
Shale gas 24
Oil refining 8
Moderately high 4,741
Chemicals2
2,821
Transportation and storage (oil)
853
Integrated oil and gas companies 404
Cement or concrete manufacturing 312
Conventional oil drilling 233
i
,
g
n
d
n
u
f
d
n
a
High-carbon power generation (regulated) 118
y
t
i
d
u
q
i
i
l
Commercial real estate management
18,029
Moderate 32,503
,
l
a
t
i
p
a
c
,
k
s
i
R
Downstream oil and gas distribution 4,430
Construction – non-infrastructure
3,206
Mining conglomerates
2,687
Manufacturing of other metals
917
Consumer durables manufacturing
873
Airlines – commercial
708
Car manufacturing (high-carbon)
644
Land-based shipping, high-carbon (trucks)
500
Medium-carbon power generation (regulated)
249
Sea-based shipping
160
Steel / iron manufacturing
76
Livestock – beef, extensive grazing
15
Conventional gas drilling
4
Transportation and storage (gas)
3
145
145
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Scenario analysis and stress tests exercises
We have been using scenario-based approaches since 2014 to
assess our exposure and the potential impacts of physical and
transition risks stemming from climate change. Novel in-house
scenario analyses have been followed by a series of assessments
performed through industry collaborations in order to harmonize
approaches in addressing methodological and data gaps. We
have performed both top-down balance sheet stress testing
(across the firm) and targeted bottom-up analyses of specific
sector exposures covering short-, mid- and long-term time
horizons. Starting in 2021, UBS participates in regulatory scenario
analysis and stress test exercises, including the Bank of England’s
“2021 Climate Biennial Exploratory Scenario: Financial risks from
climate change” and the European Central Bank’s climate stress
test. In addition, in 2021 UBS participated in a top-down climate
risk assessment performed jointly by FINMA and the Swiss
National Bank in Switzerland.
› For more information about our climate risk approach and
physical risk heatmap, refer to “Taking action on a net-zero
future – our climate report” in the Sustainability Report 2021,
available from 11 March 2022 under “Annual reporting” at
ubs.com/investors
146
146
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Scenario analysis and stress tests exercises
“2021 Climate Biennial Exploratory Scenario: Financial risks from
We have been using scenario-based approaches since 2014 to
climate change” and the European Central Bank’s climate stress
assess our exposure and the potential impacts of physical and
test. In addition, in 2021 UBS participated in a top-down climate
transition risks stemming from climate change. Novel in-house
risk assessment performed jointly by FINMA and the Swiss
scenario analyses have been followed by a series of assessments
National Bank in Switzerland.
performed through industry collaborations in order to harmonize
approaches in addressing methodological and data gaps. We
have performed both top-down balance sheet stress testing
(across the firm) and targeted bottom-up analyses of specific
› For more information about our climate risk approach and
physical risk heatmap, refer to “Taking action on a net-zero
future – our climate report” in the Sustainability Report 2021,
available from 11 March 2022 under “Annual reporting” at
sector exposures covering short-, mid- and long-term time
ubs.com/investors
horizons. Starting in 2021, UBS participates in regulatory scenario
analysis and stress test exercises, including the Bank of England’s
Non-financial risk
Key developments
We have identified seven non-financial risk themes as key to the
firm for 2022. These are:
– digital transformation and cyber and operational resilience;
– use of data;
– new ways of working and change delivery;
– investor protection and market interaction;
– strategic growth initiatives and partnerships;
– the evolving nature of anti-money-laundering (AML) / know-
your-client (KYC) programs and sanctions; and
– environmental, social and governance (ESG) risks.
We are continuing our efforts regarding innovation and
digitalization to create value for our clients. As part of the
resulting transformation, we are focusing on timely changes to
frameworks, including consideration of new or revised controls,
working practices and oversight, with the aim of mitigating any
new risks introduced, including those related to data ethics.
Increases in the sophistication of cyberattacks and frauds are
noted worldwide, especially with ransomware attacks. To date,
our security controls, regular communications to help employees
stay alert to cyber threats while working remotely and enhanced
monitoring of cyber threats have resulted in no cyber security
incidents having a material effect on our operations during 2021.
UBS continues to be vigilant, particularly in view of the potential
for intensifying cyber threats, both in terms of volume and
sophistication, driven by current geopolitical events.
Operational resilience continues to be a focus area for us, as
well as for regulators globally. We have a global program to
enhance our operational-resilience
including
addressing developing regulatory requirements.
capabilities,
The existing resilience built into our operations and the
effectiveness of our business continuity management and
operational risk processes (including those for third-party service
providers) have been critical in handling the ongoing COVID-19
pandemic. They have enabled us to maintain stable operations
while complying with governmental measures to contain
COVID-19; continuing to serve our clients without material
impact; and to support the safety and well-being of our staff.
Hybrid working arrangements can lead to increased conduct
risk, inherent risk of fraudulent activities, potential increases in the
number of suspicious transactions and increased information
security risks. We have implemented additional monitoring and
supervision intended to mitigate these risks. In addition, as we
move to a post-pandemic new normal, changes to the work
environment, including permanent hybrid and the introduction of
agile ways of working, may introduce new challenges for
supervision and monitoring.
Achieving fair outcomes for our clients, upholding market
integrity and cultivating the highest standards of employee
conduct are of critical importance to the firm. We maintain a
conduct risk framework across our activities, which is designed to
align our standards and conduct with these objectives and
maintain momentum on fostering a strong culture.
Competition to find new business opportunities across the
financial services industry, both for firms and customers, is
increasing. Thus 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 (such as the Swiss Financial Services
Act (FIDLEG) in Switzerland, Regulation Best Interest (Reg BI) in
the US, and the Markets in Financial Instruments Directive II
(MiFID II) in the EU) all significantly affect 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.
Cross-border risk remains an area of regulatory attention for
global financial institutions, with a strong focus on fiscal
transparency, as well as market access, particularly third-country
market access into the European Economic Area. There is also an
ongoing high level of attention regarding the risk that tax
authorities may, on the basis of new interpretations of existing
law, seek to impose taxation based on the existence of a
permanent establishment. We maintain a series of controls
designed to address these risks.
laundering,
Financial crime,
terrorist
including money
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 therefore remains
laundering and financial fraud
essential for UBS. Money
techniques are becoming
increasingly sophisticated, and
geopolitical volatility makes the sanctions landscape more
challenging, as new or novel sanctions may be imposed that
require complex implementation in a short timeframe, as
evidenced by the existing, and potential escalation of new
sanctions arising from the Russian invasion of Ukraine. New risks
continue to emerge, such as virtual currencies and related
activities or investments.
In the US, the Office of the Comptroller of the Currency issued
a Cease and Desist Order against the firm in May 2018 relating to
our US branch KYC and AML programs. In response, we initiated
an extensive program for the purpose of ensuring sustainable
remediation of US-relevant Bank Secrecy Act / AML issues across
all our US legal entities. We introduced significant improvements
to the framework between 2019 and 2021 and are continuing to
implement these. We believe they will yield the planned
enhancements to our AML controls.
We continued to focus on strategic enhancements to our
global AML / KYC and sanctions programs to address evolving risk
profiles and regulatory expectations, including the exploration of
new technologies and more sophisticated monitoring.
In line with our firm-wide purpose, ESG topics and the risks
related to them are high on our agenda, particularly considering
the increasing regulatory focus on ESG disclosure, climate-related
stress testing and greenwashing, as well as the potential for new
and diverse regulations being deployed across jurisdictions.
› Refer to “Sustainability and climate risk” in this section for more
information about risks related to sustainability and climate risk
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Risk, capital, liquidity and funding, and balance sheet
Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Compliance & Operational Risk Control (C&ORC) is responsible
for providing an independent and objective view of the adequacy
of operational risk management across the Group, and ensuring
that operational, compliance and conduct 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. The ORF forms the
for managing and assessing operational,
common basis
compliance and conduct risk, and there are additional C&ORC
activities intended to ensure UBS is able to demonstrate
compliance with applicable laws, rules and regulations.
In 2021, UBS continued to review and enhance the ORF
through the established ORF design authority, considering
feedback and input from both internal and external stakeholders,
including implementing Group-wide control portfolio analytics,
supporting consistency across the control portfolio.
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 is
reflected in the respective managers’ 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.
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 (an ORF) that establishes requirements
for identifying, managing, assessing and mitigating operational,
compliance and conduct risks to achieve an agreed balance
between risk and return. It is built on the following pillars:
risks
– 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
– 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 are accountable for the effectiveness of
operational risk management and for the robustness of the front-
to-back control environment within their business divisions, and
legal entity responsible executives are responsible for operational
risk management within their legal entities. Group function heads
are accountable for supporting the divisional Presidents and legal
entity responsible executives of our legal entities in the discharge
of
responsibility, by confirming completeness and
effectiveness of the control environment and operational risk
management within their Group functions. Collectively, divisional
Presidents, central Group function heads and legal entity
responsible executives are in charge of implementing the
operational risk framework.
this
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Risk, capital, liquidity and funding, and balance sheet | Risk management and control
Operational risk is an inherent part of the firm’s business. Losses
of operational risk management across the Group, and ensuring
can result from inadequate or failed internal processes, people
that operational, compliance and conduct risks are understood,
and systems, or from external causes. UBS follows a Group-wide
owned and managed in accordance with the firm’s risk appetite.
operational risk framework (an ORF) that establishes requirements
C&ORC-aligned teams sit within the Group Compliance,
for identifying, managing, assessing and mitigating operational,
Regulatory & Governance (GCRG) function, reporting to the
compliance and conduct risks to achieve an agreed balance
Group Chief Compliance and Governance Officer, who is a
between risk and return. It is built on the following pillars:
member of the Group Executive Board. The ORF forms the
– classifying
inherent
risks
through
the operational
risk
common basis
for managing and assessing operational,
taxonomy, which defines the universe of material operational
compliance and conduct risk, and there are additional C&ORC
risks that can arise as a consequence of the firm’s business
activities intended to ensure UBS is able to demonstrate
activities and external factors;
compliance with applicable laws, rules and regulations.
– assessing the design and operating effectiveness of controls
In 2021, UBS continued to review and enhance the ORF
through the control assessment process;
through the established ORF design authority, considering
– proactively and sustainably remediating identified control
feedback and input from both internal and external stakeholders,
deficiencies;
including implementing Group-wide control portfolio analytics,
– defining operational risk appetite (including a financial
supporting consistency across the control portfolio.
operational risk appetite statement at Group, UBS AG and
All functions within UBS are required to assess the design and
business division levels for operational risk events) through
operating effectiveness of their internal controls periodically. The
quantitative metrics and thresholds and qualitative measures,
output of these assessments forms the basis for the assessment
and assessing risk exposure against appetite; and
and testing of internal controls over financial reporting as required
– assessing inherent and residual risk through risk assessment
by the Sarbanes–Oxley Act, Section 404 (SOX 404).
processes, and determining whether additional remediation
Key control deficiencies identified during the internal control
plans are required to address identified deficiencies.
and risk assessment processes must be reported in the operational
Divisional Presidents are accountable for the effectiveness of
executed. These control deficiencies are assigned to owners at
operational risk management and for the robustness of the front-
senior management level and the remediation progress is
to-back control environment within their business divisions, and
reflected in the respective managers’ annual performance
risk inventory, and sustainable remediation must be defined and
risk management within their legal entities. Group function heads
prioritizing the most material control deficiencies and measuring
are accountable for supporting the divisional Presidents and legal
aggregated risk exposure, irrespective of origin, a common rating
entity responsible executives of our legal entities in the discharge
methodology is applied across all three lines of defense, as well as
of
this
responsibility, by confirming completeness and
by external audit.
effectiveness of the control environment and operational risk
management within their Group functions. Collectively, divisional
Presidents, central Group function heads and legal entity
responsible executives are in charge of implementing the
operational risk framework.
Operational risk framework
Compliance & Operational Risk Control (C&ORC) is responsible
for providing an independent and objective view of the adequacy
Advanced measurement approach model
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.
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.
legal entity responsible executives are responsible for operational
measurement and management objectives. To assist with
AMA model calibration and review
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.
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
resulting baseline data-driven frequency and severity 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.
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.
Expected transition of capital regime under Basel III capital
regulations
The AMA is expected to be replaced by the standardized
measurement approach for regulatory capital determination
purposes in line with the relevant Basel Committee for Banking
Supervision Basel III capital regulations. UBS is interacting closely
with the relevant Swiss authorities to discuss the implementation
details and related implementation timeline.
› 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 “Risk factors” section of this report for more
information
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Capital, liquidity
and funding,
and balance sheet
Table of contents
151
151
152
154
158
161
163
164
164
164
165
166
167
168
168
174
176
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
177
Currency management
178
UBS shares
Capital, liquidity
and funding,
and balance sheet
151
151
152
154
158
161
163
164
164
164
165
166
167
168
168
174
176
Table of contents
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
177
Currency management
178
UBS shares
Capital management
Capital management objectives, planning and activities
Capital management objectives
Capital planning and activities
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 2021, our common equity tier 1 (CET1)
capital ratio was 15.0% and our CET1 leverage ratio 4.24%, each
above our capital guidance, and also above 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 from the Fundamental
Review of the Trading Book (the FRTB) in January 2019. In
response to COVID-19, the Group of Central Bank Governors and
Heads of Supervision, which acts as the BCBS’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 were also extended by one year, to 1 January
2028. We expect the Swiss regulations to come into force in 2024
and we continue to make progress on our infrastructure design
and operational governance ahead of 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 around USD 20 billion in 2024, before taking into
account mitigating actions. The estimate includes credit risk and
operational risk RWA from the finalization of the Basel III
framework, as well as market risk and credit valuation adjustment
(CVA) RWA from the FRTB, based on our current understanding
of the relevant standards. It may change as a result of new or
changed regulatory interpretations, particularly those regarding
the treatment of historical operational losses, as well as the
appropriate
the
implementation of Basel III standards into national law, changes
in business growth, market conditions and other factors.
conservatism
in model
calibration,
› Refer to the “Our strategy” and “Targets, aspirations and capital
guidance” sections of this report for more information about our
capital and resource guidelines
› Refer to “We may be unable to maintain our capital strength” in
the “Risk factors” section of this report for more information
about capital ratio-related risks
Audited | We manage our balance sheet, RWA, leverage ratio
denominator (LRD) and TLAC ratio levels based on our regulatory
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 the 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 any 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 the 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
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Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | 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 2021 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 2021 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 2021, available under “Annual
reporting” at ubs.com/investors.
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 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, going concern capital includes CET1
and high-trigger loss-absorbing AT1 capital instruments. Our
existing outstanding low-trigger loss-absorbing AT1 capital
instruments are available to meet the going concern capital
requirements until their first call date. As of their first call date,
these instruments are eligible to meet the gone concern
requirements.
Outstanding high- and low-trigger loss-absorbing tier 2 capital
instruments, non-Basel III-compliant tier 2 capital instruments and
TLAC-eligible senior unsecured debt instruments are eligible to
meet gone concern requirements until one year before maturity.
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 (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.
› 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
Going concern capital requirements
Under the Swiss SRB requirements, 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 applicable market share add-on requirements
for UBS increased 0.36% to 0.72% of RWA and 0.125% to
0.25% of LRD, reflecting an increase in UBS’s market share in the
Swiss credit business to more than 17%. The applicable LRD add-
on requirements remained unchanged at 0.72% of RWA and
0.25% of LRD, as our Group LRD remained within the same add-
on bucket.
Effective from 27 March 2020, the Swiss Federal Council
deactivated the countercyclical buffer requirement of 2% on risk-
weighted positions that are directly or indirectly backed by
residential properties in Switzerland to support the lending
capacity of banks. Even though the Swiss countercyclical buffer
requirement was not active in 2021, we continued to apply
additional countercyclical buffer requirements introduced in other
BCBS member jurisdictions, which result in an additional buffer
requirement of 0.02%. In January 2022, the Swiss Federal Council
decided, at the request of the Swiss National Bank, to reactivate
the countercyclical capital buffer, at a maximum level of 2.5%.
The reactivated countercyclical capital buffer will become
effective on 30 September 2022 and is expected to increase our
CET1 capital requirement by approximately 30 basis points.
The total going concern capital requirements applicable are
14.32% of RWA (including countercyclical buffer requirements)
and 5.00% of LRD. Furthermore, of the total going concern
capital requirement of 14.32% of RWA, at least 10.02% must be
met with CET1 capital, while a maximum of 4.3% can be met
with high-trigger
instruments
(including our existing outstanding low-trigger AT1 capital
instruments, which qualify until their first call date as mentioned
above).
loss-absorbing AT1 capital
Similarly, of the total going concern leverage ratio requirement
of 5.00%, at least 3.5% must be met with CET1 capital, while a
maximum of 1.5% can be met with high-trigger loss-absorbing
AT1 capital instruments (including our existing outstanding low-
trigger AT1 capital instruments, which qualify until their first call
date as mentioned above).
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Risk, capital, liquidity and funding, and balance sheet | Capital management
Swiss SRB total loss-absorbing capacity framework
The disclosures in this section are provided for UBS Group AG on
once at least 75% of the gone concern requirement has been met
a consolidated basis and focus on key developments during the
with instruments that have a remaining maturity of greater than
reporting period and information in accordance with the Basel III
two years, all instruments that have a remaining maturity of
framework, as applicable to Swiss SRBs.
between one and two years remain eligible to be included in the
Additional regulatory disclosures for UBS Group AG on a
total gone concern capital.
consolidated basis are provided in our 31 December 2021 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
› 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
31 December 2021 and is available under “Pillar 3 disclosures” at
Total loss-absorbing capacity and leverage ratio requirements
ubs.com/investors.
Capital and other regulatory
information for UBS AG
Going concern capital requirements
consolidated in accordance with the Basel III framework, as
Under the Swiss SRB requirements, total going concern minimum
applicable to Swiss SRBs, is provided in the combined UBS Group
requirements for all Swiss SRBs are a capital ratio requirement of
AG and UBS AG Annual Report 2021, available under “Annual
12.86% of RWA and a leverage ratio requirement of 4.5%. In
reporting” at ubs.com/investors.
Regulatory framework
addition to these minimum requirements, an add-on reflecting
the degree of systemic importance is applied, based on market
share and LRD. The applicable market share add-on requirements
for UBS increased 0.36% to 0.72% of RWA and 0.125% to
The Basel III framework came into effect in Switzerland on
0.25% of LRD, reflecting an increase in UBS’s market share in the
1 January 2013 and is embedded in the Swiss Capital Adequacy
Swiss credit business to more than 17%. The applicable LRD add-
Ordinance (the CAO). The CAO also includes the too-big-to-fail
on requirements remained unchanged at 0.72% of RWA and
provisions applicable to Swiss SRBs, which have been fully phased-
0.25% of LRD, as our Group LRD remained within the same add-
in since 1 January 2020.
on bucket.
Under the Swiss SRB framework, going and gone concern
Effective from 27 March 2020, the Swiss Federal Council
requirements represent the Group’s TLAC requirement. TLAC
deactivated the countercyclical buffer requirement of 2% on risk-
encompasses regulatory capital, such as CET1, loss-absorbing
weighted positions that are directly or indirectly backed by
additional tier 1 (AT1) and tier 2 capital instruments, and liabilities
residential properties in Switzerland to support the lending
that can be written down or converted into equity in case of
capacity of banks. Even though the Swiss countercyclical buffer
resolution or for the purpose of restructuring measures.
requirement was not active in 2021, we continued to apply
additional countercyclical buffer requirements introduced in other
Capital and other instruments contributing to our total
BCBS member jurisdictions, which result in an additional buffer
loss-absorbing capacity
requirement of 0.02%. In January 2022, the Swiss Federal Council
In addition to CET1 capital, the following instruments contribute
decided, at the request of the Swiss National Bank, to reactivate
to our loss-absorbing capacity:
the countercyclical capital buffer, at a maximum level of 2.5%.
– loss-absorbing AT1 capital instruments (high- and low-trigger);
The reactivated countercyclical capital buffer will become
– loss-absorbing tier 2 capital instruments (high- and low-trigger);
effective on 30 September 2022 and is expected to increase our
– non-Basel III-compliant tier 2 capital instruments; and
CET1 capital requirement by approximately 30 basis points.
– TLAC-eligible senior unsecured debt instruments.
The total going concern capital requirements applicable are
14.32% of RWA (including countercyclical buffer requirements)
Under the Swiss SRB rules, going concern capital includes CET1
and 5.00% of LRD. Furthermore, of the total going concern
and high-trigger loss-absorbing AT1 capital instruments. Our
capital requirement of 14.32% of RWA, at least 10.02% must be
existing outstanding low-trigger loss-absorbing AT1 capital
met with CET1 capital, while a maximum of 4.3% can be met
instruments are available to meet the going concern capital
with high-trigger
loss-absorbing AT1 capital
instruments
requirements until their first call date. As of their first call date,
(including our existing outstanding low-trigger AT1 capital
these instruments are eligible to meet the gone concern
instruments, which qualify until their first call date as mentioned
requirements.
above).
Outstanding high- and low-trigger loss-absorbing tier 2 capital
Similarly, of the total going concern leverage ratio requirement
instruments, non-Basel III-compliant tier 2 capital instruments and
of 5.00%, at least 3.5% must be met with CET1 capital, while a
TLAC-eligible senior unsecured debt instruments are eligible to
maximum of 1.5% can be met with high-trigger loss-absorbing
meet gone concern requirements until one year before maturity.
AT1 capital instruments (including our existing outstanding low-
A maximum of 25% of the gone concern requirements can be
trigger AT1 capital instruments, which qualify until their first call
met with instruments that have a remaining maturity of between
date as mentioned above).
one and two years (i.e., are in the last year of eligibility). However,
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 LRD.
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
requirements. The amount of the rebate for improved resolvability
is assessed annually by FINMA. Based on actions we had
completed by December 2020 to improve resolvability, FINMA
granted a rebate on the gone concern requirement of 55% of the
aforementioned maximum rebate in the third quarter of 2021,
which resulted in a reduction of 3.14 percentage points for the
RWA-based requirement and 1.10 percentage points for the
LRD-based requirement.
Our gone concern requirements are further reduced when
higher quality capital instruments (CET1 capital, low-trigger
tier 2 capital
loss-absorbing AT1 or certain
instruments) are used to meet gone concern requirements. As of
low-trigger
tier 2 capital
31 December 2021, UBS used
instruments to fulfill gone concern requirements, resulting in a
reduction of 0.43 percentage points for the RWA-based
requirement and 0.12 percentage points for the LRD-based
requirement.
low-trigger
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 was
floored at 8.6% and 3% for the RWA- and LRD-based
requirements, respectively. From 1 January 2022 onward, this
floor increased to 10% and 3.75% for the RWA- and LRD-based
requirements, respectively.
In this report, we refer to the RWA-based gone concern
capacity
concern
requirements as gone
requirements and the RWA-based gone concern ratio is referred
to as the gone concern loss-absorbing capacity ratio.
loss-absorbing
The
table below provides
the RWA- and LRD-based
requirements and information as of 31 December 2021.
Swiss SRB going and gone concern requirements and information
AAss ooff 3311..1122..2211
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 ccaappiittaall
TToottaall ggoonnee ccoonncceerrnn lloossss--aabbssoorrbbiinngg ccaappaacciittyy44
of which: base requirement 5
of which: additional requirement for market share and LRD
of which: applicable reduction on requirements
of which: rebate granted (equivalent to 55% 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 %%
LLRRDD
iinn %%
1144..332211
1100..0022
4.50
5.50
0.02
44..3300
3.50
0.80
2200..0022
14.98
55..0033
4.23
0.80
1100..7744
12.86
1.44
(3.56)
(3.14)
(0.43)
1144..6655
11..0044
0.86
0.18
1133..6611
4433,,228811
3300,,228866
13,599
16,621
66
1122,,999955
10,577
2,418
6600,,448888
45,281
1155,,220077
12,783
2,425
3322,,444444
38,864
4,352
(10,772)
(9,474)
(1,298)
4444,,226644
33,,114444
2,596
547
4411,,112200
2255..0066
3344..6666
7755,,772255
110044,,775522
55..000011
33..550022
1.50
2.00
11..5500
1.50
55..6666
4.24
11..4422
1.20
0.23
33..7788
4.50
0.50
(1.22)
(1.10)
(0.12)
44..1144
00..2299
0.24
0.05
33..8855
88..7788
99..8800
5533,,444433
3377,,441100
16,033
21,377
1166,,003333
16,033
6600,,448888
45,281
1155,,220077
12,783
2,425
4400,,338888
48,099
5,344
(13,056)
(11,757)
(1,298)
4444,,226644
33,,114444
2,596
547
4411,,112200
9933,,883311
110044,,775522
RRiisskk--wweeiigghhtteedd aasssseettss // lleevveerraaggee rraattiioo ddeennoommiinnaattoorr
Risk-weighted assets
Leverage ratio denominator
11 Includes applicable add-ons of 1.44% for RWA and 0.50% for LRD. 22 Our minimum CET1 leverage ratio requirement of 3.5% consists of a 1.5% base requirement, a 1.5% base buffer capital requirement, a 0.25%
LRD add-on requirement and a 0.25% market share add-on requirement based on our Swiss credit business. 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 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 5.7 percentage points for the RWA-based requirement of 14.3% and 2.0 percentage points for the LRD-based requirement of 5.0%.
11,,006688,,886622
330022,,220099
152
153
153
Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Capital management
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 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
TToottaall lloossss--aabbssoorrbbiinngg ccaappaacciittyy
RRiisskk--wweeiigghhtteedd aasssseettss // lleevveerraaggee rraattiioo ddeennoommiinnaattoorr
Risk-weighted assets
Leverage ratio denominator
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
LLeevveerraaggee rraattiiooss ((%%))11
Going concern leverage ratio
of which: common equity tier 1 leverage ratio
3311..1122..2211
31.12.20
6600,,448888
6600,,448888
4455,,228811
1155,,220077
1122,,778833
22,,442255
4444,,226644
33,,114444
22,,559966
554477
4411,,112200
56,178
56,178
39,890
16,288
13,711
2,577
45,545
7,744
7,201
543
37,801
110044,,775522
101,722
330022,,220099
11,,006688,,886622
289,101
1,037,1501
2200..00
1155..00
1144..66
3344..77
19.4
13.8
15.8
35.2
55..77
44..2244
44..11
99..88
5.4
3.85
4.4
9.8
Gone concern leverage ratio
TToottaall lloossss--aabbssoorrbbiinngg ccaappaacciittyy lleevveerraaggee rraattiioo
11 The leverage ratio denominator (LRD) and leverage ratios for 31 December 2020 do not reflect the effects of the temporary exemption that applied from 25 March 2020 until 1 January 2021 and was granted by
FINMA in connection with COVID-19. Refer to the “Regulatory and legal developments” section and to “Application of the temporary COVID-19-related FINMA exemption of central bank sight deposits” in the
“Capital, liquidity and funding, and balance sheet” sections of our Annual Report 2020 for more information.
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 tax1
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 Includes goodwill related to significant investments in financial institutions of USD 22 million as of 31 December 2021 (31 December 2020: USD 413 million) presented on the balance sheet line Investments in
associates.
31.12.20
59,765
(319)
(41)
(5,617)
(5)
(6,319)
(296)
(1,349)
(330)
(2,321)
382
(45)
(152)
(150)
(1,314)
(2,000)
0
39,890
3311..1122..2211
6611,,000022
((334400))
((227700))
((44,,556655))
((4499))
((55,,883388))
((118800))
((11,,770000))
((448822))
((662288))
331155
((5500))
((6688))
((116677))
((11,,770000))
11
4455,,228811
154
154
Risk, capital, liquidity and funding, and balance sheet | Capital management
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 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
TToottaall lloossss--aabbssoorrbbiinngg ccaappaacciittyy
Risk-weighted assets
Leverage ratio denominator
RRiisskk--wweeiigghhtteedd aasssseettss // lleevveerraaggee rraattiioo ddeennoommiinnaattoorr
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
LLeevveerraaggee rraattiiooss ((%%))11
Going concern leverage ratio
of which: common equity tier 1 leverage ratio
Gone concern leverage ratio
TToottaall lloossss--aabbssoorrbbiinngg ccaappaacciittyy lleevveerraaggee rraattiioo
11 The leverage ratio denominator (LRD) and leverage ratios for 31 December 2020 do not reflect the effects of the temporary exemption that applied from 25 March 2020 until 1 January 2021 and was granted by
FINMA in connection with COVID-19. Refer to the “Regulatory and legal developments” section and to “Application of the temporary COVID-19-related FINMA exemption of central bank sight deposits” in the
“Capital, liquidity and funding, and balance sheet” sections of our Annual Report 2020 for more information.
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 tax1
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
TToottaall ccoommmmoonn eeqquuiittyy ttiieerr 11 ccaappiittaall
Other
associates.
11 Includes goodwill related to significant investments in financial institutions of USD 22 million as of 31 December 2021 (31 December 2020: USD 413 million) presented on the balance sheet line Investments in
4455,,228811
39,890
110044,,775522
101,722
330022,,220099
11,,006688,,886622
289,101
1,037,1501
3311..1122..2211
31.12.20
6600,,448888
6600,,448888
4455,,228811
1155,,220077
1122,,778833
22,,442255
4444,,226644
33,,114444
22,,559966
554477
4411,,112200
2200..00
1155..00
1144..66
3344..77
55..77
44..2244
44..11
99..88
3311..1122..2211
6611,,000022
((334400))
((227700))
((44,,556655))
((4499))
((55,,883388))
((118800))
((11,,770000))
((448822))
((662288))
331155
((5500))
((6688))
((116677))
((11,,770000))
11
56,178
56,178
39,890
16,288
13,711
2,577
45,545
7,744
7,201
543
37,801
19.4
13.8
15.8
35.2
5.4
3.85
4.4
9.8
31.12.20
59,765
(319)
(41)
(5,617)
(5)
(6,319)
(296)
(1,349)
(330)
(2,321)
382
(45)
(152)
(150)
(1,314)
(2,000)
0
Total loss-absorbing capacity and movement
Our total loss-absorbing capacity increased by USD 3.0 billion to
USD 104.8 billion as of 31 December 2021.
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 5.4 billion to USD 45.3
billion as of 31 December 2021, mainly as a result of operating
profit before tax of USD 9.5 billion, a USD 0.5 billion increase in
eligible deferred tax assets on temporary differences, a USD 0.4
billion decrease in deduction of goodwill resulting from the sale
of our remaining minority investment in Clearstream Fund
Centre AG (previously Fondcenter AG) and an increase of USD 0.2
billion related to the launch of our new operational partnership
entity with Sumitomo Mitsui Trust Holdings, Inc. These effects
were partly offset by dividend accruals of USD 1.7 billion, current
tax expenses of USD 1.6 billion, share repurchases under our
share repurchase program of USD 0.6 billion, negative foreign
currency effects of USD 0.6 billion, compensation- and own
share-related capital components of USD 0.4 billion, and negative
effects from defined benefit plans of USD 0.2 billion.
Our share repurchases in 2021 decreased CET1 capital by
USD 0.6 billion, reflecting shares repurchased under our share
repurchase programs of USD 2.6 billion, partly offset by the use
of the capital reserve for potential share repurchases of USD 2.0
billion. The capital reserve for potential share repurchases was
fully utilized during 2021.
› Refer to “UBS shares” in this section for more information about
our share repurchase programs
Our loss-absorbing additional tier 1 (AT1) capital decreased by
USD 1.1 billion to USD 15.2 billion, mainly due to two calls of
USD 2.6 billion of AT1 capital instruments denominated in US
dollars and foreign currency translation and interest rate risk
hedge effects, partly offset by two issuances of USD 2.25 billion
of AT1 capital instruments denominated in US dollars.
Gone concern loss-absorbing capacity and movement
Audited | Our total gone concern loss-absorbing capacity decreased
by USD 1.3 billion to USD 44.3 billion as of 31 December 2021 and
included USD 41.1 billion of TLAC-eligible senior unsecured
debt.
The decrease was mainly due to four TLAC-eligible senior
unsecured debt instruments denominated in US dollars, euro and
Swiss francs that ceased to be eligible as they had less than one
year to maturity, the call of a low-trigger tier 2 capital instrument
denominated in euro, a low-trigger loss-absorbing tier 2 capital
instrument denominated in US dollars that ceased to be eligible
as it had less than one year to maturity, and the call of a TLAC-
eligible senior unsecured debt instrument denominated in euro,
as well as interest rate risk hedge, foreign currency translation and
other effects. These decreases were partly offset by 16 issuances
of TLAC-eligible senior unsecured debt instruments denominated
in euro, US dollars, Swiss francs, pounds sterling and Australian
dollars.
Loss-absorbing capacity and leverage ratios
Our CET1 capital ratio increased 1.2 percentage points to 15.0%,
reflecting a USD 5.4 billion increase in CET1 capital that was partly
offset by a USD 13.1 billion increase in RWA.
Our CET1 leverage ratio increased 0.39 percentage points to
4.24% as of 31 December 2021, as the aforementioned increase
in CET1 capital was partly offset by a USD 32 billion increase in
LRD.
Our gone concern loss-absorbing capacity ratio decreased
from 15.8% to 14.6% and our gone concern leverage ratio
decreased from 4.4% to 4.1%, mainly driven by an increase in
RWA and LRD, respectively, and the aforementioned decrease in
gone concern loss-absorbing capacity.
154
155
155
Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Capital management
Swiss SRB total loss-absorbing capacity movement
USD million
Going concern capital
CCoommmmoonn eeqquuiittyy ttiieerr 11 ccaappiittaall aass ooff 3311..1122..2200
Operating profit before tax
Current tax (expense) / benefit
Deferred tax assets on temporary differences
Goodwill and intangible assets
Accruals for proposed dividends to shareholders
Share repurchase program
Capital reserve for potential share repurchases
Foreign currency translation effects before tax
Compensation- and own share-related capital components
Defined benefit plans1
Other
CCoommmmoonn eeqquuiittyy ttiieerr 11 ccaappiittaall aass ooff 3311..1122..2211
LLoossss--aabbssoorrbbiinngg aaddddiittiioonnaall ttiieerr 11 ccaappiittaall aass ooff 3311..1122..2200
Issuance of high-trigger loss-absorbing additional tier 1 capital
Call of high-trigger loss-absorbing additional tier 1 capital
Interest rate risk hedge, foreign currency translation and other effects
LLoossss--aabbssoorrbbiinngg aaddddiittiioonnaall ttiieerr 11 ccaappiittaall aass ooff 3311..1122..2211
TToottaall ggooiinngg ccoonncceerrnn ccaappiittaall aass ooff 3311..1122..2200
TToottaall ggooiinngg ccoonncceerrnn ccaappiittaall aass ooff 3311..1122..2211
Gone concern loss-absorbing capacity
TTiieerr 22 ccaappiittaall aass ooff 3311..1122..2200
Call of low-trigger loss-absorbing tier 2 capital
Debt no longer eligible as gone concern loss-absorbing capacity due to residual tenor falling to below one year
Interest rate risk hedge, foreign currency translation and other effects
TTiieerr 22 ccaappiittaall aass ooff 3311..1122..2211
TTLLAACC--eelliiggiibbllee sseenniioorr uunnsseeccuurreedd ddeebbtt aass ooff 3311..1122..2200
Issuance of TLAC-eligible senior unsecured debt
Call of TLAC-eligible senior unsecured debt
Debt no longer eligible as gone concern loss-absorbing capacity due to residual tenor falling to below one year
Interest rate risk hedge, foreign currency translation and other effects
TTLLAACC--eelliiggiibbllee sseenniioorr uunnsseeccuurreedd ddeebbtt aass ooff 3311..1122..2211
TToottaall ggoonnee ccoonncceerrnn lloossss--aabbssoorrbbiinngg ccaappaacciittyy aass ooff 3311..1122..2200
TToottaall ggoonnee ccoonncceerrnn lloossss--aabbssoorrbbiinngg ccaappaacciittyy aass ooff 3311..1122..2211
SSwwiissss SSRRBB
3399,,889900
9,484
(1,564)
544
519
(1,700)
(2,612)
2,000
(570)
(441)
(234)
(34)
4455,,228811
1166,,228888
2,250
(2,600)
(731)
1155,,220077
5566,,117788
6600,,448888
77,,774444
(2,415)
(2,020)
(166)
33,,114444
3377,,880011
11,956
(2,027)
(4,248)
(2,362)
4411,,112200
4455,,554455
4444,,226644
Total loss-absorbing capacity
TToottaall lloossss--aabbssoorrbbiinngg ccaappaacciittyy aass ooff 3311..1122..2200
TToottaall lloossss--aabbssoorrbbiinngg ccaappaacciittyy aass ooff 3311..1122..2211
11 Includes a pension plan curtailment of USD 80 million that reduced the defined benefit obligation and a USD 254 million payment of the second installment to employees’ retirement assets in the Swiss pension
fund. As announced in 2018, a similar contribution will be made in the first quarter of 2022. 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.
110011,,772222
110044,,775522
Additional information
Active management of sensitivity to foreign exchange
movements
Group Treasury is mandated to minimize adverse effects from
changes in foreign currency rates on our CET1 capital and / or
CET1 capital ratio. A significant portion of our CET1 capital and
RWA is 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
foreign currency rates sensitivity of CET1 capital.
As a consequence, it is not possible to simultaneously fully
hedge CET1 capital and the CET1 capital ratio. As the proportion
of RWA denominated in currencies other than the US dollar
outweighs 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 of CET1 capital, within limits
set by the BoD, to balance the effect of foreign exchange
movements on CET1 capital and the CET1 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 1.4 billion as of
31 December 2021 (31 December 2020: USD 13 billion and
USD 1.3 billion, respectively) and decreased our CET1 capital
ratio 15 basis points (31 December 2020: 15 basis points).
Conversely, we estimate that a 10% appreciation of the US
dollar against other currencies would have decreased our RWA by
USD 11 billion and our CET1 capital by USD 1.3 billion
(31 December 2020: USD 12 billion and USD 1.2 billion,
respectively) and increased our CET1 capital ratio 14 basis points
(31 December 2020: 15 basis points).
156
156
SSwwiissss SSRRBB
3399,,889900
9,484
(1,564)
544
519
(1,700)
(2,612)
2,000
(570)
(441)
(234)
(34)
4455,,228811
1166,,228888
2,250
(2,600)
(731)
1155,,220077
5566,,117788
6600,,448888
77,,774444
(2,415)
(2,020)
(166)
33,,114444
3377,,880011
11,956
(2,027)
(4,248)
(2,362)
4411,,112200
4455,,554455
4444,,226644
110011,,772222
110044,,775522
Risk, capital, liquidity and funding, and balance sheet | Capital management
Swiss SRB total loss-absorbing capacity movement
USD million
Going concern capital
CCoommmmoonn eeqquuiittyy ttiieerr 11 ccaappiittaall aass ooff 3311..1122..2200
Operating profit before tax
Current tax (expense) / benefit
Deferred tax assets on temporary differences
Goodwill and intangible assets
Accruals for proposed dividends to shareholders
Share repurchase program
Capital reserve for potential share repurchases
Foreign currency translation effects before tax
Compensation- and own share-related capital components
Defined benefit plans1
Other
CCoommmmoonn eeqquuiittyy ttiieerr 11 ccaappiittaall aass ooff 3311..1122..2211
LLoossss--aabbssoorrbbiinngg aaddddiittiioonnaall ttiieerr 11 ccaappiittaall aass ooff 3311..1122..2200
Issuance of high-trigger loss-absorbing additional tier 1 capital
Call of high-trigger loss-absorbing additional tier 1 capital
Interest rate risk hedge, foreign currency translation and other effects
LLoossss--aabbssoorrbbiinngg aaddddiittiioonnaall ttiieerr 11 ccaappiittaall aass ooff 3311..1122..2211
TToottaall ggooiinngg ccoonncceerrnn ccaappiittaall aass ooff 3311..1122..2200
TToottaall ggooiinngg ccoonncceerrnn ccaappiittaall aass ooff 3311..1122..2211
Gone concern loss-absorbing capacity
TTiieerr 22 ccaappiittaall aass ooff 3311..1122..2200
Call of low-trigger loss-absorbing tier 2 capital
TTiieerr 22 ccaappiittaall aass ooff 3311..1122..2211
TTLLAACC--eelliiggiibbllee sseenniioorr uunnsseeccuurreedd ddeebbtt aass ooff 3311..1122..2200
Issuance of TLAC-eligible senior unsecured debt
Call of TLAC-eligible senior unsecured debt
Debt no longer eligible as gone concern loss-absorbing capacity due to residual tenor falling to below one year
Interest rate risk hedge, foreign currency translation and other effects
Debt no longer eligible as gone concern loss-absorbing capacity due to residual tenor falling to below one year
Interest rate risk hedge, foreign currency translation and other effects
TTLLAACC--eelliiggiibbllee sseenniioorr uunnsseeccuurreedd ddeebbtt aass ooff 3311..1122..2211
TToottaall ggoonnee ccoonncceerrnn lloossss--aabbssoorrbbiinngg ccaappaacciittyy aass ooff 3311..1122..2200
TToottaall ggoonnee ccoonncceerrnn lloossss--aabbssoorrbbiinngg ccaappaacciittyy aass ooff 3311..1122..2211
Total loss-absorbing capacity
TToottaall lloossss--aabbssoorrbbiinngg ccaappaacciittyy aass ooff 3311..1122..2200
TToottaall lloossss--aabbssoorrbbiinngg ccaappaacciittyy aass ooff 3311..1122..2211
of the Annual Report 2019 for more information.
Additional information
11 Includes a pension plan curtailment of USD 80 million that reduced the defined benefit obligation and a USD 254 million payment of the second installment to employees’ retirement assets in the Swiss pension
fund. As announced in 2018, a similar contribution will be made in the first quarter of 2022. Refer to “Note 29 Pension and other post-employment benefit plans” in the “Consolidated financial statements” section
set by the BoD, to balance the effect of foreign exchange
movements on CET1 capital and the CET1 capital ratio. Limits are
Active management of sensitivity to foreign exchange
in place for the sensitivity of both CET1 capital and the CET1
movements
capital ratio to an appreciation or depreciation of 10% in the
Group Treasury is mandated to minimize adverse effects from
value of the US dollar against other currencies.
changes in foreign currency rates on our CET1 capital and / or
CET1 capital ratio. A significant portion of our CET1 capital and
Sensitivity to currency movements
RWA is denominated in Swiss francs, euro, pounds sterling and
other currencies. In order to hedge the CET1 capital ratio, CET1
Risk-weighted assets
foreign currency rates sensitivity of CET1 capital.
other currencies would have increased our RWA by USD 13
As a consequence, it is not possible to simultaneously fully
billion and our CET1 capital by USD 1.4 billion as of
hedge CET1 capital and the CET1 capital ratio. As the proportion
31 December 2021 (31 December 2020: USD 13 billion and
of RWA denominated in currencies other than the US dollar
USD 1.3 billion, respectively) and decreased our CET1 capital
outweighs CET1 capital
in such currencies, a significant
ratio 15 basis points (31 December 2020: 15 basis points).
appreciation of the US dollar against such currencies could benefit
Conversely, we estimate that a 10% appreciation of the US
our capital ratios, while a significant depreciation of the US dollar
dollar against other currencies would have decreased our RWA by
against these currencies could adversely affect our capital ratios.
USD 11 billion and our CET1 capital by USD 1.3 billion
The Group Asset and Liability Committee (the Group ALCO), a
(31 December 2020: USD 12 billion and USD 1.2 billion,
committee of the Group Executive Board, has mandated Group
respectively) and increased our CET1 capital ratio 14 basis points
Treasury to adjust the currency mix of CET1 capital, within limits
(31 December 2020: 15 basis points).
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 63 billion
as of 31 December 2021 (31 December 2020: USD 65 billion)
and decreased our Swiss SRB going concern leverage ratio
15 basis points (31 December 2020: 16 basis points). Conversely,
we estimate that a 10% appreciation of the US dollar against
other currencies would have decreased our LRD by USD 57 billion
(31 December 2020: USD 58 billion) and increased our Swiss SRB
going concern leverage ratio 16 basis points (31 December 2020:
16 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 2021 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
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
level over a 12-month horizon. The
99.9% confidence
methodology
industry
into consideration UBS and
takes
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 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
2021, with no change to prior year-end. 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.
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 2021, the liability of UBS Switzerland AG
amounted to CHF 5.2 billion (the equivalent of USD 5.7 billion), a
decrease of CHF 3.7 billion (USD 4.4 billion) compared with
31 December 2020. The respective liability of UBS AG has been
substantially extinguished.
capital needs to have foreign currency exposure, leading to
We estimate that a 10% depreciation of the US dollar against
more information
› Refer to “Non-financial 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
156
157
157
Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Capital management
Risk-weighted assets
RWA development in 2021
During 2021, RWA increased by USD 13.1 billion to USD 302.2
billion, primarily driven by increases of USD 12.0 billion in credit
and counterparty credit risk RWA, USD 1.0 billion in operational
risk RWA and USD 0.9 billion in non-counterparty-related risk.
Movement in risk-weighted assets by key driver
These increases were partly offset by a decrease of USD 0.8 billion
in market risk RWA.
› Refer to the 31 December 2021 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 risk3
Market risk
Operational risk
TToottaall
RWA as of
31.12.20
178.1
23.4
11.8
75.8
228899..11
Currency
effects
(4.1)
(0.3)
((44..44))
22..00
Methodology
and policy
changes
2.0
Model
updates /
changes
5.3
Regulatory
add-ons
3.1
Asset size and
Other1
5.8
RRWWAA aass ooff
3311..1122..2211
119900..11
(0.1)
1.0
66..11
3.14
66..22
1.2
(3.7)
33..22
2244..33
1111..11
7766..77
330022..22
11 Includes the Pillar 3 categories “Asset size,” “Credit quality of counterparties,” “Acquisitions and disposals” and “Other.” Refer to the 31 December 2021 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. 33 Non-counterparty-related
risk includes deferred tax assets recognized for temporary differences, property, equipment, software and other items. 44 As of 31 December 2021, the regulatory add-on related to time decay was USD 3.5 billion.
Credit and counterparty credit risk
Credit and counterparty credit risk RWA increased by USD 12.0
billion to USD 190.1 billion as of 31 December 2021. This increase
was partly driven by asset size and other movements of USD 5.8
billion, due to an increase in asset size of USD 8.8 billion, mainly
due to loan growth in Global Wealth Management, partly offset
by asset quality movements of USD 3.1 billion, mainly reflecting
improvements in counterparty ratings and loss given default (LGD)
in Global Wealth Management and Personal & Corporate
Banking. Also, 2021 included increases from model updates of
USD 5.3 billion, regulatory add-ons of USD 3.1 billion, and
methodology and policy changes of USD 2.0 billion. These
increases were partly offset by decreases from currency effects of
USD 4.1 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..2200
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..2211
Global Wealth
Management
4466..77
Personal &
Corporate
Banking
6622..88
Asset
Management
22..99
Investment
Bank
5588..55
Group
Functions
77..22
5.5
(1.3)
4.3
1.7
0.2
0.0
(0.6)
0.4
1100..22
5566..99
1.1
(1.1)
1.2
0.3
0.7
0.0
(1.6)
(0.4)
00..22
6633..00
0.3
0.0
0.0
0.0
0.0
0.0
0.0
0.0
00..33
33..22
1.8
(0.4)
(0.2)
0.0
2.3
0.0
(1.4)
0.0
22..11
6600..55
0.1
(0.3)
0.0
0.0
(0.1)
0.0
(0.5)
0.0
((00..88))
66..44
GGrroouupp
117788..11
88..88
((33..11))
55..33
22..00
33..11
00..00
((44..11))
00..11
1122..00
119900..11
11 Refer to the 31 December 2021 Pillar 3 Report under “Pillar 3 disclosures” at ubs.com/investors for the definitions of credit and counterparty credit risk RWA movement categories.
158
158
Risk, capital, liquidity and funding, and balance sheet | Capital management
Risk-weighted assets
RWA development in 2021
These increases were partly offset by a decrease of USD 0.8 billion
During 2021, RWA increased by USD 13.1 billion to USD 302.2
billion, primarily driven by increases of USD 12.0 billion in credit
and counterparty credit risk RWA, USD 1.0 billion in operational
› Refer to the 31 December 2021 Pillar 3 Report, available under
“Pillar 3 disclosures” at ubs.com/investors, for more information
about RWA movements and definitions of RWA movement key
risk RWA and USD 0.9 billion in non-counterparty-related risk.
drivers
in market risk RWA.
Movement in risk-weighted assets by key driver
USD billion
Credit and counterparty credit risk2
Non-counterparty-related risk3
Market risk
Operational risk
TToottaall
Methodology
and policy
changes
2.0
Model
updates /
changes
5.3
RWA as of
31.12.20
Currency
effects
(4.1)
(0.3)
178.1
23.4
11.8
75.8
228899..11
((44..44))
22..00
Regulatory
Asset size and
RRWWAA aass ooff
3311..1122..2211
add-ons
3.1
3.14
66..22
Other1
5.8
1.2
(3.7)
33..22
119900..11
2244..33
1111..11
7766..77
330022..22
(0.1)
1.0
66..11
11 Includes the Pillar 3 categories “Asset size,” “Credit quality of counterparties,” “Acquisitions and disposals” and “Other.” Refer to the 31 December 2021 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. 33 Non-counterparty-related
risk includes deferred tax assets recognized for temporary differences, property, equipment, software and other items. 44 As of 31 December 2021, the regulatory add-on related to time decay was USD 3.5 billion.
Credit and counterparty credit risk
improvements in counterparty ratings and loss given default (LGD)
Credit and counterparty credit risk RWA increased by USD 12.0
in Global Wealth Management and Personal & Corporate
billion to USD 190.1 billion as of 31 December 2021. This increase
Banking. Also, 2021 included increases from model updates of
was partly driven by asset size and other movements of USD 5.8
USD 5.3 billion, regulatory add-ons of USD 3.1 billion, and
billion, due to an increase in asset size of USD 8.8 billion, mainly
methodology and policy changes of USD 2.0 billion. These
due to loan growth in Global Wealth Management, partly offset
increases were partly offset by decreases from currency effects of
by asset quality movements of USD 3.1 billion, mainly reflecting
USD 4.1 billion.
Movement in credit and counterparty credit risk RWA by key driver1
TToottaall ccrreeddiitt aanndd ccoouunntteerrppaarrttyy ccrreeddiitt rriisskk RRWWAA aass ooff 3311..1122..2200
USD billion
Asset size
Asset quality
Model updates
Methodology and policy changes
Regulatory add-ons
Acquisitions and disposals
Foreign exchange movements
Other
TToottaall mmoovveemmeenntt
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Investment
Management
Group
Functions
4466..77
5.5
(1.3)
4.3
1.7
0.2
0.0
(0.6)
0.4
1100..22
5566..99
6622..88
1.1
(1.1)
1.2
0.3
0.7
0.0
(1.6)
(0.4)
00..22
6633..00
22..99
0.3
0.0
0.0
0.0
0.0
0.0
0.0
0.0
00..33
33..22
Bank
5588..55
1.8
(0.4)
(0.2)
0.0
2.3
0.0
(1.4)
0.0
22..11
6600..55
77..22
0.1
(0.3)
0.0
0.0
(0.1)
0.0
(0.5)
0.0
((00..88))
66..44
GGrroouupp
117788..11
88..88
((33..11))
55..33
22..00
33..11
00..00
((44..11))
00..11
1122..00
119900..11
TToottaall ccrreeddiitt aanndd ccoouunntteerrppaarrttyy ccrreeddiitt rriisskk RRWWAA aass ooff 3311..1122..2211
11 Refer to the 31 December 2021 Pillar 3 Report under “Pillar 3 disclosures” at ubs.com/investors for the definitions of credit and counterparty credit risk RWA movement categories.
Regulatory add-ons
The increase in credit and counterparty credit risk RWA from
regulatory add-ons of USD 3.1 billion was primarily driven by add-
ons for prime brokerage clients of USD 2.4 billion, credit card
exposures in Switzerland of USD 0.5 billion, as well as clients
leasing aircraft and industrial goods of USD 0.4 billion.
› Refer to the “Risk management and control” section of this
report and the 31 December 2021 Pillar 3 Report, available under
“Pillar 3 disclosures” at ubs.com/investors, for more information
about credit and counterparty credit risk developments
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 2022.
The extent and timing of RWA changes may vary as methodology
changes and model updates are completed and receive regulatory
approval. In addition, changes in the composition of the relevant
portfolios and other market factors will affect RWA.
Model updates
The increase in credit and counterparty credit risk RWA from
model updates of USD 5.3 billion was primarily driven by the
phase-in impacts for structured margin loans and similar products
in Global Wealth Management of USD 2.1 billion and by new
probability of default (PD) and LGD models for the mortgage
portfolio in the US of USD 2.0 billion. In addition, we have
updated the LGD model for mortgages in Switzerland, which
resulted in an RWA increase of USD 0.9 billion and was partly
offset by an RWA reduction of USD 0.3 billion related to the
introduction of new models for the leasing of aircraft and
industrial goods.
› Refer to “Credit risk models” in the “Risk management and
control” section of this report for more information about model
updates
Methodology changes
The increase in credit and counterparty credit risk RWA from
methodology changes of USD 2.0 billion was primarily driven by
a change related to credit valuation adjustment (CVA) risk for
derivative exposures with Lombard clients that resulted in an
increase of USD 1.1 billion in RWA. Additionally, the approach
used for the covered bonds within the high-quality liquid asset
(HQLA) portfolio has been changed from the advanced internal
ratings-based (A-IRB) approach to the standardized approach, as
requested by FINMA, resulting in an RWA increase of USD 1.0
billion.
158
159
159
Risk, capital, liquidity and funding, and balance sheet Risk, capital, liquidity and funding, and balance sheet | Capital management
Non-counterparty-related risk
Non-counterparty credit risk RWA increased by USD 0.9 billion to
USD 24.3 billion as of 31 December 2021, primarily driven by an
increase in deferred tax assets on temporary differences.
Market risk
Market risk RWA decreased by USD 0.8 billion to USD 11.1 billion
as of 31 December 2021, primarily driven by a decrease of
USD 3.7 billion from portfolio and market movements, mostly in
the Investment Bank’s Global Markets business. This was partly
offset by an increase from regulatory add-ons of USD 3.1 billion,
primarily related to time decay. The integration of time decay into
the regulatory VaR model is subject to further discussions
between FINMA and UBS.
› Refer to the “Risk management and control” section of this
Operational risk
Operational risk RWA increased by USD 1.0 billion to USD 76.7
billion as of 31 December 2021, driven by the annual recalibration
of the AMA model used for the calculation of operational risk
capital. Allocations to the business divisions changed in the fourth
quarter of 2021, as certain historical losses dropped from the time
window that is relevant for the internal allocation approach.
We are assessing the effect of the verdict in the French cross-
border matter and the corresponding changes in provisions for
litigation, regulatory and similar matters on operational risk RWA
in consultation with FINMA. We expect to reflect additional
operational risk RWA in the first quarter of 2022, with a potential
single-digit billion US dollar operational risk RWA impact
following completion of this assessment.
› Refer to “Advanced measurement approach model” in the “Risk
report and the 31 December 2021 Pillar 3 Report, available under
management and control” section of this report for more
“Pillar 3 disclosures” at ubs.com/investors, for more information
information about the AMA model
about market risk developments
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..2211
IInnvveessttmmeenntt
BBaannkk
GGrroouupp
FFuunnccttiioonnss
TToottaall
RRWWAA
56.9
6.2
1.6
35.2
9999..88
46.7
6.2
1.4
32.8
8877..22
10.2
0.0
0.1
2.4
1122..77
63.0
2.0
0.0
8.1
7733..22
62.8
2.1
0.0
7.2
7722..11
0.2
(0.1)
0.0
0.9
11..11
3.2
0.6
3.0
66..99
31.12.20
2.9
0.7
3.3
66..99
60.5
3.5
8.1
20.2
9922..22
58.5
3.6
9.0
23.2
9944..33
31.12.21 vs 31.12.20
0.3
(0.1)
(0.3)
((00..11))
2.1
(0.2)
(0.9)
(3.0)
((22..00))
6.4
12.0
1.5
10.3
3300..11
7.2
10.7
1.4
9.3
2288..77
(0.8)
1.2
0.1
1.0
11..55
190.1
24.3
11.1
76.7
330022..22
178.1
23.4
11.8
75.8
228899..11
12.0
0.9
(0.8)
1.0
1133..11
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 2021: USD 11.4 billion; 31 December 2020: USD 10.0 billion), as well as property, equipment, software and other items (31 December 2021: USD 12.9 billion; 31 December
2020: USD 13.4 billion).
160
160
Risk, capital, liquidity and funding, and balance sheet | Capital management
Non-counterparty-related risk
Operational risk
Non-counterparty credit risk RWA increased by USD 0.9 billion to
Operational risk RWA increased by USD 1.0 billion to USD 76.7
USD 24.3 billion as of 31 December 2021, primarily driven by an
billion as of 31 December 2021, driven by the annual recalibration
increase in deferred tax assets on temporary differences.
of the AMA model used for the calculation of operational risk
Market risk
capital. Allocations to the business divisions changed in the fourth
quarter of 2021, as certain historical losses dropped from the time
Market risk RWA decreased by USD 0.8 billion to USD 11.1 billion
window that is relevant for the internal allocation approach.
as of 31 December 2021, primarily driven by a decrease of
We are assessing the effect of the verdict in the French cross-
USD 3.7 billion from portfolio and market movements, mostly in
border matter and the corresponding changes in provisions for
the Investment Bank’s Global Markets business. This was partly
litigation, regulatory and similar matters on operational risk RWA
offset by an increase from regulatory add-ons of USD 3.1 billion,
in consultation with FINMA. We expect to reflect additional
primarily related to time decay. The integration of time decay into
operational risk RWA in the first quarter of 2022, with a potential
the regulatory VaR model is subject to further discussions
single-digit billion US dollar operational risk RWA impact
between FINMA and UBS.
following completion of this assessment.
› Refer to the “Risk management and control” section of this
› Refer to “Advanced measurement approach model” in the “Risk
report and the 31 December 2021 Pillar 3 Report, available under
management and control” section of this report for more
“Pillar 3 disclosures” at ubs.com/investors, for more information
information about the AMA model
about market risk developments
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
2020: USD 13.4 billion).
GGlloobbaall WWeeaalltthh
MMaannaaggeemmeenntt
PPeerrssoonnaall &&
CCoorrppoorraattee
BBaannkkiinngg
AAsssseett
MMaannaaggee--
mmeenntt
IInnvveessttmmeenntt
BBaannkk
GGrroouupp
FFuunnccttiioonnss
TToottaall
RRWWAA
56.9
6.2
1.6
35.2
9999..88
46.7
6.2
1.4
32.8
8877..22
10.2
0.0
0.1
2.4
1122..77
3311..1122..2211
31.12.20
3.2
0.6
3.0
66..99
2.9
0.7
3.3
66..99
0.3
(0.1)
(0.3)
((00..11))
60.5
3.5
8.1
20.2
9922..22
58.5
3.6
9.0
23.2
9944..33
2.1
(0.2)
(0.9)
(3.0)
((22..00))
31.12.21 vs 31.12.20
63.0
2.0
0.0
8.1
7733..22
62.8
2.1
0.0
7.2
7722..11
0.2
(0.1)
0.0
0.9
11..11
6.4
12.0
1.5
10.3
3300..11
7.2
10.7
1.4
9.3
2288..77
(0.8)
1.2
0.1
1.0
11..55
190.1
24.3
11.1
76.7
330022..22
178.1
23.4
11.8
75.8
228899..11
12.0
0.9
(0.8)
1.0
1133..11
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 2021: USD 11.4 billion; 31 December 2020: USD 10.0 billion), as well as property, equipment, software and other items (31 December 2021: USD 12.9 billion; 31 December
Leverage ratio denominator
LRD increased by USD 32 billion to USD 1,069 billion as of 31 December 2021, driven by asset size and other movements of USD 54
billion, partly offset by a decrease due to currency effects of USD 23 billion.
Movement in leverage ratio denominator by key driver
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..220011
806.6
96.6
115.3
31.3
(12.8)
Currency
effects
(17.0)
Asset size and
other
57.8
(2.7)
(2.3)
(0.7)
0.1
(3.0)
(3.9)
2.2
1.2
LLRRDD aass ooff
3311..1122..2211
884477..44
9900..99
110099..22
3322..88
((1111..55))
TToottaall
11 The respective period shown ending on 31 December 2020 does not reflect the effects of the temporary exemption that applied from 25 March 2020 until 1 January 2021 and was granted by FINMA in connection
with COVID-19. Refer to the “Regulatory and legal developments” section and to “Application of the temporary COVID-19-related FINMA exemption of central bank sight deposits” in the “Capital, liquidity and
funding, and balance sheet” section of our Annual Report 2020, available under “Annual reporting” at ubs.com/investors, for more information. 22 The exposures exclude derivative financial instruments, cash
collateral receivables on derivative instruments, receivables from SFTs, and margin loans, as well as prime brokerage receivables and financial assets at fair value not held for trading, both related to SFTs. These
exposures are presented separately under Derivative exposures and Securities financing transactions in this table.
11,,006688..99
11,,003377..11
((2222..66))
5544..33
The LRD movements described below exclude currency effects.
On-balance sheet exposures (excluding derivative exposures
and SFTs) increased by USD 58 billion, mainly driven by an
increase in central bank balances partly offset by disposal of high-
quality liquid asset (HQLA) securities in Group Treasury, as well as
higher lending balances, mainly in Global Wealth Management,
and trading assets in the Investment Bank.
Derivative exposures decreased by USD 3 billion, reflecting
market-driven movements and lower client volumes mainly in the
Investment Bank.
SFTs decreased by USD 4 billion, mainly due to lower prime
brokerage receivables and margin loan repayments as a result of
client activities in the Investment Bank.
› Refer to “Balance sheet and off-balance sheet” in this section for
more information about balance sheet movements
160
161
161
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 Functions
USD billion
Total IFRS assets
Difference in scope of consolidation1
Less: derivative exposures and SFTs2
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 consolidation1
Less: derivative exposures and SFTs2
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..2211
395.2
0.0
(25.9)
336699..33
5.8
22.6
7.2
(5.3)
339999..66
367.7
(0.1)
(34.0)
333333..66
6.6
30.1
6.1
(5.2)
337711..22
225.4
0.0
(11.8)
221133..66
1.4
10.9
17.5
(0.2)
224433..22
231.7
(16.7)
221155..00
2.0
15.1
16.3
(0.1)
224488..33
25.6
(21.5)
(0.1)
44..11
0.0
0.0
0.0
(1.2)
22..99
31.12.203
28.6
(21.1)
(0.7)
66..77
0.0
0.7
0.0
(1.6)
55..88
346.4
(0.1)
(159.2)
118877..11
79.0
45.7
7.6
(0.3)
331199..22
369.7
0.0
(191.6)
117788..00
82.7
46.5
8.5
(0.3)
331155..55
31.12.21 vs 31.12.20
124.5
0.0
(51.2)
7733..33
4.7
29.9
0.5
(4.4)
110044..00
128.1
0.1
(54.9)
7733..33
5.3
22.9
0.4
(5.5)
9966..22
1,117.2
(21.6)
(248.2)
884477..44
90.9
109.2
32.8
(11.5)
11,,006688..99
1,125.8
(21.2)
(298.0)
880066..66
96.6
115.3
31.3
(12.8)
11,,003377..11
Total IFRS assets
Difference in scope of consolidation1
Less: derivative exposures and SFTs2
OOnn--bbaallaannccee sshheeeett eexxppoossuurreess
Derivative exposures
Securities financing transactions
Off-balance sheet items
Items deducted from Swiss SRB tier 1 capital
TToottaall
11 Represents the difference between the IFRS and the regulatory scope of consolidation, which is the applicable scope for the LRD calculation. 22 The exposures consist of derivative financial instruments, cash
collateral receivables on derivative instruments, receivables from SFTs, and margin loans, as well as prime brokerage receivables and financial assets at fair value not held for trading, both related to SFTs, all of which
are in accordance with the regulatory scope of consolidation. These exposures are presented separately under Derivative exposures and Securities financing transactions in this table. 33 The respective period shown
ending on 31 December 2020 does not reflect the effects of the temporary exemption that applied from 25 March 2020 until 1 January 2021 and was granted by FINMA in connection with COVID-19. Refer to the
“Regulatory and legal developments” section and to “Application of the temporary COVID-19-related FINMA exemption of central bank sight deposits” in the “Capital, liquidity and funding, and balance sheet”
section of our Annual Report 2020, available under “Annual reporting” at ubs.com/investors, for more information.
(23.3)
(0.1)
32.5
99..11
(3.7)
(0.8)
(0.9)
0.0
33..77
27.5
0.1
8.1
3355..77
(0.8)
(7.5)
1.1
(0.1)
2288..44
(8.6)
(0.5)
49.8
4400..88
(5.7)
(6.2)
1.5
1.3
3311..77
(6.3)
0.0
4.9
((11..44))
(0.6)
(4.2)
1.2
0.0
((55..11))
(3.6)
(0.1)
3.7
00..00
(0.6)
7.0
0.1
1.1
77..77
(2.9)
(0.4)
0.7
((22..77))
0.0
(0.7)
0.4
((22..99))
162
162
Risk, capital, liquidity and funding, and balance sheet | Capital management
USD billion
Total IFRS assets
Difference in scope of consolidation1
Less: derivative exposures and SFTs2
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 consolidation1
Less: derivative exposures and SFTs2
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 consolidation1
Less: derivative exposures and SFTs2
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..2211
395.2
0.0
(25.9)
336699..33
5.8
22.6
7.2
(5.3)
339999..66
367.7
(0.1)
(34.0)
333333..66
6.6
30.1
6.1
(5.2)
337711..22
27.5
0.1
8.1
3355..77
(0.8)
(7.5)
1.1
(0.1)
2288..44
225.4
0.0
(11.8)
221133..66
1.4
10.9
17.5
(0.2)
224433..22
231.7
(16.7)
221155..00
2.0
15.1
16.3
(0.1)
224488..33
(6.3)
0.0
4.9
((11..44))
(0.6)
(4.2)
1.2
0.0
((55..11))
31.12.203
25.6
(21.5)
(0.1)
44..11
0.0
0.0
0.0
(1.2)
22..99
28.6
(21.1)
(0.7)
66..77
0.0
0.7
0.0
(1.6)
55..88
(2.9)
(0.4)
0.7
((22..77))
0.0
(0.7)
0.4
((22..99))
346.4
(0.1)
(159.2)
118877..11
79.0
45.7
7.6
(0.3)
331199..22
369.7
0.0
(191.6)
117788..00
82.7
46.5
8.5
(0.3)
331155..55
(23.3)
(0.1)
32.5
99..11
(3.7)
(0.8)
(0.9)
0.0
33..77
31.12.21 vs 31.12.20
124.5
0.0
(51.2)
7733..33
4.7
29.9
0.5
(4.4)
110044..00
128.1
0.1
(54.9)
7733..33
5.3
22.9
0.4
(5.5)
9966..22
(3.6)
(0.1)
3.7
00..00
(0.6)
7.0
0.1
1.1
77..77
1,117.2
(21.6)
(248.2)
884477..44
90.9
109.2
32.8
(11.5)
11,,006688..99
1,125.8
(21.2)
(298.0)
880066..66
96.6
115.3
31.3
(12.8)
11,,003377..11
(8.6)
(0.5)
49.8
4400..88
(5.7)
(6.2)
1.5
1.3
3311..77
11 Represents the difference between the IFRS and the regulatory scope of consolidation, which is the applicable scope for the LRD calculation. 22 The exposures consist of derivative financial instruments, cash
collateral receivables on derivative instruments, receivables from SFTs, and margin loans, as well as prime brokerage receivables and financial assets at fair value not held for trading, both related to SFTs, all of which
are in accordance with the regulatory scope of consolidation. These exposures are presented separately under Derivative exposures and Securities financing transactions in this table. 33 The respective period shown
ending on 31 December 2020 does not reflect the effects of the temporary exemption that applied from 25 March 2020 until 1 January 2021 and was granted by FINMA in connection with COVID-19. Refer to the
“Regulatory and legal developments” section and to “Application of the temporary COVID-19-related FINMA exemption of central bank sight deposits” in the “Capital, liquidity and funding, and balance sheet”
section of our Annual Report 2020, available under “Annual reporting” at ubs.com/investors, for more information.
Leverage ratio denominator by business division and Group Functions
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 risk-
weighted assets (RWA) and average leverage ratio denominator
(LRD), which both include resource allocations from Group
Functions to the business divisions (the BDs). Average RWA and
LRD are converted to common equity tier 1 (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.
Furthermore, we allocate to the BDs attributed equity related
to certain CET1 deduction items, such as compensation-related
components and expected losses on the advanced internal
ratings-based portfolio less 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, DTAs on temporary
differences in excess of the threshold, accruals for shareholder
returns, and unrealized gains from cash flow hedges.
› Refer to “Balance sheet and off-balance sheet” in this section for
more information about movements in equity attributable to
In addition to tangible equity, we allocate equity to the BDs to
shareholders
support goodwill and intangible assets.
Average attributed equity
USD billion
Global Wealth Management
Personal & Corporate Banking
Asset Management
Investment Bank
Group Functions
31.12.19
16.6
8.4
1.8
12.3
15.1
7.1
2.8
5.1
AAvveerraaggee eeqquuiittyy aattttrriibbuutteedd ttoo bbuussiinneessss ddiivviissiioonnss aanndd GGrroouupp FFuunnccttiioonnss
54.2
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 that applied from 25 March 2020 until 1 January 2021 and was granted by FINMA in connection with COVID-19 was not applied when calculating average attributed equity for 2020. Refer to the
“Regulatory and legal developments” section of our Annual Report 2020 for more information. 44 Includes attributed equity related to dividend accruals, unrealized gains from cash flow hedges, and a balancing
item for capital held in excess of the 12.5% / 3.75% capital and leverage ratio calibration thresholds for equity attribution.
of which: deferred tax assets1
of which: related to retained RWA and LRD2,3
of which: accruals for shareholder returns and others4
3311..1122..2211
1188..88
99..22
22..00
1133..00
1166..33
55..99
33..22
77..22
5599..33
For the year ended
31.12.20
17.1
8.9
2.0
12.6
17.4
6.7
3.4
7.2
57.8
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
31.12.20
23.6
14.2
74.2
19.7
3311..1122..2211
2255..44
1188..99
5511..88
2200..33
31.12.19
20.5
17.1
29.7
6.4
162
163
163
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 risks of our balance sheet, including
interest rate risk, structural foreign exchange risk and collateral
risk, as well as liquidity and funding risks. This section provides
information about regulatory requirements and the firm’s
funding management
liquidity and
governance structure,
(including sources of liquidity and funding), 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 internal stress models while in compliance 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 Chief Risk 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 indicators are
used at the Group level to assess both the overall global and
regional liquidity status for potential threats. Treasury Risk
Control provides independent oversight over liquidity and
funding risks.
› Refer to the “Corporate governance” and “Risk management
and control” sections 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, to meet prudential requirements and to
survive a severe three-month idiosyncratic and market-wide
liquidity stress event, allowing for discrete management actions
instructed by the Group Treasurer in addition to monetizing the
firm’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.
Stress testing
Audited | We perform stress testing to determine the optimal asset
and liability structure that enables 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
market and idiosyncratic 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
164
164
Risk, capital, liquidity and funding, and balance sheet | Liquidity and funding management
Liquidity and funding management
We manage the structural risks of our balance sheet, including
are designed to maximize and sustain the value of our business
interest rate risk, structural foreign exchange risk and collateral
franchise and maintain an appropriate balance in the asset and
risk, as well as liquidity and funding risks. This section provides
liability structure. Structural limits, triggers and targets focus
information about regulatory requirements and the firm’s
on the structure and composition of the balance sheet, with
governance structure,
liquidity and
funding management
supplementary limits, triggers and targets designed to drive
(including sources of liquidity and funding), contingency planning,
the utilization, diversification and allocation of funding
and stress testing. The balances disclosed in this section represent
resources. To complement and support this framework, Group
year-end positions, unless indicated otherwise. Intra-period
Treasury monitors the markets for early warning indicators
balances fluctuate in the ordinary course of business and may
regarding the current liquidity situation. These indicators are
differ from year-end positions.
Strategy, objectives and governance
used at the Group level to assess both the overall global and
regional liquidity status for potential threats. Treasury Risk
Control provides independent oversight over liquidity and
funding risks.
› Refer to the “Corporate governance” and “Risk management
and control” sections 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
value across a broad range of market conditions while considering
current and future regulatory constraints. We employ a number
Liquidity management
of measures to monitor these positions under normal and stressed
conditions. In particular, we use stress scenarios to apply
Audited | Our liquidity risk management aims to ensure that the firm
behavioral adjustments to our balance sheet and calibrate the
has sufficient liquidity or access to funding sources to meet its
results from internal stress models while in compliance with
liabilities when due, to meet prudential requirements and to
external measures, primarily the liquidity coverage ratio (the LCR)
survive a severe three-month idiosyncratic and market-wide
and the net stable funding ratio (the NSFR). Our liquidity and
liquidity stress event, allowing for discrete management actions
funding strategy is proposed by Group Treasury and approved by
instructed by the Group Treasurer in addition to monetizing the
the Group Asset and Liability Committee (the Group ALCO),
firm’s liquidity reserves.
which is a committee of the Group Executive Board (the GEB) that
Our liquid assets are managed using limits, triggers and targets
is overseen by the Risk Committee of the Board of Directors (the
to maintain an appropriate level of diversification (issuer, tenor
BoD).
and other risk characteristics) in response to any expected or
Group Treasury monitors and oversees the implementation
unexpected volatility in funding availability or requirements
and execution of our liquidity and funding strategy and is
caused by adverse market, operational or other firm-specific
responsible for adherence to policies, limits, triggers and targets.
events. The liquid asset portfolio size is managed dynamically, so
This enables close control of both our cash and collateral,
as to operate at all times within the risk appetite of the BoD and
including our high-quality liquid assets, and centralizes the
relevant Group and subsidiary liquidity requirements.
Group’s general access to wholesale cash markets in Group
Treasury. In addition, should a crisis require contingency funding
Stress testing
measures to be invoked, Group Treasury is responsible for
Audited | We perform stress testing to determine the optimal asset
coordinating liquidity generation with representatives of the
and liability structure that enables us to maintain an appropriately
relevant business areas. Group Treasury reports on the Group’s
balanced liquidity and funding position under various scenarios.
overall liquidity and funding position, including funding status
Liquidity crisis scenario analysis and contingency funding planning
and concentration risks, at least monthly, to the Group ALCO and
support the liquidity management process and aim to ensure that
the Risk Committee of the BoD.
immediate corrective measures to absorb potential sudden
Audited | Liquidity and funding limits, triggers and targets are
liquidity shortfalls can be put into effect.
set at Group and, where appropriate, at legal entity and
We model our liquidity exposures under two main potential
business division levels, and are reviewed and reconfirmed at
scenarios: a structural market-wide scenario and a combined
least once a year by the BoD, the Group ALCO, the Group
market and idiosyncratic scenario. We continuously refine the
Chief Financial Officer, the Group Chief Risk Officer, the Group
assumptions used to maintain a robust, actionable and tested
Treasurer and the business divisions, taking into consideration
contingency plan.
current and projected business strategy and risk tolerance. The
principles underlying our limit, trigger and target framework
› Refer to “Risk measurement” in the “Risk management and
control” section of this report for more information about stress
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
stable client deposits and liquidity outflows corresponding to a
one-notch downgrade in our long-term credit rating, and a
corresponding downgrade in our short-term rating.
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 assets cannot easily and
readily be sold or exchanged for cash without a substantial loss in
value 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 market and idiosyncratic 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; (vi) triggering contractual obligations to unwind derivative
positions or to deliver additional collateral;
(vii) additional
collateral requirements due to adverse 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.
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 generative
actions in a stressed environment, early warning 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-
quality 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 business
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
management team looks to create 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.
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 targets for funding generation, including concentration
limits, weighted average maturity limits 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 and off-balance sheet” in this section for
more information about the development of our short-term and
long-term debt during 2021
Global Wealth Management and Personal & Corporate
Banking provide significant, cost-efficient and stable sources of
funding. These include core deposits and debt issued through the
Swiss central mortgage institutions, which use a portion of our
portfolio of Swiss residential mortgages as collateral to generate
long-term 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.
164
165
165
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.
to counterparties
In evaluating our liquidity and funding requirements, we
consider the potential effect of a reduction in our 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
from contractual
obligations related to over-the-counter (OTC) derivative positions
and other obligations. Based on our credit ratings as of 31
December 2021, in the event of a one-notch reduction in our
long-term credit ratings, we would have been required to provide
USD 0.0 billion in cash or other collateral. In the event of a two-
notch reduction it would have been USD 0.5 billion and for a
three-notch downgrade USD 0.7 billion. In all scenarios these
collateral requirements predominantly relate to OTC derivative
positions.
There was one main rating action with regard to UBS Group
AG’s and UBS AG’s solicited credit ratings in 2021. 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, reversing the outlook change on 31 March 2020,
which was part of a series of rating actions over several weeks
across the sector to reflect the disruption caused by the
COVID-19 pandemic.
› 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 44 billion of assets were excluded from
our daily average Group HQLA for the fourth quarter of 2021.
Amounts held in excess of local liquidity requirements that are not
subject to other restrictions are generally available for transfer
within the Group.
Basel Committee on Banking Supervision (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 2021 was
155%, compared with 152% in the fourth quarter of 2020,
remaining above the prudential requirement communicated by
FINMA.
The average LCR increase was driven by a USD 14 billion
increase in average HQLA to USD 228 billion, driven by higher
average cash balances, which was partly offset by an increase in
average net cash outflows of USD 6 billion to USD 147 billion, due
to higher outflows from customer deposit balances and secured
financing transactions.
› Refer to the 31 December 2021 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
AAvveerraaggee 44QQ22111
222288
Average 4Q201
214
Net cash outflows
141
LLiiqquuiiddiittyy ccoovveerraaggee rraattiioo ((%%))22
152
11 Calculated based on an average of 66 data points in the fourth quarter of 2021 and 63 data points in the fourth quarter of 2020. 22 Calculated after the application of haircuts and inflow and outflow rates, as
well as, where applicable, caps on Level 2 assets and cash inflows.
114477
115555
166
166
Credit ratings
For UBS, HQLA are low-risk unencumbered assets under the
Net stable funding ratio
The net stable funding ratio (NSFR) framework is intended to limit
overreliance on short-term wholesale funding, 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%.
Net stable funding ratio
USD billion, except where indicated
Available stable funding
Required stable funding
NNeett ssttaabbllee ffuunnddiinngg rraattiioo ((%%))
11 “Net stable funding ratio” is based on estimated pro forma reporting.
The NSFR regulation was finalized in the fourth quarter of 2020
with the release of the revised FINMA Circular 2015/2 “Liquidity
risks – banks” and became effective on 1 July 2021.
As of 31 December 2021, our NSFR was unchanged at 119%.
This reflected USD 15 billion higher available stable funding,
mainly driven by an increase in debt issued designated at fair value
and an increase in required stable funding of USD 15 billion,
mainly reflecting higher loans and advances to customers.
3311..1122..2211
31.12.201
557788
448888
111199
563
473
119
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 franchise
available to meet funding and collateral needs in certain
value, stability and quality of earnings, capital adequacy, risk
jurisdictions, but are not readily available for use by the Group as
profile and management, liquidity management, diversification of
a whole. These limitations are typically the result of local
funding sources, asset quality, and corporate governance. Credit
regulatory requirements, including local LCR and large exposure
ratings reflect the opinions of the rating agencies and can change
requirements. Funds that are effectively restricted are excluded
at any time.
from the calculation of Group HQLA to the extent they exceed the
In evaluating our liquidity and funding requirements, we
outflow assumptions for the subsidiary that holds the relevant
consider the potential effect of a reduction in our long-term credit
HQLA. On this basis, USD 44 billion of assets were excluded from
ratings and a corresponding reduction in short-term ratings. If our
our daily average Group HQLA for the fourth quarter of 2021.
credit ratings were to be downgraded, rating trigger clauses could
Amounts held in excess of local liquidity requirements that are not
result in an immediate cash settlement or the need to deliver
subject to other restrictions are generally available for transfer
additional collateral
to counterparties
from contractual
within the Group.
obligations related to over-the-counter (OTC) derivative positions
Basel Committee on Banking Supervision (BCBS) standards
and other obligations. Based on our credit ratings as of 31
require an LCR of at least 100%. In a period of financial stress,
December 2021, in the event of a one-notch reduction in our
the Swiss Financial Market Supervisory Authority (FINMA) may
long-term credit ratings, we would have been required to provide
allow banks to use their HQLA and let their LCR temporarily fall
USD 0.0 billion in cash or other collateral. In the event of a two-
below the minimum threshold. We monitor the LCR in all
notch reduction it would have been USD 0.5 billion and for a
significant currencies
in order to manage any currency
three-notch downgrade USD 0.7 billion. In all scenarios these
mismatches between HQLA and the net expected cash outflows
collateral requirements predominantly relate to OTC derivative
in times of stress.
positions.
Our daily average LCR for the fourth quarter of 2021 was
There was one main rating action with regard to UBS Group
155%, compared with 152% in the fourth quarter of 2020,
AG’s and UBS AG’s solicited credit ratings in 2021. On 2 March
remaining above the prudential requirement communicated by
2021, Fitch Ratings revised the outlooks for the issuer ratings of
FINMA.
UBS Group AG, UBS AG and the rated subsidiaries from negative
The average LCR increase was driven by a USD 14 billion
back to stable, reversing the outlook change on 31 March 2020,
increase in average HQLA to USD 228 billion, driven by higher
which was part of a series of rating actions over several weeks
average cash balances, which was partly offset by an increase in
across the sector to reflect the disruption caused by the
average net cash outflows of USD 6 billion to USD 147 billion, due
COVID-19 pandemic.
to higher outflows from customer deposit balances and secured
› Refer to “Liquidity and funding management are critical to UBS’s
financing transactions.
ongoing performance” in the “Risk factors” section of this report
› Refer to the 31 December 2021 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
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.
Liquidity coverage ratio
USD billion, except where indicated
High-quality liquid assets
Net cash outflows
LLiiqquuiiddiittyy ccoovveerraaggee rraattiioo ((%%))22
AAvveerraaggee 44QQ22111
Average 4Q201
222288
114477
115555
214
141
152
11 Calculated based on an average of 66 data points in the fourth quarter of 2021 and 63 data points in the fourth quarter of 2020. 22 Calculated after the application of haircuts and inflow and outflow rates, as
well as, where applicable, caps on Level 2 assets and cash inflows.
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
Balance sheet and off-balance sheet
Balance sheet
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.
Balance sheet assets
As of 31 December 2021, balance sheet assets totaled USD 1,117
billion, a decrease of USD 9 billion compared with 31 December
2020, which included a decrease from currency effects of
approximately USD 21 billion.
Derivatives and cash collateral receivables on derivative
instruments decreased by USD 44 billion. This decrease
predominantly reflected decreases in foreign exchange contracts,
mainly in our Derivatives & Solutions and Financing businesses in
the Investment Bank, driven by net roll-offs, partly offset by
market-driven movements. In addition, interest rate contracts
decreased, mainly in our Derivatives & Solutions and Financing
businesses and in Non-core and Legacy Portfolio, reflecting
market-driven movements as long-term interest rates increased in
the year.
Other financial assets measured at amortized cost and fair
value decreased by USD 21 billion, largely due to shifts within the
high-quality liquid asset (HQLA) portfolio from securities into cash
within Group Treasury. Brokerage receivables decreased by USD 3
billion, mainly in our Financing business in the Investment Bank,
Assets
with growth in lending more than offset by an associated increase
in netting effects.
consumption by
These decreases were partly offset by a USD 35 billion increase
in Cash and balances at central banks, predominantly in Group
Treasury. The cash inflow was generated mainly from lower
funding
the
aforementioned shifts within the HQLA portfolio from securities
into cash, and net new issuances of long-term debt issued
measured at amortized cost. These inflows were partly offset by
outflows from higher margin requirements and an increase in net
receivables from securities financing transactions, as well as
currency effects.
Investment Bank,
the
Lending assets increased by USD 18 billion, of which USD 21
billion was in Global Wealth Management and predominantly
reflected increases in Lombard loans and mortgage loans,
primarily in the Americas, partly offset by currency effects. In
Personal & Corporate Banking, lending assets decreased by USD 1
billion as increases in mortgage loans and corporate lending were
more than offset by currency effects. Trading portfolio assets
increased by USD 5 billion, mainly in our Financing business in the
Investment Bank, reflecting higher inventory held to hedge client
positions.
› Refer to the “Consolidated financial statements” section of this
report for more information
% change from
31.12.20
USD billion
22
Cash and balances at central banks
Lending1
5
Securities financing transactions at amortized cost
1
Trading portfolio2
4
Derivatives and cash collateral receivables on derivative instruments
(23)
Brokerage receivables
(11)
Other financial assets measured at amortized cost and fair value3
(22)
0
Non-financial assets and financial assets for unit-linked investment contracts
TToottaall aasssseettss
(1)
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.
31.12.20
158.2
395.0
74.2
125.4
192.4
24.7
95.1
60.9
1,125.8
3311..1122..2211
119922..88
441133..22
7755..00
113300..88
114488..77
2211..88
7733..88
6611..00
11,,111177..22
As of
168
168
Risk, capital, liquidity and funding, and balance sheet | Balance sheet and off-balance sheet
Balance sheet and off-balance sheet
Balance sheet
with growth in lending more than offset by an associated increase
The balances disclosed in this section represent year-end
in netting effects.
positions, unless indicated otherwise. Intra-period balances
These decreases were partly offset by a USD 35 billion increase
fluctuate in the ordinary course of business and may differ from
in Cash and balances at central banks, predominantly in Group
year-end positions.
Balance sheet assets
Treasury. The cash inflow was generated mainly from lower
funding
consumption by
the
Investment Bank,
the
aforementioned shifts within the HQLA portfolio from securities
As of 31 December 2021, balance sheet assets totaled USD 1,117
into cash, and net new issuances of long-term debt issued
billion, a decrease of USD 9 billion compared with 31 December
measured at amortized cost. These inflows were partly offset by
2020, which included a decrease from currency effects of
outflows from higher margin requirements and an increase in net
approximately USD 21 billion.
receivables from securities financing transactions, as well as
instruments decreased by USD 44 billion. This decrease
Lending assets increased by USD 18 billion, of which USD 21
predominantly reflected decreases in foreign exchange contracts,
billion was in Global Wealth Management and predominantly
mainly in our Derivatives & Solutions and Financing businesses in
reflected increases in Lombard loans and mortgage loans,
the Investment Bank, driven by net roll-offs, partly offset by
primarily in the Americas, partly offset by currency effects. In
market-driven movements. In addition, interest rate contracts
Personal & Corporate Banking, lending assets decreased by USD 1
decreased, mainly in our Derivatives & Solutions and Financing
billion as increases in mortgage loans and corporate lending were
businesses and in Non-core and Legacy Portfolio, reflecting
more than offset by currency effects. Trading portfolio assets
market-driven movements as long-term interest rates increased in
increased by USD 5 billion, mainly in our Financing business in the
the year.
Investment Bank, reflecting higher inventory held to hedge client
Other financial assets measured at amortized cost and fair
positions.
value decreased by USD 21 billion, largely due to shifts within the
› Refer to the “Consolidated financial statements” section of this
high-quality liquid asset (HQLA) portfolio from securities into cash
report for more information
within Group Treasury. Brokerage receivables decreased by USD 3
billion, mainly in our Financing business in the Investment Bank,
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..2211
31.12.20
% change from
31.12.20
119922..88
441133..22
7755..00
113300..88
114488..77
2211..88
7733..88
6611..00
158.2
395.0
74.2
125.4
192.4
24.7
95.1
60.9
11,,111177..22
1,125.8
22
5
1
4
(23)
(11)
(22)
0
(1)
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.
› 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 represents assets
that are not encumbered but by their nature are not considered
available to secure funding or meet collateral needs.
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.
Derivatives and cash collateral receivables on derivative
currency effects.
Asset encumbrance as of 31 December 2021
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 22002211
TToottaall bbaallaannccee sshheeeett aasssseettss aass ooff 3311 DDeecceemmbbeerr 22002200
OOffff--bbaallaannccee sshheeeett
FFaaiirr vvaalluuee ooff sseeccuurriittiieess aacccceepptteedd aass ccoollllaatteerraall aass ooff 3311 DDeecceemmbbeerr 22002211
FFaaiirr vvaalluuee ooff sseeccuurriittiieess aacccceepptteedd aass ccoollllaatteerraall aass ooff 3311 DDeecceemmbbeerr 22002200
3.4
4.7
1.2
0.1
99..55
0.4
22.8
2233..22
00..99
00..00
3333..55
32.3
1166..33
12.4
18.2
2.2
2200..44
63.71
1.01
6644..77
00..00
8855..11
89.5
336677..44
367.3
TToottaall bbaallaannccee sshheeeett aasssseettss aanndd ooffff--bbaallaannccee sshheeeett sseeccuurriittiieess aacccceepptteedd aass ccoollllaatteerraall aass ooff
3311 DDeecceemmbbeerr 22002211
445522..55
4499..88
of which: high-quality liquid assets
TToottaall bbaallaannccee sshheeeett aasssseettss aanndd ooffff--bbaallaannccee sshheeeett sseeccuurriittiieess aacccceepptteedd aass ccoollllaatteerraall aass ooff
3311 DDeecceemmbbeerr 22002200
456.8
44.7
of which: high-quality liquid assets
192.8
16.6
220099..44
62.2
22.7
8844..88
77..99
55..33
330077..55
284.0
110066..55
113.4
441144..00
232.8
397.3
214.1
12.1
375.5
1.4
338888..99
4.5
7.8
1122..33
1144..11
441155..44
395.6
77..66
7.7
75.0
25.8
2.9
5.9
110099..66
118.1
21.8
5.9
114455..99
2200..33
227755..77
324.3
192.8
15.5
75.0
30.5
397.8
26.2
773377..88
130.8
118.1
21.8
60.1
333300..99
88..88
3399..77
11,,111177..22
1,125.8
449977..88
500.7
442233..00
227755..77
11,,661155..00
403.3
324.3
1,626.5
11 Includes assets pledged as collateral that may be sold or repledged by counterparties. The respective amounts are disclosed in “Note 23 Restricted 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..2211
111111..44
117744..77
4466..66
8811..22
441144..00
31.12.20
109.2
163.3
48.1
76.7
397.3
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
Balance sheet liabilities
Total liabilities as of 31 December 2021 were USD 1,056 billion,
a decrease of USD 10 billion compared with 31 December 2020,
which included a decrease from currency effects of approximately
USD 20 billion.
Derivatives and cash collateral payables on derivative
instruments decreased by USD 45 billion, in line with the
movement on the asset side. Trading portfolio liabilities decreased
by USD 2 billion, predominantly due to lower levels of short
positions held to hedge client positions. Other financial liabilities
measured at amortized cost and fair value decreased by USD 2
billion, mainly in Group Treasury due to higher netting on
securities financing transactions measured at fair value. Short-
term borrowings decreased by USD 2 billion, mainly due to lower
short-term debt issued in Global Wealth Management, partly
offset by higher amounts due to banks in our Derivatives &
Solutions business in the Investment Bank.
These decreases were partly offset by an increase in customer
deposits of USD 17 billion. An increase of USD 22 billion in Global
Wealth Management, mainly in the Americas, was partly offset by
a decrease of USD 4 billion in Personal & Corporate Banking
driven by currency effects. As of 31 December 2021, our ratio of
customer deposits to outstanding loan balances was 136%
(31 December 2020: 138%).
Debt issued designated at fair value and long-term debt issued
measured at amortized cost increased by USD 16 billion, mainly
driven by USD 13 billion higher debt issued designated at fair
value, mainly reflecting net new issuances of equity-linked and
rates-linked debt
instruments, as well as market-driven
movements in our Derivatives & Solutions business in the
Investment Bank. In addition, long-term debt issued measured at
amortized cost increased by USD 3 billion, driven by net new
issuances, partly offset by foreign exchange and hedge
accounting effects. During 2021, net new issuances of TLAC-
eligible benchmark instruments and senior unsecured debt
USD 12 billion were partly offset by USD 4 billion of net
redemptions of covered bonds and
subordinated debt
instruments.
During 2022, USD 1.4 billion equivalent of TLAC-eligible
benchmark instruments and USD 2.0 billion of loss-absorbing
tier 2 capital instruments will mature. In February 2022, loss-
absorbing additional tier 1 capital instruments equivalent to
USD 1.1 billion were called and USD 2.8 billion equivalent of
TLAC-eligible benchmark instruments matured. UBS is already
compliant with its 2022 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
Brokerage payables increased by USD 5 billion, mainly in the
Financing business of our Investment Bank, due to an increase in
client credit and short positions, partly offset by higher netting
effects from increased lending.
reclassification of assets
Non-financial liabilities and financial liabilities related to unit-
linked investment contracts increased by USD 2 billion, mainly
reflecting a
in Global Wealth
Management as disposal groups held for sale in connection with
the upcoming sales of our domestic wealth management business
in Spain and UBS Swiss Financial Advisers AG. The increase also
included market-driven increases from unit-linked investment
contracts in Asset Management.
› Refer to the “Consolidated financial statements” section of this
report for more information
Equity
Equity attributable to shareholders increased by USD 1,217
million to USD 60,662 million as of 31 December 2021.
This increase was mainly driven by total comprehensive income
attributable to shareholders of positive USD 5,106 million,
reflecting net profit of USD 7,457 million and negative other
comprehensive income (OCI) of USD 2,351 million. OCI mainly
included negative cash flow hedge OCI of USD 1,675 million,
negative OCI related to foreign currency translation of USD 535
million and negative OCI related to debt instruments measured at
fair value through OCI of USD 157 million.
In addition,
amortization of deferred share-based compensation awards
increased share premium by USD 643 million and the launch of
our new operational partnership entity with Sumitomo Mitsui
Trust Holdings, Inc. resulted in an equity increase of USD 155
million.
These increases were partly offset by net treasury share activity
that decreased equity by USD 3,326 million. This was mainly due
to share repurchases with an acquisition cost of USD 2,500 million
under our 2021 share repurchase program, repurchases of
USD 112 million under our 2018–2021 program and purchases of
USD 545 million from the market to hedge our share delivery
obligations related to employee share-based compensation
awards. In addition, distributions to shareholders reduced equity
by USD 1,301 million, reflecting a dividend payment of USD 0.37
per share.
In the second quarter of 2021, we canceled 156,632,400
shares purchased under our 2018–2021 share repurchase
program, as approved by shareholders at the 2021 Annual
General Meeting. The cancellation of shares resulted
in
reclassifications within equity but had no net effect on our total
equity attributable to shareholders.
› Refer to the “Group performance” and “Consolidated financial
statements” sections of this report for more information about
capital instruments and TLAC-eligible senior unsecured debt,”
OCI
available under “Bondholder information” at ubs.com/investors,
for more information
› Refer to “UBS shares” in this section for more information about
our share repurchase programs
› Refer to “Note 30 Changes in organization and acquisitions and
disposals of subsidiaries and businesses” in the “Consolidated
financial statements” section of this report for more information
about our partnership with Sumitomo Mitsui Trust Holdings, Inc.
170
170
Risk, capital, liquidity and funding, and balance sheet | Balance sheet and off-balance sheet
Total liabilities as of 31 December 2021 were USD 1,056 billion,
Financing business of our Investment Bank, due to an increase in
a decrease of USD 10 billion compared with 31 December 2020,
client credit and short positions, partly offset by higher netting
which included a decrease from currency effects of approximately
effects from increased lending.
USD 20 billion.
Non-financial liabilities and financial liabilities related to unit-
Derivatives and cash collateral payables on derivative
linked investment contracts increased by USD 2 billion, mainly
instruments decreased by USD 45 billion, in line with the
reflecting a
reclassification of assets
in Global Wealth
movement on the asset side. Trading portfolio liabilities decreased
Management as disposal groups held for sale in connection with
by USD 2 billion, predominantly due to lower levels of short
the upcoming sales of our domestic wealth management business
positions held to hedge client positions. Other financial liabilities
in Spain and UBS Swiss Financial Advisers AG. The increase also
measured at amortized cost and fair value decreased by USD 2
included market-driven increases from unit-linked investment
billion, mainly in Group Treasury due to higher netting on
contracts in Asset Management.
securities financing transactions measured at fair value. Short-
› Refer to the “Consolidated financial statements” section of this
term borrowings decreased by USD 2 billion, mainly due to lower
report for more information
short-term debt issued in Global Wealth Management, partly
offset by higher amounts due to banks in our Derivatives &
Equity
Solutions business in the Investment Bank.
Equity attributable to shareholders increased by USD 1,217
These decreases were partly offset by an increase in customer
million to USD 60,662 million as of 31 December 2021.
deposits of USD 17 billion. An increase of USD 22 billion in Global
This increase was mainly driven by total comprehensive income
Wealth Management, mainly in the Americas, was partly offset by
attributable to shareholders of positive USD 5,106 million,
a decrease of USD 4 billion in Personal & Corporate Banking
reflecting net profit of USD 7,457 million and negative other
driven by currency effects. As of 31 December 2021, our ratio of
comprehensive income (OCI) of USD 2,351 million. OCI mainly
customer deposits to outstanding loan balances was 136%
included negative cash flow hedge OCI of USD 1,675 million,
(31 December 2020: 138%).
negative OCI related to foreign currency translation of USD 535
Debt issued designated at fair value and long-term debt issued
million and negative OCI related to debt instruments measured at
measured at amortized cost increased by USD 16 billion, mainly
fair value through OCI of USD 157 million.
In addition,
driven by USD 13 billion higher debt issued designated at fair
amortization of deferred share-based compensation awards
value, mainly reflecting net new issuances of equity-linked and
increased share premium by USD 643 million and the launch of
rates-linked debt
instruments, as well as market-driven
our new operational partnership entity with Sumitomo Mitsui
movements in our Derivatives & Solutions business in the
Trust Holdings, Inc. resulted in an equity increase of USD 155
Investment Bank. In addition, long-term debt issued measured at
million.
amortized cost increased by USD 3 billion, driven by net new
These increases were partly offset by net treasury share activity
issuances, partly offset by foreign exchange and hedge
that decreased equity by USD 3,326 million. This was mainly due
accounting effects. During 2021, net new issuances of TLAC-
to share repurchases with an acquisition cost of USD 2,500 million
eligible benchmark instruments and senior unsecured debt
under our 2021 share repurchase program, repurchases of
USD 12 billion were partly offset by USD 4 billion of net
USD 112 million under our 2018–2021 program and purchases of
redemptions of covered bonds and
subordinated debt
USD 545 million from the market to hedge our share delivery
instruments.
obligations related to employee share-based compensation
During 2022, USD 1.4 billion equivalent of TLAC-eligible
awards. In addition, distributions to shareholders reduced equity
benchmark instruments and USD 2.0 billion of loss-absorbing
by USD 1,301 million, reflecting a dividend payment of USD 0.37
tier 2 capital instruments will mature. In February 2022, loss-
per share.
absorbing additional tier 1 capital instruments equivalent to
In the second quarter of 2021, we canceled 156,632,400
USD 1.1 billion were called and USD 2.8 billion equivalent of
shares purchased under our 2018–2021 share repurchase
TLAC-eligible benchmark instruments matured. UBS is already
program, as approved by shareholders at the 2021 Annual
compliant with its 2022 going and gone concern capital
General Meeting. The cancellation of shares resulted
in
requirements and expects to act rationally and strategically with
reclassifications within equity but had no net effect on our total
respect to the refinancing of any callable capital instruments and
equity attributable to shareholders.
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 about
capital instruments and TLAC-eligible senior unsecured debt,”
OCI
available under “Bondholder information” at ubs.com/investors,
for more information
› Refer to “UBS shares” in this section for more information about
our share repurchase programs
› Refer to “Note 30 Changes in organization and acquisitions and
disposals of subsidiaries and businesses” in the “Consolidated
financial statements” section of this report for more information
about our partnership with Sumitomo Mitsui Trust Holdings, Inc.
Balance sheet liabilities
Brokerage payables increased by USD 5 billion, mainly in the
Liabilities and equity
As of
% change from
USD billion
31.12.20
Short-term borrowings1
(3)
Securities financing transactions at amortized cost
(12)
Customer deposits
3
Debt issued designated at fair value and long-term debt issued measured at amortized cost2
10
Trading portfolio3
(6)
Derivatives and cash collateral payables on derivative instruments
(23)
Brokerage payables
14
Other financial liabilities measured at amortized cost and fair value4
(8)
Non-financial liabilities and financial liabilities related to unit-linked investment contracts
7
TToottaall lliiaabbiilliittiieess
(1)
Share capital
(5)
Share premium
(5)
Treasury shares
15
Retained earnings
13
Other comprehensive income5
(32)
TToottaall eeqquuiittyy aattttrriibbuuttaabbllee ttoo sshhaarreehhoollddeerrss
2
Equity attributable to non-controlling interests
6
TToottaall eeqquuiittyy
2
TToottaall lliiaabbiilliittiieess aanndd eeqquuiittyy
(1)
11 Consists of short-term debt issued measured at amortized cost and amounts due to banks. 22 The classification of debt issued measured at amortized cost into short-term and long-term is based on original
contractual maturity and therefore long-term debt also includes debt with a remaining time to maturity of less than one year. This classification does not consider any early redemption features. 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.
31.12.20
57.7
6.3
524.6
153.8
33.6
198.4
38.7
19.1
33.7
1,066.0
0.3
16.8
(4.1)
38.8
7.6
59.4
0.3
59.8
1,125.8
3311..1122..2211
5566..22
55..55
554422..00
116699..99
3311..77
115533..11
4444..00
1177..66
3366..11
11,,005566..22
00..33
1155..99
((44..77))
4433..99
55..22
6600..77
00..33
6611..00
11,,111177..22
Asset funding
USD billion, except where indicated
As of 31 December 2021
Cash, balances at central banks and
loans and advances to banks
208
Securities financing transactions at amortized cost
75
Trading portfolio
Brokerage receivables
Loans and advances to customers
131
22
398
Other (including net derivative assets)
162
USD 69 billion
collateral surplus
136% coverage
USD 144 billion
surplus
s
t
i
s
o
p
e
d
r
e
m
o
t
s
u
C
56
6
32
44
542
74
96
86
61
Short-term borrowings
Securities financing transactions at amortized cost
Trading portfolio
Brokerage payables
246 Demand deposits
247
Retail savings / deposits
49
Time deposits
Debt issued designated at fair value
Long-term debt issued measured at
amortized cost1
Other
Total equity
1 The classification of debt issued measured at amortized cost into short- and long-term is based on original contractual maturity and therefore long-term debt also includes
debt with a remaining time to maturity of less than one year. This classification does not consider any early redemption features.
Assets
Liabilities and equity
170
171
171
00
1000
750
500
250
1000
1000
750750
500500
250250
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..2211 31.12.20
57.7
11.0
46.7
5566..22
1133..11
4433..11
6.3
55..55
554422..00
524.6
224466..44 236.4
224477..22 220.9
4488..44
67.3
AAllll ccuurrrreenncciieess
3311..1122..2211 31.12.20
5.4
1.0
4.4
55..33
11..22
44..11
00..55
5511..33
2233..33
2233..44
44..66
0.6
49.2
22.2
20.7
6.3
116699..99
153.8
1166..11
14.4
3311..77
33.6
33..00
3.2
115533..11
4444..00
198.4
38.7
1144..55
44..22
18.6
3.6
UUSSDD
3311..1122..2211 31.12.20
3.0
0.3
2.7
33..11
00..33
22..77
AAss aa ppeerrcceennttaaggee ooff ttoottaall lliiaabbiilliittiieess
CCHHFF
3311..1122..2211 31.12.20
0.6
0.5
0.0
00..44
00..44
00..00
EEUURR
3311..1122..2211 31.12.20
1.0
0.1
0.9
00..66
00..11
00..55
00..55
2233..99
88..77
1111..99
33..22
99..55
11..33
1122..00
33..11
0.5
19.7
7.4
8.3
4.0
7.6
1.3
15.2
2.7
00..00
1188..00
66..77
1111..00
00..33
11..77
00..11
00..22
00..00
00..11
0.0
20.1
7.2
11.8
1.1
1.6
0.1
0.2
0.0
0.2
00..00
55..22
44..44
00..55
00..33
33..33
00..66
11..44
00..33
00..44
0.0
5.2
4.3
0.5
0.4
3.7
0.5
2.0
0.2
0.2
OOtthheerr
3311..1122..2211 31.12.20
0.9
0.1
0.8
11..33
00..44
00..88
00..00
44..33
33..55
00..00
00..88
11..55
11..00
00..99
00..88
00..33
0.1
4.2
3.4
0.0
0.8
1.5
1.2
1.1
0.7
0.3
1177..66
19.1
11..77
1.8
00..99
1.1
Short-term borrowings
of which: amounts 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
Debt issued designated at fair value
and long-term debt issued
measured at amortized cost2
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
3366..11
11,,005566..22
33.7
1,066.0
33..44
110000..00
3.2
100.0
00..66
5544..77
0.6
51.6
00..22
2200..88
0.2
23.0
00..33
1122..11
0.2
13.1
22..33
1122..44
2.2
12.3
11 Short-term debt issued consists of certificates of deposit, commercial paper, acceptances and promissory notes, and other money market paper. 22 The classification of debt issued measured at amortized cost into
short-term and long-term is based on original contractual maturity and therefore long-term debt also includes debt with a remaining time to maturity of less than one year. This classification does not consider any
early redemption features. 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.
172
172
Risk, capital, liquidity and funding, and balance sheet | Balance sheet and off-balance sheet
Liabilities by product and currency
3311..1122..2211 31.12.20
3311..1122..2211 31.12.20
3311..1122..2211 31.12.20
3311..1122..2211 31.12.20
3311..1122..2211 31.12.20
3311..1122..2211 31.12.20
AAllll ccuurrrreenncciieess
UUSSDD
CCHHFF
EEUURR
OOtthheerr
AAss aa ppeerrcceennttaaggee ooff ttoottaall lliiaabbiilliittiieess
UUSSDD bbiilllliioonn
AAllll ccuurrrreenncciieess
5566..22
1133..11
4433..11
57.7
11.0
46.7
55..55
554422..00
6.3
524.6
224466..44 236.4
224477..22 220.9
4488..44
67.3
55..33
11..22
44..11
00..55
5511..33
2233..33
2233..44
44..66
5.4
1.0
4.4
0.6
49.2
22.2
20.7
6.3
116699..99
153.8
1166..11
14.4
3311..77
33.6
33..00
3.2
115533..11
4444..00
198.4
38.7
1144..55
44..22
18.6
3.6
33..11
00..33
22..77
00..55
2233..99
88..77
1111..99
33..22
99..55
11..33
1122..00
33..11
3.0
0.3
2.7
0.5
19.7
7.4
8.3
4.0
7.6
1.3
15.2
2.7
00..44
00..44
00..00
00..00
1188..00
66..77
1111..00
00..33
11..77
00..11
00..22
00..00
00..11
0.6
0.5
0.0
0.0
20.1
7.2
11.8
1.1
1.6
0.1
0.2
0.0
0.2
00..66
00..11
00..55
00..00
55..22
44..44
00..55
00..33
33..33
00..66
11..44
00..33
00..44
1.0
0.1
0.9
0.0
5.2
4.3
0.5
0.4
3.7
0.5
2.0
0.2
0.2
11..33
00..44
00..88
00..00
44..33
33..55
00..00
00..88
11..55
11..00
00..99
00..88
00..33
0.9
0.1
0.8
0.1
4.2
3.4
0.0
0.8
1.5
1.2
1.1
0.7
0.3
1177..66
19.1
11..77
1.8
00..99
1.1
Short-term borrowings
of which: amounts 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
Debt issued designated at fair value
and long-term debt issued
measured at amortized cost2
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
excludes financial liabilities related to unit-linked investment contracts.
Maturity analysis of assets and liabilities
The table below provides an analysis of carrying amounts of
balance sheet assets and liabilities, as well as off-balance sheet
exposures by residual contractual maturity as of the reporting
date. The residual contractual maturity of assets includes the
effect of callable features. The residual contractual maturity of
liabilities and off-balance sheet exposures is based on the earliest
date on which we could be required to pay. The presentation of
liabilities at the carrying amount in this table differs from “Note
24 Maturity analysis of financial liabilities” in the “Consolidated
financial statements” section of this report, where such liabilities
are presented on an 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.
3366..11
33.7
33..44
3.2
11,,005566..22
1,066.0
110000..00
100.0
00..66
5544..77
0.6
51.6
00..22
2200..88
0.2
23.0
00..33
1122..11
0.2
13.1
22..33
1122..44
2.2
12.3
11 Short-term debt issued consists of certificates of deposit, commercial paper, acceptances and promissory notes, and other money market paper. 22 The classification of debt issued measured at amortized cost into
short-term and long-term is based on original contractual maturity and therefore long-term debt also includes debt with a remaining time to maturity of less than one year. This classification does not consider any
early redemption features. 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
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
Maturity analysis of assets and liabilities
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 22002211
TToottaall aasssseettss aass ooff 3311 DDeecceemmbbeerr 22002200
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 22002211
TToottaall lliiaabbiilliittiieess aass ooff 3311 DDeecceemmbbeerr 22002200
453.7
157.2
300.5
29.7
0.1
7.7
776611..99
748.1
581.6
530.1
3.7
237.7
12.5
9.3
882288..66
865.1
45.9
28.7
5.8
5.8
0.4
0.5
5522..66
64.2
20.1
5.2
12.1
12.0
11.6
3.0
3355..11
37.3
19.1
16.3
3.6
3.6
0.5
0.1
2233..33
32.7
21.3
2.0
16.5
5.2
5.1
0.0
2266..55
24.1
12.4
10.4
2.6
2.6
0.2
0.0
1155..11
18.6
15.0
0.6
13.7
6.1
5.8
0.0
2211..11
17.1
11.7
10.5
1.9
1.9
0.1
0.0
1133..66
17.8
12.1
0.7
9.6
3.3
3.2
0.0
1155..55
14.4
53.7
49.6
5.2
5.2
0.1
0.2
5599..22
53.0
17.0
1.6
14.9
18.8
18.6
0.0
3355..88
27.2
64.1
54.9
7.1
7.1
0.4
1.4
7733..00
79.9
35.6
1.5
32.5
5.6
5.4
0.0
4411..22
33.2
77.3
70.1
2.5
2.5
7.1
0.3
8877..22
79.6
24.4
0.3
22.7
12.2
11.5
0.0
3366..66
30.5
737.8
397.8
1.8
1.8
330.9
60.1
8.8
39.7
11,,111177..22
1,125.8
29.4
3311..22
31.8
13.5
740.6
542.0
13.5 139.2
300.9
73.8
14.7
11,,005566..22
1,066.0
2.4
1155..99
17.1
Guarantees, loan commitments and forward starting transactions11
GGuuaarraanntteeeess,, llooaann ccoommmmiittmmeennttss aanndd ffoorrwwaarrdd ssttaarrttiinngg
ttrraannssaaccttiioonnss aass ooff 3311 DDeecceemmbbeerr 22002211
Guarantees, loan commitments and forward starting
transactions as of 31 December 2020
62.2
11 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. Refer to “Note 10 Derivative instruments” in the “Consolidated financial statements” section of this report for
information about the notional amounts of these instruments.
6600..99
61.3
6622..11
00..00
00..22
00..44
00..00
00..00
00..55
00..00
0.0
0.0
00..00
0.3
0.0
0.1
0.0
0.5
0.0
172
173
173
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, loan
commitments and similar arrangements.
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 Material accounting policies” items 1, 2a and
2c, and “Note 29 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 29 in the “Consolidated financial statements” section of
this report, and in the 31 December 2021 Pillar 3 Report, available
under “Pillar 3 disclosures” at ubs.com/investors.
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
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 2021, the net exposure (i.e., gross values less sub-
participations) from guarantees and similar instruments was
USD 19 billion, compared with USD 15 billion as of 31 December
2020. The increase of USD 4 billion reflected higher guarantees in
Group Treasury and an increase in guarantees issued to corporate
clients in Personal & Corporate Banking. Fee income from issuing
guarantees was not significant to total revenues in 2021 or 2020.
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 2021, loan commitments decreased by USD 2 billion,
mainly in Personal & Corporate Banking, predominantly in
Personal Banking Switzerland.
Committed unconditionally revocable credit lines remained
broadly stable. Forward starting reverse repurchase agreements
decreased by USD 2 billion and forward starting repurchase
agreements increased by USD 1 billion, both predominantly in
Group Treasury.
Off-balance sheet
As of
USD billion
Guarantees1
Loan commitments1,2
Committed unconditionally revocable credit lines
Forward starting reverse repurchase agreements2
Forward starting repurchase agreements2
11 Guarantees and Loan commitments are shown net of sub-participations. 22 The exposures related to loan commitments, forward starting repurchase and reverse repurchase agreements measured at fair value
through profit or loss are not included in this table but are reflected as notional amounts in “Note 10 Derivative instruments” in the “Consolidated financial statements” section of this report.
31.12.20
15.0
41.4
40.1
3.2
0.4
3311..1122..2211
1188..99
3399..55
4400..88
11..44
11..00
% change from
31.12.20
26
(5)
2
(56)
178
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 2021, we recognized net credit loss releases
of USD 46 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 138 million in 2020. Provisions recognized for guarantees,
loan commitments and other credit facilities in the scope of
expected credit loss measurement were USD 196 million as of
31 December 2021, compared with USD 257 million as of
31 December 2020.
› 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 provisions for expected credit losses
174
174
Risk, capital, liquidity and funding, and balance sheet | Balance sheet and off-balance sheet
Off-balance sheet
Guarantees, loan commitments and similar arrangements
In the normal course of business, we issue various forms of
In the normal course of business, we enter into transactions
guarantees, commitments to extend credit, standby and other
where, pursuant to IFRS, the maximum contractual exposure may
letters of credit to support our clients, forward starting
not be recognized in whole or in part on our balance sheet. These
transactions, note issuance facilities and revolving underwriting
transactions include derivative instruments, guarantees, loan
facilities. With the exception of related premiums, generally these
commitments and similar arrangements.
guarantees and similar obligations are kept as off-balance sheet
When we incur an obligation or become entitled to an asset
items, unless a provision to cover probable losses or expected
through these arrangements, we recognize them on the balance
credit losses is required.
sheet. It should be noted that in certain instances the amount
Guarantees represent irrevocable assurances that, subject to
recognized on the balance sheet does not represent the full gain
the satisfying of certain conditions, we will make payments if our
or loss potential inherent in such arrangements.
› Refer to “Note 1a Material accounting policies” items 1, 2a and
clients fail to fulfill their obligations to third parties. As of
31 December 2021, the net exposure (i.e., gross values less sub-
2c, and “Note 29 Interests in subsidiaries and other entities” in
participations) from guarantees and similar instruments was
the “Consolidated financial statements” section of this report for
USD 19 billion, compared with USD 15 billion as of 31 December
more information
2020. The increase of USD 4 billion reflected higher guarantees in
Group Treasury and an increase in guarantees issued to corporate
The following paragraphs provide more information about
clients in Personal & Corporate Banking. Fee income from issuing
certain off-balance sheet arrangements. Additional off-balance
guarantees was not significant to total revenues in 2021 or 2020.
sheet information is primarily provided in Notes 9, 10, 18, 20, 21i,
We also enter into commitments to extend credit in the form
23 and 29 in the “Consolidated financial statements” section of
of credit lines available to secure the liquidity needs of clients. The
this report, and in the 31 December 2021 Pillar 3 Report, available
majority of loan commitments range in maturity from one month
under “Pillar 3 disclosures” at ubs.com/investors.
to one year. Committed unconditionally revocable credit lines are
generally open-ended.
During 2021, loan commitments decreased by USD 2 billion,
mainly in Personal & Corporate Banking, predominantly in
Personal Banking Switzerland.
Committed unconditionally revocable credit lines remained
broadly stable. Forward starting reverse repurchase agreements
decreased by USD 2 billion and forward starting repurchase
agreements increased by USD 1 billion, both predominantly in
Group Treasury.
As of
% change from
3311..1122..2211
31.12.20
31.12.20
1188..99
3399..55
4400..88
11..44
11..00
15.0
41.4
40.1
3.2
0.4
26
(5)
2
(56)
178
Off-balance sheet
USD billion
Guarantees1
Loan commitments1,2
Committed unconditionally revocable credit lines
Forward starting reverse repurchase agreements2
Forward starting repurchase agreements2
11 Guarantees and Loan commitments are shown net of sub-participations. 22 The exposures related to loan commitments, forward starting repurchase and reverse repurchase agreements measured at fair value
through profit or loss are not included in this table but are reflected as notional amounts in “Note 10 Derivative instruments” in the “Consolidated financial statements” section of this report.
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 196 million as of
instruments. The risk is similar to the risk involved in extending
31 December 2021, compared with USD 257 million as of
loan facilities and is subject to the same risk management and
31 December 2020.
control framework. In 2021, we recognized net credit loss releases
of USD 46 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
› 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
USD 138 million in 2020. Provisions recognized for guarantees,
about provisions for expected credit losses
For certain obligations we enter into partial sub-participations
to mitigate various risks from guarantees and 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.
and
indemnifications to third parties in the normal course of business.
representations, warranties
provide
also
We
Support provided to non-consolidated investment funds
In 2021, 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 it 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 these
memberships, we may be required to pay a share of the financial
obligations of another member who defaults, or we may be
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. As of
31 December 2021, FINMA estimates our share in the deposit
insurance system to be CHF 0.9 billion. This represents a
contingent payment obligation and exposes us to additional risk.
As of 31 December 2021, we considered the probability of a
material loss from our obligations to be remote.
UBS is also subject to, or is a member of, other deposit
protection schemes in other countries. However, no contingent
payment obligation existed as of 31 December 2021 from any
other material scheme.
Material cash requirements
The Group’s material cash requirements as of 31 December 2021
are represented by the residual contractual maturities for non-
derivative and non-trading financial liabilities included in the table
presented in “Note 24 Maturity analysis of financial liabilities” in
the “Consolidated financial statements” section of this report.
Included in the table are debt issued designated at fair value
(USD 82 billion) and long-term debt issued measured at amortized
cost (USD 106 billion). The amounts represent estimated future
interest and principal payments on an undiscounted basis.
In the normal course of business, we also issue or enter into
various forms of guarantees, loan commitments and other similar
arrangements that may result in an outflow of cash in the future.
The maturity profile of these obligations, which are presented off-
balance sheet, are included in “Note 24 Maturity analysis of
financial liabilities” in the “Consolidated financial statements”
section of this report.
› Refer to “Guarantees, loan commitments and similar
arrangements” in this section for more information
174
175
175
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 2021, cash and cash equivalents totaled
USD 207.9 billion, an increase of USD 34.3 billion compared with
31 December 2020, driven by net cash inflows from operating
and financing activities. These effects were partly offset by net
cash outflows from investing activities, as well as the effects of
exchange rate differences on cash and cash equivalents, mainly
reflecting the appreciation of the US dollar against the Swiss
franc, Japanese yen and euro in 2021.
Operating activities
Net cash inflows from operating activities were USD 31.4 billion
in 2021, compared with USD 37.0 billion in 2020. The net
operating cash flow, before changes in operating assets and
liabilities and income taxes paid, was an inflow of USD 13.5
billion. Changes in operating assets and liabilities resulted in net
cash inflows of USD 18.0 billion, mainly driven by net inflows of
USD 29.8 billion related to customer deposits and USD 19.6
billion from financial assets and liabilities at fair value not held for
trading and other financial assets and liabilities, as well as USD 8.1
billion from brokerage receivables and payables. These inflows
were partly offset by a net outflow from lending balances to
customers of USD 27.5 billion and a net outflow from financial
assets and liabilities at fair value held for trading and derivative
financial instruments of USD 10.5 billion.
Investing activities
Investing activities resulted in a net cash outflow of USD 2.1 billion
in 2021, compared with USD 6.8 billion in 2020, primarily related
to a cash outflow of USD 1.8 billion from purchase of property,
equipment and software.
Financing activities
Financing activities resulted in a net cash inflow of USD 10.3 billion
in 2021, compared with USD 12.4 billion in 2020, mainly due to
net issuance proceeds of USD 18.4 billion from debt designated at
fair value and long-term debt measured at amortized cost. This
inflow was partly offset by the net repayment of USD 3.1 billion of
short-term debt, net cash used to acquire treasury shares of
USD 3.3 billion and a dividend distribution to shareholders of
USD 1.3 billion.
› Refer to “Primary financial statements and share information” 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..2211
31.12.20
3311
((22))
1100
((55))
3344
220088
37
(7)
12
11
54
174
176
176
Cash flows
USD 29.8 billion related to customer deposits and USD 19.6
billion from financial assets and liabilities at fair value not held for
Currency management
less meaningful when evaluating our liquidity position than the
customers of USD 27.5 billion and a net outflow from financial
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 foreign
currency IFRS 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. 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 Material accounting policies” and “Note 26
Hedge accounting” in the “Consolidated financial statements”
section of this report for more information
› 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
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
trading and other financial assets and liabilities, as well as USD 8.1
often may bear little relation to our net earnings and net assets.
billion from brokerage receivables and payables. These inflows
Consequently, we believe that a traditional cash flow analysis is
were partly offset by a net outflow from lending balances to
liquidity, funding and capital management frameworks and
assets and liabilities at fair value held for trading and derivative
measures described elsewhere in this section.
financial instruments of USD 10.5 billion.
Cash and cash equivalents
Investing activities
As of 31 December 2021, cash and cash equivalents totaled
Investing activities resulted in a net cash outflow of USD 2.1 billion
USD 207.9 billion, an increase of USD 34.3 billion compared with
in 2021, compared with USD 6.8 billion in 2020, primarily related
31 December 2020, driven by net cash inflows from operating
to a cash outflow of USD 1.8 billion from purchase of property,
and financing activities. These effects were partly offset by net
equipment and software.
cash outflows from investing activities, as well as the effects of
exchange rate differences on cash and cash equivalents, mainly
Financing activities
reflecting the appreciation of the US dollar against the Swiss
Financing activities resulted in a net cash inflow of USD 10.3 billion
franc, Japanese yen and euro in 2021.
Operating activities
in 2021, compared with USD 12.4 billion in 2020, mainly due to
net issuance proceeds of USD 18.4 billion from debt designated at
fair value and long-term debt measured at amortized cost. This
Net cash inflows from operating activities were USD 31.4 billion
inflow was partly offset by the net repayment of USD 3.1 billion of
in 2021, compared with USD 37.0 billion in 2020. The net
short-term debt, net cash used to acquire treasury shares of
operating cash flow, before changes in operating assets and
USD 3.3 billion and a dividend distribution to shareholders of
liabilities and income taxes paid, was an inflow of USD 13.5
USD 1.3 billion.
billion. Changes in operating assets and liabilities resulted in net
› Refer to “Primary financial statements and share information” in
cash inflows of USD 18.0 billion, mainly driven by net inflows of
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..2211
31.12.20
3311
((22))
1100
((55))
3344
220088
37
(7)
12
11
54
174
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 exchange 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.
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
176
177
177
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 2021, IFRS equity attributable to
shareholders amounted to USD 60,662 million, represented by
issued decreased by
issued. Shares
3,702,422,995 shares
157 million in 2021, as the 156,632,400 shares acquired under the
2018–2021 share repurchase program were canceled by means of
a capital reduction, as approved by shareholders at the 2021
Annual General Meeting (AGM).
UBS Group share information
Shares issued
Treasury shares1
of which: related to share repurchase program 2018–2021
of which: related to share repurchase program 20212
Shares outstanding
Basic earnings per share (USD)3
Basic earnings per share (CHF)4
Diluted earnings per share (USD)3
Diluted earnings per share (CHF)4
Equity attributable to shareholders (USD million)
Less: goodwill and intangible assets (USD million)
Tangible equity attributable to shareholders (USD million)
Ordinary cash dividends per share (USD)5,6
Total book value per share (USD)
Tangible book value per share (USD)
Share price (USD)7
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..2211
33,,770022,,442222,,999955
330022,,881155,,332288
115522,,559966,,227733
33,,339999,,660077,,666677
31.12.20
3,859,055,395
307,477,002
148,975,800
3,551,578,393
22..1144
11..9966
22..0066
11..8888
6600,,666622
66,,337788
5544,,228833
00..5500
1177..8844
1155..9977
1188..0011
6611,,223300
1.83
1.71
1.77
1.65
59,445
6,480
52,965
0.37
16.74
14.91
14.08
50,013
% change from
31.12.20
(4)
(2)
(100)
(4)
17
15
16
14
2
(2)
2
35
7
7
28
22
11 Based on a settlement date view. 22 Our active share repurchase program of up to CHF 4 billion was started in February 2021. The program was initially planned to run over a three-year period, but we currently
expect to complete it in the first half of 2022. We therefore refer to this program as “share repurchase program 2021” throughout this report. 33 Refer to “Share information and earnings per share” in the
“Consolidated financial statements” section of this report for more information. 44 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. 55 Dividends and / or distributions out of the capital contribution reserve are normally approved and paid in the year subsequent to the reporting period. 66 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. 77 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.
178
178
Risk, capital, liquidity and funding, and balance sheet | UBS shares
UBS shares
UBS Group AG shares
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 2021, IFRS equity attributable to
also entitles the holder to a proportionate share of distributed
shareholders amounted to USD 60,662 million, represented by
dividends. All shares are fully paid up. As the Articles of
3,702,422,995 shares
issued. Shares
issued decreased by
Association of UBS Group AG indicate, there are no other classes
157 million in 2021, as the 156,632,400 shares acquired under the
of shares and no preferential rights for shareholders.
2018–2021 share repurchase program were canceled by means of
a capital reduction, as approved by shareholders at the 2021
› Refer to the “Corporate governance” section of this report for
more information about UBS shares
Annual General Meeting (AGM).
UBS Group share information
Shares issued
Treasury shares1
of which: related to share repurchase program 2018–2021
of which: related to share repurchase program 20212
Shares outstanding
Basic earnings per share (USD)3
Basic earnings per share (CHF)4
Diluted earnings per share (USD)3
Diluted earnings per share (CHF)4
Equity attributable to shareholders (USD million)
Less: goodwill and intangible assets (USD million)
Tangible equity attributable to shareholders (USD million)
Ordinary cash dividends per share (USD)5,6
Total book value per share (USD)
Tangible book value per share (USD)
Share price (USD)7
Market capitalization (USD million)
As of or for the year ended
3311..1122..2211
33,,770022,,442222,,999955
330022,,881155,,332288
115522,,559966,,227733
33,,339999,,660077,,666677
31.12.20
3,859,055,395
307,477,002
148,975,800
3,551,578,393
22..1144
11..9966
22..0066
11..8888
6600,,666622
66,,337788
5544,,228833
00..5500
1177..8844
1155..9977
1188..0011
6611,,223300
1.83
1.71
1.77
1.65
59,445
6,480
52,965
0.37
16.74
14.91
14.08
50,013
% change from
31.12.20
(100)
(4)
(2)
(4)
(2)
17
15
16
14
2
2
35
7
7
28
22
11 Based on a settlement date view. 22 Our active share repurchase program of up to CHF 4 billion was started in February 2021. The program was initially planned to run over a three-year period, but we currently
expect to complete it in the first half of 2022. We therefore refer to this program as “share repurchase program 2021” throughout this report. 33 Refer to “Share information and earnings per share” in the
“Consolidated financial statements” section of this report for more information. 44 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. 55 Dividends and / or distributions out of the capital contribution reserve are normally approved and paid in the year subsequent to the reporting period. 66 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. 77 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 2021, we held a
total of 302,815,328 treasury shares (31 December 2020:
307,477,002), or 8.2% (31 December 2020: 8.0%) of shares
issued.
Our 2018–2021 share repurchase program was completed on
2 February 2021 with the purchase of an additional 7.7 million
shares in 2021 for a total acquisition cost of CHF 100 million
(USD 112 million). The 156.6 million shares repurchased under
this program were canceled by means of a capital reduction, as
approved by shareholders at the 2021 AGM.
On 8 February 2021, we commenced a new 2021 share
repurchase program of up to CHF 4 billion. Shares acquired under
this program totaled 152.6 million as of 31 December 2021 for a
total acquisition cost of CHF 2,294 million (USD 2,500 million)
and are intended to be canceled by means of a capital reduction,
pending approval by shareholders at the 2022 AGM.
Looking ahead, we intend to commence a new 2022 share
repurchase program of up to USD 6 billion over two years and
expect to execute up to USD 5 billion of repurchases under both
the existing 2021 repurchase program and the new 2022
program by the end of 2022.
Treasury share purchases
Treasury shares held to hedge our share delivery obligations
related to employee share-based compensation awards totaled
148.8 million shares as of 31 December 2021 (31 December
2020: 157.1 million). Share delivery obligations related to
employee share-based compensation awards totaled 175 million
shares as of 31 December 2021 (31 December 2020: 172 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 2021, up to 122 million UBS Group
AG shares (31 December 2020: 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 derivatives, and
to hedge certain issued structured debt 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.
Share repurchase programs1
Other treasury shares purchased2
Remaining volume of
2018–2021 share
repurchase program in
CHF million at month-end
31
0
Remaining volume of
2021 share repurchase
program in CHF million
at month-end
Number of shares
Average price in USD
Number of shares
5,250,000
22,861,600
39,377,000
7,400,415
15,858,110
Average price in CHF
13.06
13.89
14.64
14.56
13.97
Month of purchase3
January 2021
February 2021
March 2021
April 2021
May 2021
June 2021
July 2021
August 2021
September 2021
October 2021
November 2021
December 2021
17.73
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. UBS has an active share repurchase program to buy
back up to CHF 4 billion of its own shares over the three-year period started in February 2021. 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 906,951 UBS Group AG shares during the year and held 14,073,132 UBS Group AG shares as of 31 December 2021. 33 Based on the transaction date of
the respective treasury share purchases. 44 The remaining volume of the 2021 share repurchase program as of 31 December 2021 was USD 1,871 million. This was calculated based on the remaining volume of
CHF 1,706 million as of 31 December 2021 and the respective closing exchange rate as of this date.
3,714
3,137
3,030
2,808
2,808
2,694
2,431
2,259
2,184
1,708
1,7064
7,730,000
17,140,000
11,241,248
4,500,000
28,800,000
94,500
14.71
15.36
15.36
16.58
16.54
16.23
5,585,000
14,415,000
16.11
16.31
12,770,000
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..2211
22,,551144,,225599
99,,889999
113377,,336666
554455
31.12.20
5,095,908
20,222
260,681
1,030
31.12.19
4,161,555
16,713
203,967
809
178
179
179
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 2021, the average daily trading volume of UBS Group
AG shares was 9.9 million shares on SIX and 0.5 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
BBlloooommbbeerrgg
UBSG
UBS
UBSG SW
UBS UN
RReeuutteerrss
UBSG.S
UBS.N
ISIN
Valoren
CUSIP
CCHH00224444776677558855
2244 447766 775588
CCIINNSS HH4422009977 1100 77
180
180
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.
182
Corporate governance
182
183
Corporate governance and compensation | Corporate governance
Corporate governance
regarding
regulatory
UBS Group AG is subject to, and complies with, all relevant Swiss
legal and
corporate
requirements
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 (SEC) regulations and NYSE 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.wolterskluwer.cloud/listed-company-manual
Differences from corporate governance standards relevant
to US-listed companies
The NYSE 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
184
184
of Obligations, the BoD submits its proposals for a 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 to those risk principles and monitoring
whether business divisions and control units maintain appropriate
systems of risk management and control.
Supervision of the internal audit function
Although under NYSE standards only audit committees supervise
internal audit functions, the Chairman of the BoD (the 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 require an increase in capital. No shareholder
approval is required if shares for such plans are purchased in the
market.
› 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 Swiss
of Obligations, the BoD submits its proposals for a shareholder
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 Stock
As per the Organization Regulations of UBS Group AG and
Exchange (the NYSE), UBS Group AG also complies with all
UBS AG, the Risk Committee, instead of the Audit Committee, as
relevant corporate governance standards applicable to foreign
per NYSE standards, oversees our risk principles and risk capacity
private issuers.
on 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 monitoring
the Board of Directors (the BoD) based on Art. 716b of the Swiss
whether business divisions and control units maintain appropriate
Code of Obligations and articles 25 and 27 of the Articles of
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 Chairman)
relevant Swiss
legal and regulatory corporate governance
and the Audit Committee share the supervisory responsibility and
requirements. As a foreign private issuer with debt securities listed
authority with respect to the internal audit function.
on the NYSE, UBS AG also complies with the relevant NYSE
corporate governance standards. The discussion in this section
Responsibility of the Compensation Committee for performance
refers to both UBS Group AG and UBS AG, unless specifically
evaluations of senior management of UBS Group AG
noted otherwise or unless the information discussed is relevant
In line with Swiss law, our Compensation Committee, together
only to listed companies and therefore only applicable to
with the BoD, proposes for shareholder approval at the AGM the
UBS Group AG. This approach is in line with US Securities and
maximum aggregate amount of compensation for the BoD, the
Exchange Commission (SEC) regulations and NYSE 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.wolterskluwer.cloud/listed-company-manual
Differences from corporate governance standards relevant
to US-listed companies
The NYSE 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
Responsibility of the Audit Committee regarding independent
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 require an increase in capital. No shareholder
approval is required if shares for such plans are purchased in the
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
market.
› 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
below.
auditors
184
Group structure and shareholders
Operational Group structure
As of 31 December 2021, 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 21 of this report
for more information about our business divisions and Group
Functions
› Refer to “Financial and operating performance” on page 75 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 178 of this report for
information about UBS Group AG’s market capitalization and
shares held by Group entities
› Refer to “Note 29 Interests in subsidiaries and other entities” in
the “Consolidated financial statements” section on page 391 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 2021, the following
entities held more than 3% of the total share capital of
UBS Group AG: Massachusetts Financial Services Company,
Boston, which disclosed a holding of 3.01% on 22 June 2021;
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 the aforementioned thresholds requiring SIX
notification under the FMIA do not necessarily appear in the table
below.
On 24 January 2022, Dodge & Cox International Stock Fund,
San Francisco, disclosed a holding of 3.02% of the total share
capital of UBS Group AG. No new disclosures of significant
shareholdings have been made since that date.
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) that were registered in the UBS
share register with 3% or more of the total share capital of UBS
Group AG as of 31 December 2021.
› Refer to “Shareholders’ participation rights” on page 191 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
DTC (Cede & Co.), New York2,3
3311..1122..2211
31.12.20
31.12.19
88..8899
55..7788
10.39
4.99
10.94
7.57
Nortrust Nominees Ltd., London2
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..8800
5.15
4.90
185
185
Corporate governance and compensation Corporate governance and compensation | Corporate governance
Share capital structure
Ordinary share capital
At year-end 2021, UBS Group AG had 3,702,422,995 issued
shares with a nominal value of CHF 0.10 each, equating to a share
capital of CHF 370,242,299.50.
Under Swiss company law, shareholders must approve, in a
general meeting of shareholders, any increase or reduction in the
ordinary share capital or the creation of conditional or authorized
share capital.
In 2021, our shareholders were asked to approve a reduction
of share capital by way of canceling 156,632,400 registered
shares repurchased under the 2018–2021 share buyback
program.
In 2021, our shareholders were not asked to approve the
creation of conditional or authorized share capital.
No shares were issued out of existing conditional capital, as
there were no employee options and stock appreciation rights
outstanding.
Distribution of UBS shares
AAss ooff 3311 DDeecceemmbbeerr 22002211
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
5,000,001–37,024,229 (1%)
1–2%
2–3%
3–4%
4–5%
Over 5%
Total registered
Unregistered3
TToottaall
SShhaarreehhoollddeerrss rreeggiisstteerreedd
SShhaarreess rreeggiisstteerreedd
Number
% of shares issued
Number
21,973
98,460
65,295
6,421
523
94
26
3
0
0
1
21
%
11.4
51.1
33.9
3.3
0.3
0.0
0.0
0.0
0.0
0.0
0.0
0.0
1,210,904
46,829,775
192,251,772
152,692,476
152,003,230
202,245,394
291,114,743
142,657,900
0
0
177,762,902
543,460,208
192,798
100.0
1,902,229,3042
119922,,779988
110000..00
1,800,193,691
33,,770022,,442222,,999955
0.0
1.3
5.2
4.1
4.1
5.5
7.9
3.9
0.0
0.0
4.8
14.7
51.4
48.6
110000..00
11 On 31 December 2021, Chase Nominees Ltd., London, entered as a nominee, was registered with 8,89% 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 5.78% 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, 295,987,073 shares did not carry voting rights. 33 Shares not entered in the UBS share register as of 31 December 2021.
186
186
Corporate governance and compensation | Corporate governance
Share capital structure
Ordinary share capital
In 2021, our shareholders were asked to approve a reduction
of share capital by way of canceling 156,632,400 registered
At year-end 2021, UBS Group AG had 3,702,422,995 issued
shares repurchased under the 2018–2021 share buyback
shares with a nominal value of CHF 0.10 each, equating to a share
program.
capital of CHF 370,242,299.50.
In 2021, our shareholders were not asked to approve the
Under Swiss company law, shareholders must approve, in a
creation of conditional or authorized share capital.
general meeting of shareholders, any increase or reduction in the
No shares were issued out of existing conditional capital, as
ordinary share capital or the creation of conditional or authorized
there were no employee options and stock appreciation rights
share capital.
outstanding.
Distribution of UBS shares
AAss ooff 3311 DDeecceemmbbeerr 22002211
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
5,000,001–37,024,229 (1%)
1–2%
2–3%
3–4%
4–5%
Over 5%
Total registered
Unregistered3
TToottaall
SShhaarreehhoollddeerrss rreeggiisstteerreedd
SShhaarreess rreeggiisstteerreedd
Number
% of shares issued
Number
21,973
98,460
65,295
6,421
523
94
26
3
0
0
1
21
%
11.4
51.1
33.9
3.3
0.3
0.0
0.0
0.0
0.0
0.0
0.0
0.0
1,210,904
46,829,775
192,251,772
152,692,476
152,003,230
202,245,394
291,114,743
142,657,900
0
0
177,762,902
543,460,208
1,800,193,691
33,,770022,,442222,,999955
0.0
1.3
5.2
4.1
4.1
5.5
7.9
3.9
0.0
0.0
4.8
14.7
51.4
48.6
110000..00
11 On 31 December 2021, Chase Nominees Ltd., London, entered as a nominee, was registered with 8,89% 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 5.78% 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, 295,987,073 shares did not carry voting rights. 33 Shares not entered in the UBS share register as of 31 December 2021.
119922,,779988
110000..00
Conditional share capital
At year-end 2021, 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 (the EGM) held on
26 November 2014, having originally been 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
› Refer to the “Our evolution” section on page 14 of this report
for more information
Conditional capital of UBS Group AG
AAss ooff 3311 DDeecceemmbbeerr 22002211
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
3.29
10.26
1133..5555
Authorized share capital
Ownership
192,798
100.0
1,902,229,3042
Changes in capital
UBS Group AG had no authorized capital available to issue on
31 December 2021.
In accordance with International Financial Reporting Standards
(IFRS), Group equity attributable to shareholders was USD 60.7
billion as of 31 December 2021 (2020: USD 59.4 billion; 2019:
USD 54.5 billion). The equity of UBS Group AG shareholders was
represented by 3,702,422,995 issued shares as of 31 December
2021 (31 December 2020: 3,859,055,395 shares; 31 December
2019: 3,859,055,395 shares).
› Refer to “Statement of changes in equity” in the “Consolidated
financial statements” section on page 286 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 2021, 1,606,242,231 UBS Group AG
shares were registered in the share register and carried voting
rights, 295,987,073 shares were registered in the share register
without voting rights, and 1,800,193,691 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.
186
187
187
Corporate governance and compensation Corporate governance and compensation | Corporate governance
Shareholders, legal entities and nominees: type and geographical distribution
AAss ooff 3311 DDeecceemmbbeerr 22002211
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
188,892
3,724
182
%
98.0
1.9
0.1
119922,,779988
110000..00
IInnddiivviidduuaall sshhaarreehhoollddeerrss
LLeeggaall eennttiittiieess
NNoommiinneeeess
TToottaall
Number
11,,775522
1,244
55,,002244
1111,,998888
3,715
4,580
3,419
274
117700,,112288
%
00..99
0.6
22..66
66..22
1.9
2.4
1.8
0.1
8888..22
Number
110022
54
9988
221188
25
9
180
4
33,,330066
%
00..11
0.0
00..11
00..11
0.0
0.0
0.1
0.0
11..77
Number
8811
78
2244
4455
3
7
34
1
3322
%
00..00
0.0
00..00
00..00
0.0
0.0
0.0
0.0
00..00
Number
11,,993355
1,376
55,,114466
1122,,225511
3,743
4,596
3,633
279
117733,,446666
%
11..00
0.7
22..77
66..44
1.9
2.4
1.9
0.1
9900..00
118888,,889922
9988..00
33,,772244
11..99
118822
00..11
119922,,779988
110000..00
At year-end 2021, UBS owned 302,815,328 UBS Group AG
registered shares, which corresponded to 8.18% of the total
share capital of UBS Group AG. At the same time, UBS had
acquisition positions relating to 327,114,543 voting rights of UBS
Group AG and disposal positions relating to 184,989,149 such
rights, corresponding to 8.84% and 5.00% of the total voting
rights of UBS Group AG, respectively. Of the disposal positions,
174,354,474 related to 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 states that all future potential share
delivery obligations, irrespective of the contingent nature of the
delivery, must be considered.
achieving growth ambitions, EOP and LTIP awards granted to
certain employees will only vest if predetermined performance
conditions are met.
On 31 December 2021, UBS employees held at least 7% of
UBS shares outstanding (including approximately 5% 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 2021, at least 30% of
all employees held UBS shares through the firm’s employee share
participation plans.
› Refer to the “Compensation” section on page 222 of this report
for more information
Trading restrictions in UBS shares
Employee share ownership
total compensation greater
Employee share ownership is encouraged and made possible in a
variety of ways. Our Equity Plus Plan 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. The Equity Ownership Plan (the EOP) is a mandatory
deferral plan for all employees with regulatory-driven deferral
requirements or
than USD /
CHF 300,000, excluding selected senior leaders. EOP recipients
receive a portion of their deferred performance award in notional
shares (and / or notional funds for Asset Management). Selected
senior leaders receive 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 an award if an employee commits
certain harmful acts, and in most cases trigger forfeiture where
employment has been terminated. To reinforce our emphasis on
sustainable performance and risk management, and our focus on
UBS employees with regular access to unpublished price-sensitive
information about the firm are subject to specific restrictions in
respect to UBS financial instruments, including, but not limited to,
pre-clearance requirements and regular blackout periods. Such
UBS employees are not permitted to trade UBS financial
instruments in the period starting from the close of business in
New York on the seventh business day of the final month of the
financial quarter of UBS Group AG and ending on the day of the
publication of the quarterly financial results.
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.
188
188
Corporate governance and compensation | Corporate governance
Shareholders, legal entities and nominees: type and geographical distribution
AAss ooff 3311 DDeecceemmbbeerr 22002211
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
188,892
3,724
182
119922,,779988
110000..00
%
98.0
1.9
0.1
%
11..00
0.7
22..77
66..44
1.9
2.4
1.9
0.1
IInnddiivviidduuaall sshhaarreehhoollddeerrss
LLeeggaall eennttiittiieess
Number
NNoommiinneeeess
Number
Number
11,,775522
1,244
55,,002244
1111,,998888
3,715
4,580
3,419
274
%
00..99
0.6
22..66
66..22
1.9
2.4
1.8
0.1
110022
54
9988
221188
25
9
180
4
%
00..11
0.0
00..11
00..11
0.0
0.0
0.1
0.0
11..77
8811
78
2244
4455
3
7
34
1
3322
%
00..00
0.0
00..00
00..00
0.0
0.0
0.0
0.0
00..00
TToottaall
Number
11,,993355
1,376
55,,114466
1122,,225511
3,743
4,596
3,633
279
117700,,112288
8888..22
33,,330066
117733,,446666
9900..00
118888,,889922
9988..00
33,,772244
11..99
118822
00..11
119922,,779988
110000..00
IInnddiivviidduuaall sshhaarreehhoollddeerrss
LLeeggaall eennttiittiieess
NNoommiinneeeess
Number of shares
22,,335533,,330099
895,352
2200,,773388,,997788
4444,,113355,,558888
12,300,749
19,457,985
11,187,562
1,189,292
333399,,778877,,445511
407,015,326
0
440077,,001155,,332266
%
00..11
0.0
00..66
11..22
0.3
0.5
0.3
0.0
99..22
11.0
1111..00
Number of shares
3388,,223311,,773388
32,243,999
1122,,339999,,008877
7700,,447777,,888877
1,303,330
288,377
30,050,555
38,835,625
441111,,663344,,330077
532,743,019
0
553322,,774433,,001199
%
11..00
0.9
00..33
11..99
0.0
0.0
0.8
1.0
1111..11
14.4
1144..44
Number of shares
331144,,229988,,779988
314,079,349
88,,221133,,884411
662233,,007755,,224422
10,696,165
578,307,924
33,946,355
124,798
1166,,888833,,007788
962,470,959
0
996622,,447700,,995599
%
88..55
8.5
00..22
1166..88
0.3
15.6
0.9
0.0
00..55
26.0
2266..00
SShhaarreess rreeggiisstteerreedd
Number
407,015,326
532,743,019
962,470,959
1,902,229,304
1,800,193,691
33,,770022,,442222,,999955
TToottaall
Number of shares
335544,,888833,,884455
347,218,700
4411,,335511,,990066
773377,,668888,,771177
24,300,244
598,054,286
75,184,472
40,149,715
776688,,330044,,883366
1,902,229,304
1,800,193,691
33,,770022,,442222,,999955
%
11.0
14.4
26.0
51.4
48.6
110000..00
%
99..66
9.4
11..11
1199..99
0.7
16.2
2.0
1.1
2200..88
51.4
48.6
110000..00
At year-end 2021, UBS owned 302,815,328 UBS Group AG
achieving growth ambitions, EOP and LTIP awards granted to
registered shares, which corresponded to 8.18% of the total
certain employees will only vest if predetermined performance
share capital of UBS Group AG. At the same time, UBS had
conditions are met.
acquisition positions relating to 327,114,543 voting rights of UBS
On 31 December 2021, UBS employees held at least 7% of
Group AG and disposal positions relating to 184,989,149 such
UBS shares outstanding (including approximately 5% in unvested
rights, corresponding to 8.84% and 5.00% of the total voting
notional shares from our compensation programs). These figures
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 178 of this report for more
rights of UBS Group AG, respectively. Of the disposal positions,
are based on known shareholding information from employee
information
174,354,474 related to voting rights on shares deliverable in
participation plans, personal holdings with UBS and selected
respect of employee awards. The calculation methodology for the
individual retirement plans. At the end of 2021, at least 30% of
acquisition and disposal positions is based on the Ordinance of
all employees held UBS shares through the firm’s employee share
the Swiss Financial Market Supervisory Authority on Financial
participation plans.
Market Infrastructures and Market Conduct in Securities and
› Refer to the “Compensation” section on page 222 of this report
Derivatives Trading, which states that all future potential share
for more information
delivery obligations, irrespective of the contingent nature of the
delivery, must be considered.
Trading restrictions in UBS shares
Employee share ownership
UBS employees with regular access to unpublished price-sensitive
information about the firm are subject to specific restrictions in
Employee share ownership is encouraged and made possible in a
respect to UBS financial instruments, including, but not limited to,
variety of ways. Our Equity Plus Plan is a voluntary plan that
pre-clearance requirements and regular blackout periods. Such
provides eligible employees with the opportunity to purchase UBS
UBS employees are not permitted to trade UBS financial
Group AG shares at market value and receive, at no additional
instruments in the period starting from the close of business in
cost, one notional UBS Group AG share for every three shares
New York on the seventh business day of the final month of the
purchased. The Equity Ownership Plan (the EOP) is a mandatory
financial quarter of UBS Group AG and ending on the day of the
deferral plan for all employees with regulatory-driven deferral
publication of the quarterly financial results.
requirements or
total compensation greater
than USD /
CHF 300,000, excluding selected senior leaders. EOP recipients
Shares and participation certificates
receive a portion of their deferred performance award in notional
shares (and / or notional funds for Asset Management). Selected
UBS Group AG has a single class of shares, which are registered
senior leaders receive the equity-based Long-Term Incentive Plan
shares in the form of uncertificated securities (in the sense of the
(the LTIP) instead of the EOP. Both the EOP and LTIP include
Swiss Code of Obligations) and intermediary-held securities (in the
provisions that allow the firm to reduce or fully forfeit the
sense of the Swiss Federal Act on Intermediated Securities). Each
unvested deferred portion of an award if an employee commits
registered share has a nominal value of CHF 0.10 and carries one
certain harmful acts, and in most cases trigger forfeiture where
vote, subject to the restrictions set out under “Transferability,
employment has been terminated. To reinforce our emphasis on
voting rights and nominee registration” below.
sustainable performance and risk management, and our focus on
We have no participation certificates outstanding.
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.
At the 2022 AGM, the BoD intends to propose to shareholders
for approval a dividend of USD 0.50 per share for the 2021
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 6 April 2022, the payment of
USD 0.50 per share will be made on 14 April 2022 to holders of
shares on the record date 13 April 2022. The shares will be traded
ex-dividend as of 12 April 2022 and, accordingly, the last day on
which the shares may be traded with entitlement to receive the
dividend will be 11 April 2022.
In February 2021, the BoD launched a new three-year share
buyback program. At the 2021 AGM, the shareholders authorized
the BoD to buy back shares for cancellation purposes in an
aggregate value of up to CHF 4 billion until the 2024 AGM. Any
shares bought back under the program are intended to be
canceled by way of capital reduction, which will be subject to
shareholder approval at one or several subsequent AGMs, and the
acquisition and holding of such shares are not subject to the 10%
threshold for UBS Group AG’s own shares within the meaning of
Art. 659 para. 1 of the Swiss Code of Obligations. Since the start
of this 2021 share repurchase program in February 2021 until
18 February 2022, we have bought back CHF 2.78 billion of
shares. These shares are expected to be canceled by means of a
capital reduction, to be proposed for shareholder approval at the
2022 AGM.
Looking ahead, we intend to commence a new 2022 share
buyback program of up to USD 6 billion over two years and
expect to execute up to USD 5 billion of share repurchases under
both the existing 2021 and the new 2022 share buyback program
by the end of 2022.
› Refer to “UBS shares” in the “Capital, liquidity and funding, and
balance sheet” section on page 178 of this report for more
information about the share repurchase programs
188
189
189
Corporate governance and compensation Corporate governance and compensation | Corporate governance
Transferability, voting rights and nominee registration
Convertible bonds and options
As of 31 December 2021, 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 150 of this report for more information about
our outstanding capital instruments
rights
appreciation
As of 31 December 2021, there were no employee options and
stock
outstanding. Option-based
compensation plans are sourced by issuing new shares out of
conditional capital. As of 31 December 2021, 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
information
› Refer to “Note 28 Employee benefits: variable compensation” in
the “Consolidated financial statements” section on page 387 of
this report for more information about outstanding options and
stock appreciation rights
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.
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 limit rule is in place for securities clearing organizations,
such as The Depository Trust Company in New York.
› Refer to “Shareholders’ participation rights” in this section for
more information
190
190
Corporate governance and compensation | Corporate governance
We do not apply any restrictions or
limitations on the
As of 31 December 2021, there were no contingent capital
transferability of shares. Voting rights may be exercised without
securities or convertible bonds outstanding requiring the issuance
any restrictions by shareholders entered into the share register if
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 150 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 2021, there were no employee options and
to disclose, upon our request, beneficial owners holding 0.3% or
stock
appreciation
rights
outstanding. Option-based
more of all issued UBS Group AG shares. An exception to the 5%
compensation plans are sourced by issuing new shares out of
voting limit rule is in place for securities clearing organizations,
conditional capital. As of 31 December 2021, 121,705,830
such as The Depository Trust Company in New York.
unissued UBS Group AG shares in conditional share capital were
› Refer to “Shareholders’ participation rights” in this section for
more information
available for the issuance of new shares for this purpose.
› Refer to “Conditional share capital” in this section for more
information
› Refer to “Note 28 Employee benefits: variable compensation” in
the “Consolidated financial statements” section on page 387 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
questions for the BoD, GEB and internal and external auditors.
Also, prior to our virtual general meetings, we offer all
shareholders the opportunity to contact us with questions, which
are answered in writing or during the general meeting.
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
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 2021, physical attendance at the AGM was not possible, due
to COVID-19-related restrictions in Switzerland, and voting rights
could only be exercised through the independent proxy. Due to
the ongoing pandemic, the BoD has decided to also hold the 2022
AGM without the physical participation of shareholders.
› 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
Statutory quorums
Motions 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. 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 2022, the AGM will take
place on 6 April.
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, where around 190,000
shareholders are directly registered, 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
Infrastructures and Market Conduct 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.
The general rules for entry into our Swiss share register with
voting rights are described in article 5 of our AoA. 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,
where some 230,000 US shareholders are indirectly registered via
nominee companies. 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.
› Refer to article 5 of the Articles of Association of UBS Group AG,
available at ubs.com/governance, for more information about
the general rules for entry into our Swiss share register
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Corporate governance and compensation | Corporate governance
The AGM must be held within six months of the close of the
The share register of UBS Group AG, where around 190,000
financial year (i.e., 31 December). In 2022, the AGM will take
shareholders are directly registered, is an internal, non-public
place on 6 April.
register subject to statutory confidentiality, secrecy, privacy and
Extraordinary General Meetings (EGMs) may be convened
data protection regulations protecting registered shareholders. In
whenever the BoD or the auditors consider it necessary.
general, third parties and shareholders have no inspection rights
Shareholders individually or jointly representing at least 10% of
with regard to data related to other shareholders. Disclosure of
the share capital may at any time, including during an AGM,
such data is permitted only in specific and limited instances. In line
require, by way of a written statement, that an EGM be convened
with the Swiss Federal Act on Data Protection, the disclosure of
to address a specific issue they put forward.
personal data as defined thereunder is only allowed with the
A personal invitation, including a detailed agenda, is made
consent of the registered shareholder and in cases where there is
available to every registered shareholder at least 20 days ahead of
an overriding private or public interest or if explicitly provided for
each scheduled general meeting. The items on the agenda are
by Swiss law. The Swiss Federal Act on Financial Market
also published in the Swiss Official Gazette of Commerce, as well
Infrastructures and Market Conduct in Securities and Derivatives
as at ubs.com/agm.
Placing of items on the agenda
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
Pursuant to our AoA, shareholders
individually or
jointly
regulatory body that regulates the conduct of UBS Group AG or
representing shares with an aggregate minimum nominal value of
by other statutory provisions.
CHF 62,500 may submit proposals for matters to be placed on the
The general rules for entry into our Swiss share register with
agenda for consideration at the next general meeting of
voting rights are described in article 5 of our AoA. The same rules
shareholders.
apply to our US transfer agent that operates the US share register
At the beginning of January, the invitation to submit such
for all UBS Group AG shares in a custodian account in the US,
proposals is published in the Swiss Official Gazette of Commerce
where some 230,000 US shareholders are indirectly registered via
and at ubs.com/agm. Requests for items to be placed on the
nominee companies. In order to determine the voting rights of
agenda must include the actual motions to be put forward,
each shareholder, our share register generally closes two business
together with a short explanation. Such requests must be
days prior to a general meeting. Our independent proxy agent
submitted to the BoD 50 days prior to the general meeting of
processes voting instructions from shareholders as long as
shareholders, including a statement from the depository bank
technically possible, generally also until two business days before
confirming the number of shares held by the requesting
a general meeting. Such technical closure of our share register
shareholder(s) and that these shares are blocked from sale until
facilitates the determination of the actual voting rights of every
the end of the general meeting of shareholders. The BoD
shareholder that issued a voting instruction. Irrespective of this
formulates opinions on the proposals, which are published
technical closure, shares that are registered in our share register
together with the motions.
are never immobilized and are freely tradable at any time,
irrespective of any issued voting instructions.
› Refer to article 5 of the Articles of Association of UBS Group AG,
available at ubs.com/governance, for more information about
the general rules for entry into our Swiss share register
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 8 April 2021, Jeremy Anderson, William C.
Dudley, Reto Francioni, Fred Hu, Mark Hughes, Nathalie Rachou,
Julie G. Richardson, Dieter Wemmer and Jeanette Wong were re-
elected as members of the BoD. Beatrice Weder di Mauro did not
stand for re-election; the biography of Ms. Weder di Mauro can
be found on page 190 of the UBS Group AG Annual Report 2020,
available under “Annual reporting” at ubs.com/investors. Claudia
Böckstiegel and Patrick Firmenich were elected for their first
terms. At that same AGM, Axel A. Weber was re-elected
Chairman, and Julie G. 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 20 November 2021, the BoD announced that Colm
Kelleher would be nominated for election to the BoD of UBS
Group AG and UBS AG to succeed Axel A. Weber as Chairman at
the forthcoming AGMs. Mr. Kelleher was the President of Morgan
Stanley & Company, and responsible for Institutional Securities
and Wealth Management from 2016 to 2019. In his 30-year
career with Morgan Stanley, he held various senior management
positions, including Chief Financial Officer during the financial
crisis in 2008. In addition, the BoD announced that Lukas
Gähwiler would be nominated for election to the BoD of UBS
Group AG and UBS AG as Vice Chairman at the forthcoming
AGMs. Having joined UBS in 2010 as a member of the GEB of
UBS AG and President UBS Switzerland, Mr. Gähwiler stepped
down from those roles in 2016 and has been Chairman of the
board of directors of UBS Switzerland AG since 2017. He will step
down from the board of directors of UBS Switzerland AG as of 5
April 2022.
Article 31 of our AoA limits the number of mandates that
members of the BoD may hold outside UBS Group to four
mandates in listed companies and five additional mandates in
non-listed companies. Mandates in companies that are 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. As of 31 December 2021, no member of the
BoD reached the thresholds described in article 31 of our AoA.
The following biographies provide information about the BoD
members who were in office in 2021 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 2021, 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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193
193
Corporate governance and compensation Corporate governance and compensation | Corporate governance
Axel A. Weber
Chairman of the Board of Directors and non-executive member of
the Board since 2012
– Chairperson of the Corporate Culture and Responsibility Committee
Education
– Master’s degree, economics, University of Constance
– Doctorate (Dr. rer. pol.) and habilitation, economics,
since 2013
University of Siegen, Germany
– Chairperson of the Governance and Nominating Committee
since 2012
Nationality: German | Year of birth: 1957
Axel A. Weber was elected Chairman of UBS in 2012. He gained
international recognition as the President of the Deutsche Bundesbank.
During his six-year tenure there, he also served as a member of the
Governing Council of the European Central Bank, a member of the Board
of Directors of the Bank for International Settlements, German governor
of the International Monetary Fund and a member of the G7 and G20
Ministers and Governors. As an expert in international and monetary
economics, Mr. Weber strove to strengthen the Bundesbank’s importance
in the group of the 17 European central banks and led the Bundesbank
through the events of the global real estate and financial crisis. Before the
Deutsche Bundesbank, he had a career as a renowned expert in monetary
and currency theories through his academic posts at several German
universities.
Professional experience
2011 – 2012
2011
Visiting professor, University of Chicago Booth School of
Business, USA (on leave, University of Cologne, Germany)
Member of the Steering Committee, the European
Systemic Risk Board
2010 – 2011 Member of the Steering Committee, the Financial
Stability Board
President, Deutsche Bundesbank
2004 – 2011
2002 – 2004 Member, German Council of Economic Experts
2001 – 2004
1998 – 2001
1994 – 1998
Professor of International Economics and Director of the
Centre for Financial Research, University of Cologne
Professor for Applied Monetary Economics and Director
of the Center for Financial Studies, Goethe University
Frankfurt am Main
Professor of Economic Theory, University of Bonn
Other activities and functions
– Vice Chairman 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 the China Securities
Regulatory Commission
– Member of the International Advisory Panel, Monetary Authority
of Singapore
– Member of the Group of Thirty, Washington, DC
– Member of the Advisory Board of the Department of Economics,
University of Zurich
– European Chairman 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
194
194
Corporate governance and compensation | Corporate governance
Axel A. Weber
Chairman of the Board of Directors and non-executive member of
Education
the Board since 2012
– Master’s degree, economics, University of Constance
– Chairperson of the Corporate Culture and Responsibility Committee
– Doctorate (Dr. rer. pol.) and habilitation, economics,
– Chairperson of the Governance and Nominating Committee
since 2013
since 2012
Nationality: German | Year of birth: 1957
University of Siegen, Germany
Other activities and functions
– Vice Chairman of the Swiss Bankers Association
– Member of the Board of Trustees of Avenir Suisse
– Member of the Board of the Swiss Finance Council
Axel A. Weber was elected Chairman of UBS in 2012. He gained
international recognition as the President of the Deutsche Bundesbank.
During his six-year tenure there, he also served as a member of the
Governing Council of the European Central Bank, a member of the Board
of Directors of the Bank for International Settlements, German governor
of the International Monetary Fund and a member of the G7 and G20
Ministers and Governors. As an expert in international and monetary
economics, Mr. Weber strove to strengthen the Bundesbank’s importance
in the group of the 17 European central banks and led the Bundesbank
through the events of the global real estate and financial crisis. Before the
Deutsche Bundesbank, he had a career as a renowned expert in monetary
and currency theories through his academic posts at several German
– 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 the China Securities
– Member of the International Advisory Panel, Monetary Authority
Regulatory Commission
of Singapore
– Member of the Group of Thirty, Washington, DC
– Member of the Advisory Board of the Department of Economics,
University of Zurich
– European Chairman of the Trilateral Commission
universities.
Professional experience
2011 – 2012
Visiting professor, University of Chicago Booth School of
Business, USA (on leave, University of Cologne, Germany)
– Risk management, compliance and legal
– Regulatory authority, central bank
2011
Member of the Steering Committee, the European
– ESG (environmental, social and governance)
Key competencies
– Finance, audit, accounting
Leadership experience
– CEO, Chairman
2010 – 2011 Member of the Steering Committee, the Financial
Systemic Risk Board
Stability Board
2004 – 2011
President, Deutsche Bundesbank
2002 – 2004 Member, German Council of Economic Experts
2001 – 2004
Professor of International Economics and Director of the
Centre for Financial Research, University of Cologne
1998 – 2001
Professor for Applied Monetary Economics and Director
of the Center for Financial Studies, Goethe University
Frankfurt am Main
1994 – 1998
Professor of Economic Theory, University of Bonn
Jeremy Anderson
Claudia Böckstiegel
Vice Chairman and Senior Independent Director since 2020 and
non-executive member of the Board since 2018
– Member of the Governance and Nominating Committee since 2019
– Chairperson of the Audit Committee since 2018
Non-executive member of the Board since 2021
Nationality: Swiss and German | Year of birth: 1964
Claudia Böckstiegel has been General Counsel and a member of the
Enlarged Executive Committee of Roche Holding AG since 2020. She
started her professional career as an attorney in private practice in
Germany, then joined the Swiss pharmaceutical company in Germany in
2001 and subsequently held various global management positions in the
legal sector in Switzerland. Ms. Böckstiegel brings a wealth of know-how
in a highly regulated sector. Her responsibilities at Roche Holding AG
include a broad range of additional topics, such as safety, health &
risk advisory, compliance and
environment, patents, audit and
sustainability.
Professional experience
2020 – date
2016 – 2020
2010 – 2016
2005 – 2010
2001 – 2005
1995 – 2001
1992 – 1995
General Counsel and member of the Enlarged Executive
Committee, Roche Holding AG
Head of Legal Diagnostics, F. Hoffmann-La Roche Ltd.,
Basel, Switzerland, Roche Group
Head Legal Business, Roche Diagnostics International Ltd,
Rotkreuz, Switzerland, Roche Group
Head Legal Business, Roche Diagnostics GmbH,
Mannheim, Germany, Roche Group
Legal Counsel, Roche Diagnostics GmbH,
Mannheim, Germany, Roche Group
Attorney (Partner), Philipp & Littig, Mannheim, Germany
Attorney (Associate), Dr. Hermann Büttner,
Karlsruhe, Germany
Education
– Master’s degree, law, Universities of Mannheim and Heidelberg
– Master of Laws (LL.M.), Georgetown University, Washington, DC
Key competencies
– Risk management, compliance and legal
– Finance, audit, accounting
– ESG (environmental, social and governance)
– Regulatory authority, central bank
Leadership experience
– Executive board leadership
Other activities and functions
None
Nationality: British | Year of birth: 1958
Jeremy Anderson is a financial services veteran, with more than 30 years’
experience working in the banking and insurance sector in an advisory
capacity, covering a broad range of topics, including strategy, audit and
risk management, technology-enabled transformation, mergers, and bank
restructuring. Before retiring from KPMG in 2017, he was its Chairman of
Global Financial Services. Mr. Anderson is also an IT expert, having started
out as a software developer in the early 1980s, before working in IT
consulting and developing a broad knowledge of systems integration and
IT outsourcing services, as well as software development. He cemented his
reputation as a tech specialist by becoming a founding sponsor of KPMG’s
Global Fintech Network in 2014.
Professional experience
2010 – 2017
2008 – 2011
2006 – 2011
2004 – 2006
Chairman of Global Financial Services,
KPMG International
Head of Clients and Markets KPMG Europe,
KPMG International
Head of Financial Services KPMG Europe,
KPMG International
Head of Financial Services KPMG UK,
KPMG International
2002 – 2004 Member of the Group Management Board and
1985 – 2002
1980 – 1985
Head of UK operations, Atos Origin SA
KPMG consulting UK, KPMG
Software developer, Triad Computing Systems
Education
– Bachelor’s degree, economics, 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) and insurance
– Finance, audit, accounting
– Risk management, compliance and legal
– Technology, cybersecurity
Leadership experience
– Executive board leadership
194
195
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Corporate governance and compensation Corporate governance and compensation | Corporate governance
William C. Dudley
Patrick Firmenich
Non-executive member of the Board since 2019
– Member of the Governance and Nominating Committee since 2020
– Member of the Corporate Culture and Responsibility Committee
Non-executive member of the Board since 2021
– Member of the Audit Committee since 2021
– Member of the Corporate Culture and Responsibility Committee
since 2019
– Member of the Risk Committee since 2019
Nationality: American (US) | Year of birth: 1953
since 2021
Nationality: Swiss | Year of birth: 1962
William C. Dudley served as the President and CEO of the Federal Reserve
Bank of New York for nine years. He demonstrated exceptional leadership
in monetary policy and as a top regulator, including during the years of
the global financial crisis. During that period, his additional area of focus
included cultural behavior and social and governance topics in the
financial services industry. He also served as the Vice Chairman and a
permanent member of the Federal Open Market Committee. Mr. Dudley
brings a wealth of experience in banking and research thanks to his former
management positions at Goldman Sachs Group and Morgan Guaranty
Trust.
Patrick Firmenich has been Chairman of the Board of Firmenich
International SA, the world’s largest privately owned fragrances and
flavorings company, since 2016, after leading the company as CEO during
a 12-year tenure. He demonstrated his entrepreneurial leadership by
significantly advancing the Firmenich group’s global position through
organic and in-organic growth and successfully continuously transformed
the organization to respond to client needs and the market environment.
He developed an ambitious sustainability strategy for the group to lead
the industry in health, safety and environmental performance. Before
joining Firmenich, he held several positions in the legal and banking
sectors, including working as an international investment banking analyst.
Professional experience
Professional experience
2009 – 2018
2007 – 2009
2006
2002 – 2005
President and CEO, Federal Reserve Bank of New York,
USA
Executive Vice President and Head Markets Group,
Federal Reserve Bank of New York, USA
Senior advisor (part-time), Goldman Sachs Group, USA
Partner and Director US Economic Research Group,
Goldman Sachs Group, USA
2014 – 2016
2002 – 2014
2001 – 2002
1997 – 2001
1996 – 2002 Managing Director and Director US Economic Research
1993 – 1997
1983 – 1996
Group, Goldman Sachs Group, USA
Economist at Goldman Sachs Group, Morgan Guaranty
Trust Company, and Board of Governors of the Federal
Reserve System
Education
– Bachelor of Arts, New College of Florida
– Doctorate, economics, University of California, Berkeley
Non-listed company boards
– Member of the Board of Treliant LLC
Other activities and functions
– Senior Advisor to the Griswold Center for Economic Policy Studies,
Princeton University
– 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
196
196
Vice Chairman of the Board, Firmenich International SA
CEO, Firmenich SA, Geneva
Corporate Vice President, Special Operations,
Firmenich SA, Geneva
Vice President Fine Fragrance worldwide and Président
Directeur Général, Firmenich & Cie, Paris and
Firmenich Inc, New York
Vice President Fine Fragrance North America,
Firmenich Inc, New York
Account Manager, Firmenich & Cie, Paris
Analyst, International Investment Banking, Credit Suisse
First Boston
Production administrator, Firmenich SA de CV, Mexico
Attorney, Business Law, Patry, Junet, Simon & Le Fort,
Geneva
1990 – 1993
1988 – 1989
1988
1984 – 1986
Education
– Master’s degree, law, University of Geneva, admitted to the bar
in Geneva
– MBA, INSEAD Fontainebleau
Non-listed company boards
– Member of the Board of Jacobs Holding AG
Other activities and functions
– Member of the Board of INSEAD and INSEAD World Foundation
– Member of the Advisory Council of the Swiss Board Institute
Key competencies
– Risk management, compliance and legal
– Finance, audit, accounting
– ESG (environmental, social and governance)
– Banking (wealth management, asset management, personal and
corporate banking) and insurance
Leadership experience
– CEO, Chairman
Corporate governance and compensation | Corporate governance
since 2019
– Member of the Risk Committee since 2019
Nationality: American (US) | Year of birth: 1953
since 2021
Nationality: Swiss | Year of birth: 1962
Patrick Firmenich has been Chairman of the Board of Firmenich
William C. Dudley served as the President and CEO of the Federal Reserve
International SA, the world’s largest privately owned fragrances and
Bank of New York for nine years. He demonstrated exceptional leadership
flavorings company, since 2016, after leading the company as CEO during
in monetary policy and as a top regulator, including during the years of
a 12-year tenure. He demonstrated his entrepreneurial leadership by
the global financial crisis. During that period, his additional area of focus
significantly advancing the Firmenich group’s global position through
included cultural behavior and social and governance topics in the
organic and in-organic growth and successfully continuously transformed
financial services industry. He also served as the Vice Chairman and a
the organization to respond to client needs and the market environment.
permanent member of the Federal Open Market Committee. Mr. Dudley
He developed an ambitious sustainability strategy for the group to lead
brings a wealth of experience in banking and research thanks to his former
the industry in health, safety and environmental performance. Before
management positions at Goldman Sachs Group and Morgan Guaranty
joining Firmenich, he held several positions in the legal and banking
Trust.
sectors, including working as an international investment banking analyst.
Professional experience
Professional experience
2009 – 2018
President and CEO, Federal Reserve Bank of New York,
2014 – 2016
Vice Chairman of the Board, Firmenich International SA
USA
2002 – 2014
CEO, Firmenich SA, Geneva
2007 – 2009
Executive Vice President and Head Markets Group,
2001 – 2002
Corporate Vice President, Special Operations,
Federal Reserve Bank of New York, USA
Firmenich SA, Geneva
2006
Senior advisor (part-time), Goldman Sachs Group, USA
1997 – 2001
Vice President Fine Fragrance worldwide and Président
2002 – 2005
Partner and Director US Economic Research Group,
Goldman Sachs Group, USA
Directeur Général, Firmenich & Cie, Paris and
Firmenich Inc, New York
1996 – 2002 Managing Director and Director US Economic Research
1993 – 1997
Vice President Fine Fragrance North America,
Group, Goldman Sachs Group, USA
Firmenich Inc, New York
1983 – 1996
Economist at Goldman Sachs Group, Morgan Guaranty
1990 – 1993
Account Manager, Firmenich & Cie, Paris
Trust Company, and Board of Governors of the Federal
1988 – 1989
Analyst, International Investment Banking, Credit Suisse
– Senior Advisor to the Griswold Center for Economic Policy Studies,
Non-listed company boards
– Member of the Board of Jacobs Holding AG
– 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
Other activities and functions
– Member of the Board of INSEAD and INSEAD World Foundation
– Member of the Advisory Council of the Swiss Board Institute
Reserve System
Education
– Bachelor of Arts, New College of Florida
– Doctorate, economics, University of California, Berkeley
Non-listed company boards
– Member of the Board of Treliant LLC
Other activities and functions
Princeton University
– Member of the Group of Thirty
Key competencies
– Investment banking, capital markets
– Risk management, compliance and legal
– Regulatory authority, central bank
– ESG (environmental, social and governance)
Leadership experience
– CEO, Chairman
196
1988
Production administrator, Firmenich SA de CV, Mexico
1984 – 1986
Attorney, Business Law, Patry, Junet, Simon & Le Fort,
First Boston
Geneva
– Master’s degree, law, University of Geneva, admitted to the bar
Education
in Geneva
– MBA, INSEAD Fontainebleau
Key competencies
– Risk management, compliance and legal
– Finance, audit, accounting
– ESG (environmental, social and governance)
– Banking (wealth management, asset management, personal and
corporate banking) and insurance
Leadership experience
– CEO, Chairman
William C. Dudley
Patrick Firmenich
Reto Francioni
Fred Hu
Non-executive member of the Board since 2019
Non-executive member of the Board since 2021
– Member of the Governance and Nominating Committee since 2020
– Member of the Audit Committee since 2021
– Member of the Corporate Culture and Responsibility Committee
– Member of the Corporate Culture and Responsibility Committee
Non-executive member of the Board since 2013
– Member of the Compensation Committee since 2019
– Member of the Risk Committee since 2015
Non-executive member of the Board since 2018
– Member of the Governance and Nominating Committee since 2020
– Member of the Risk Committee since 2020
Nationality: Swiss | Year of birth: 1955
Nationality: Chinese | Year of birth: 1963
Reto Francioni, as the former CEO of Deutsche Börse, can draw on many
years of experience in the financial world. Prior to his role at Deutsche
Börse, he was Chairman of the Supervisory Board and President of the
SWX Group, Zurich, placing him at the heart of digitalization within the
financial sector. In both positions, he drove a fundamental transformation
to reshape the firms as world leaders in technology. Mr. Francioni has
been a professor of applied capital markets theory at the University of
Basel since 2006 and is the author of several highly respected books on
capital markets issues. He has also served as an independent director on
the boards of various major corporations.
Fred Hu has been the Chairman and CEO of Primavera Capital Group , an
Asia-based private investment firm focused on emerging technology and
innovative industries, since founding it in 2010. Prior to that, he was a
partner and Chairman for Greater China at Goldman Sachs, building the
firm’s Asia Pacific franchise. Mr. Hu has a profound understanding of
China’s economy and rapidly developing financial system, and vast
amount of experience advising and investing in leading firms in the tech,
consumer and health care sectors in China and globally. He has worked
at the IMF and advised the Chinese government on economic policy.
Professional experience
2005 – 2015
2002 – 2005
CEO, Deutsche Börse AG
Chairman of the Supervisory Board and President,
SWX Group, Zurich
Co-CEO and Spokesman for the Board of Directors,
Consors AG, Nuremberg
Deputy CEO, Deutsche Börse AG, Frankfurt am Main
1999 – 2000
1993 – 2000 Member of the Executive Board, Deutsche Börse AG,
2000 – 2002
1992 – 1993
1989 – 1992
1985 – 1988
1981 – 1984
Frankfurt am Main
Director, Corporate Finance, Hoffmann-La Roche, Basel
Deputy Director and deputy CEO, Association Tripartite
Bourses, Zurich
Equity sales and legal, Credit Suisse, New York and Zurich
Union Bank of Switzerland
Education
– Master’s degree and doctorate, law, University of Zurich
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
– Vice Chairman of the Board of MTIP AG
Other activities and functions
– Member of the Board of economiesuisse
Key competencies
– Investment banking, capital markets
– Risk management, compliance and legal
– Human resources management, including compensation
– Technology, cybersecurity
Leadership experience
– CEO, Chairman
Professional experience
2010 – date
2008 – 2010
2004 – 2008
Founder, Chairman & CEO,
Primavera Capital Group, China
Partner and Chairman of Greater China, Goldman Sachs
Partner and Co-Head, Investment Banking, China,
Goldman Sachs
2003 – 2004 Managing Director and Co-Head, Investment Banking,
1997 – 2003
1996 – date
1996 – date
China, Goldman Sachs
Executive Director, then Managing Director and Chief
Economist and Strategist, Greater China, Goldman Sachs
Co-Director, the National Center for Economic Research
Adjunct Professor, Economics, Tsinghua University
Education
– Master’s degree, engineering science, Tsinghua University
– Master’s degree and doctorate, economics, 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
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 SAR
– Co-Chairman of the Nature Conservancy Asia Pacific Council
– Member of the Board of Trustees, the Institute for Advanced Study
– Director and member of the Executive Committee of China Venture
Capital and Private Equity Association Ltd.
Key competencies
– Investment banking, capital markets
– Risk management, compliance and legal
– Technology, cybersecurity
– Regulatory authority, central bank
Leadership experience
– CEO, Chairman
197
197
Corporate governance and compensation Corporate governance and compensation | Corporate governance
Mark Hughes
Nathalie Rachou
Non-executive member of the Board since 2020
– Chairperson of the Risk Committee since 2020
– Member of the Corporate Culture and Responsibility Committee
Non-executive member of the Board since 2020
– Member of the Risk Committee since 2020
since 2020
Nationality: French | Year of birth: 1957
Nationality: Canadian, British and American (US) | Year of birth: 1958
Mark Hughes is a veteran in the financial services sector, having spent
more than 35 years working for the Royal Bank of Canada (RBC) in
Canada, in the US and the UK. In his final role as Group Chief Risk Officer
of RBC, he was responsible for the strategic management of risk on an
enterprise-wide basis and oversaw all risk functions. During his career, Mr.
Hughes has also held senior management positions in the front office and
key operational roles. Currently, he is a visiting lecturer at Leeds University
and is chair of the Global Risk Institute, bringing an enormous amount of
experience as a risk specialist to the Board of Directors of UBS.
Professional experience
2014 – 2018
2013
2008 – 2013
2001 – 2008
1999 – 2001
1998 – 1999
1997 – 1998
1982 – 1996
Group Chief Risk Officer and member Group Executive
Committee, Royal Bank of Canada
Deputy Chief Risk Officer, Royal Bank of Canada
Chief Operating Officer, RBC Capital Markets, Royal Bank
of Canada
Head of Global Credit, Royal Bank of Canada
Head of Debt Products, Royal Bank of Canada
Senior Vice President and General Manager USA,
Royal Bank of Canada
Senior Vice President Financial Services, Royal Bank
of Canada
Various positions, Royal Bank of Canada
Nathalie Rachou is a seasoned expert in financial services, having held a
number of banking positions, such as CEO of Prime Brokerage and Head
of a business line in Capital Markets at Crédit Agricole Indosuez in the UK
and in France. In 1999, she founded a London-based asset management
company that merged with a French asset manager and continued as a
senior adviser until 2020. Alongside these roles, Ms. Rachou brings
extensive experience from serving as a board member of Société Générale
for 12 years and is currently on the boards of two other listed companies,
including the pan-European bourse, Euronext N.V.
Professional experience
2015 – 2020
1999 – 2014
1996 – 1999
1991 – 1996
1986 – 1991
1983 – 1986
1978 – 1982
Senior Advisor, Clartan Associés
(formerly Rouvier Associés), France
Founding partner and CEO,
Topiary Finance Ltd., UK
Head of Global Foreign Exchange and Currency Options,
Crédit Agricole Indosuez (formerly Banque Indosuez), UK
Corporate Secretary and Secretary to the
Board of Directors, Crédit Agricole Indosuez, France
COO, Carr Futures, France (owned by Banque Indosuez),
Crédit Agricole Indosuez, France
Head of Asset and Liability Management & Market Risks,
Crédit Agricole Indosuez, France
Position in Forex Exchange Sales, Crédit Agricole Indosuez,
France and UK
Education
– Bachelor of Laws (LL.B.), University of Leeds
– MBA, finance, University of Manchester
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) and insurance
– Investment banking, capital markets
– Risk management, compliance and legal
– Technology, cybersecurity
Leadership experience
– Executive board leadership
Education
– Master’s degree, management, HEC Paris
– MBA, INSEAD Fontainebleau
Listed company boards
– Member of the Board of Euronext N.V.
(chair of the remuneration committee)
– Member of the Board of Veolia Environnement SA
(chair of the audit committee)
Other activities and functions
– Member of the Board of the African Financial Institutions Investment
Platform
Key competencies
– Banking (wealth management, asset management,
personal and corporate banking) and insurance
– Investment banking, capital markets
– Risk management, compliance and legal
– Finance, audit, accounting
198
198
Corporate governance and compensation | Corporate governance
Mark Hughes
Nathalie Rachou
Julie G. Richardson
Dieter Wemmer
Non-executive member of the Board since 2020
– Chairperson of the Risk Committee since 2020
– Member of the Corporate Culture and Responsibility Committee
Non-executive member of the Board since 2020
– Member of the Risk Committee since 2020
since 2020
Nationality: French | Year of birth: 1957
Non-executive member of the Board since 2017
– Chairperson of the Compensation Committee since 2019
– Member of the Governance and Nominating Committee since 2019
– Member of the Risk Committee since 2017
Non-executive member of the Board since 2016
– Member of the Governance and Nominating Committee since 2020
– Member of the Audit Committee since 2019
– Member of the Compensation Committee since 2018
Nationality: Canadian, British and American (US) | Year of birth: 1958
Nathalie Rachou is a seasoned expert in financial services, having held a
Nationality: American (US) | Year of birth: 1963
Nationality: Swiss and German | Year of birth: 1957
Mark Hughes is a veteran in the financial services sector, having spent
of a business line in Capital Markets at Crédit Agricole Indosuez in the UK
more than 35 years working for the Royal Bank of Canada (RBC) in
and in France. In 1999, she founded a London-based asset management
Canada, in the US and the UK. In his final role as Group Chief Risk Officer
company that merged with a French asset manager and continued as a
of RBC, he was responsible for the strategic management of risk on an
senior adviser until 2020. Alongside these roles, Ms. Rachou brings
enterprise-wide basis and oversaw all risk functions. During his career, Mr.
extensive experience from serving as a board member of Société Générale
Hughes has also held senior management positions in the front office and
for 12 years and is currently on the boards of two other listed companies,
key operational roles. Currently, he is a visiting lecturer at Leeds University
including the pan-European bourse, Euronext N.V.
number of banking positions, such as CEO of Prime Brokerage and Head
and is chair of the Global Risk Institute, bringing an enormous amount of
experience as a risk specialist to the Board of Directors of UBS.
Professional experience
Julie G. Richardson spent more than 25 years on Wall Street as a senior
investment banker with a focus on telecom, media and technology. She
began her career at Merrill Lynch, before moving to JPMorgan, where she
headed the telecommunications, media and technology investment
banking group. Later, she moved into private equity, as head of the New
York office of Providence Equity Partners. Throughout her career,
Ms. Richardson has spent significant time with both incumbent and new
technology companies, including being a board member of a digital
knowledge management company and a leading cloud monitoring firm.
Professional experience
2015 – 2020
Senior Advisor, Clartan Associés
(formerly Rouvier Associés), France
Professional experience
2014 – 2018
Group Chief Risk Officer and member Group Executive
1999 – 2014
Founding partner and CEO,
Committee, Royal Bank of Canada
Topiary Finance Ltd., UK
2013
Deputy Chief Risk Officer, Royal Bank of Canada
1996 – 1999
Head of Global Foreign Exchange and Currency Options,
2008 – 2013
Chief Operating Officer, RBC Capital Markets, Royal Bank
Crédit Agricole Indosuez (formerly Banque Indosuez), UK
of Canada
1991 – 1996
Corporate Secretary and Secretary to the
2001 – 2008
Head of Global Credit, Royal Bank of Canada
Board of Directors, Crédit Agricole Indosuez, France
2012 – 2014
2003 – 2012
1998 – 2003
1999 – 2001
Head of Debt Products, Royal Bank of Canada
1986 – 1991
COO, Carr Futures, France (owned by Banque Indosuez),
1986 – 1998
Senior advisor, Providence Equity Partners, New York
Partner and Head of the New York office,
Providence Equity Partners, New York
Vice Chairman of the Investment Banking division of
JPMorgan Chase & Co. and Head of its Global
Telecommunications, Media and Technology group
Various position at Merrill Lynch, final position:
Managing Director Media and Communications
Investment Banking
Education
– Bachelor’s degree, business administration, University of
Wisconsin–Madison
Listed company boards
– Member of the Board of Yext (chair of the audit 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
1998 – 1999
Senior Vice President and General Manager USA,
Crédit Agricole Indosuez, France
Royal Bank of Canada
1983 – 1986
Head of Asset and Liability Management & Market Risks,
1997 – 1998
Senior Vice President Financial Services, Royal Bank
Crédit Agricole Indosuez, France
of Canada
1978 – 1982
Position in Forex Exchange Sales, Crédit Agricole Indosuez,
1982 – 1996
Various positions, Royal Bank of Canada
France and UK
Education
– Bachelor of Laws (LL.B.), University of Leeds
– MBA, finance, University of Manchester
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) and insurance
– Investment banking, capital markets
– Risk management, compliance and legal
– Technology, cybersecurity
Leadership experience
– Executive board leadership
Education
– Master’s degree, management, HEC Paris
– MBA, INSEAD Fontainebleau
Listed company boards
– Member of the Board of Euronext N.V.
(chair of the remuneration committee)
– Member of the Board of Veolia Environnement SA
(chair of the audit committee)
Other activities and functions
– Member of the Board of the African Financial Institutions Investment
Platform
Key competencies
– Banking (wealth management, asset management,
personal and corporate banking) and insurance
– Investment banking, capital markets
– Risk management, compliance and legal
– Finance, audit, accounting
Dieter Wemmer began his esteemed career in the insurance sector with the
Zurich Group in 1986, retiring in 2017 as CFO of Allianz. As a long-serving
CFO of two large multi-national companies in the financial services sector, he
brings deep experience across a broad range of highly relevant topics to the
table. Mr. Wemmer brings to the BoD knowledge covering accounting,
finance and audit, including capital markets, investments, risk management,
as well as asset management. His know-how includes hands-on experience in
M&A and management of large organizations with a dedication to strategy.
Professional experience
2013 – 2017
2012 – 2013
2007 – 2011
2010 – 2011
2004 – 2007
2003 – 2004
1999 – 2003
1997 – 1999
CFO, Allianz SE
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, Allianz SE
CFO, Zurich Insurance Group
Regional Chairman of Europe, Zurich Insurance Group
CEO of the Europe General Insurance business
and member of Zurich’s Group Executive Committee,
Zurich Insurance Group
COO of Europe General Insurance, Zurich Insurance Group
Head of Mergers and Acquisitions, Zurich Insurance Group
Head of Financial Controlling, Zurich Insurance Group
Education
– Master’s degree and doctorate, mathematics, University of Cologne
Listed company boards
– Member of the Board of Ørsted A/S
(chair of the audit and risk committee)
Non-listed company boards
– Chairman of Marco Capital Holdings Limited, Malta and subsidiaries
Other activities and functions
– Member of the Berlin Center of Corporate Governance
Key competencies
– Banking (wealth management, asset management,
personal and corporate banking) and insurance
– Investment banking, capital markets
– Finance, audit, accounting
– Risk management, compliance and legal
Leadership experience
– Executive board leadership
198
199
199
Corporate governance and compensation Corporate governance and compensation | Corporate governance
Jeanette Wong
Non-executive member of the Board since 2019
– Member Compensation Committee since 2020
– Member of the Corporate Culture and Responsibility Committee
since 2020
– Member of the Audit Committee since 2019
Nationality: Singaporean | Year of birth: 1960
Jeanette Wong has spent more than 30 years working in the financial
sector in Singapore. She retired from DBS Group in 2019, where she was
Group Executive responsible for the institutional banking business, a post
which encompassed corporate banking, global transaction services,
strategic advisory and mergers and acquisitions. Prior to that, she held the
position of CFO at DBS Bank. During a 16-year career with JPMorgan,
Ms. Wong helped build up its Asia and emerging markets business. She
brings extensive experience from serving as a member of the board of
directors of two highly valued listed companies.
Professional experience
2008 – 2019
2003 – 2008
2003
1997 – 2002
1986 – 1997
Group Executive institutional banking business,
DBS Bank, Singapore
CFO, DBS Bank
Chief Administration Officer, DBS Bank, Singapore
Country Manager Singapore, JPMorgan Chase, Singapore
Various roles in Global Markets and Emerging Markets
Sales and Trading business, Asia, JPMorgan Chase,
Singapore
Markus Baumann
Group Company Secretary since 2017
Nationality: Swiss | Year of birth: 1963
Markus Baumann joined UBS in 1979 as a banking apprentice
and has now been with the firm for more than 40 years. Earlier
in his career, he worked in Japan for four years, as Corporate
Planning Officer and assistant to the CEO. He then worked as
COO EMEA for UBS Asset Management and has since held a
broad range of leadership roles across the Group in Switzerland,
the US and Japan, including COO of Group Internal Audit from
2006 to 2015.
Professional experience
2017 – date
Group Company Secretary of UBS Group AG
and Company Secretary of UBS AG
Chief of Staff to the Chairman of the Board of
Directors, UBS
COO, Group Internal Audit, UBS
Head Global Reporting & Controlling,
Global Asset Management, UBS
Head Management Support CEO EMEA,
Global Asset Management, UBS
COO EMEA, Global Asset Management, UBS
Various positions, Union Bank of Switzerland
2015 – 2016
2006 – 2015
2005 – 2006
2002 – 2004
1998 – 2002
1979 – 1997
Education
– Swiss Federal Diploma as a Business Analyst
– MBA, INSEAD Fontainebleau
1984 – 1986 Manager, Private Banking, Citibank, Singapore
1982 – 1984 Manager, Corporate Banking, Paribas, Singapore
Education
– Bachelor’s degree, business administration, the National University
of Singapore
– MBA, University of Chicago
Listed company boards
– Member of the Board of Prudential plc
– Member of the Board of Singapore Airlines Limited
Non-listed company boards
– Member of the Board Risk Committee of GIC Pte Ltd
– Member of the Board of Jurong Town Corporation
– Member of the Board of PSA International
Other activities and functions
– Chairman of the CareShield Life Council
– Member of the Securities Industry Council
– Member of the Board of Trustees of the National University
of Singapore
Key competencies
– Banking (wealth management, asset management,
personal and corporate banking) and insurance
– Investment banking, capital markets
– Finance, audit, accounting
– ESG (environmental, social and governance)
Leadership experience
– Executive board leadership
200
200
– Member of the Corporate Culture and Responsibility Committee
Nationality: Swiss | Year of birth: 1963
Organizational principles and structure
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. BoD members
are limited to serving for a maximum of 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
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
the
Organization Regulations, acts as secretary to the BoD and its
committees.
to
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 the continued COVID-19 pandemic, all
meetings were organized as video calls, with the exception of the
meeting held in October 2021. Additional video calls were
organized during the reporting period to facilitate social
engagement and interaction between the members of the BoD.
During 2021, a total of 24 BoD meetings were held, 12 of which
were attended by GEB members. Average participation in the BoD
Markus Baumann
Group Company Secretary since 2017
Markus Baumann joined UBS in 1979 as a banking apprentice
and has now been with the firm for more than 40 years. Earlier
in his career, he worked in Japan for four years, as Corporate
Planning Officer and assistant to the CEO. He then worked as
COO EMEA for UBS Asset Management and has since held a
broad range of leadership roles across the Group in Switzerland,
the US and Japan, including COO of Group Internal Audit from
2006 to 2015.
Professional experience
2017 – date
Group Company Secretary of UBS Group AG
and Company Secretary of UBS AG
2015 – 2016
Chief of Staff to the Chairman of the Board of
Directors, UBS
2006 – 2015
2005 – 2006
COO, Group Internal Audit, UBS
Head Global Reporting & Controlling,
Global Asset Management, UBS
2002 – 2004
Head Management Support CEO EMEA,
Global Asset Management, UBS
1998 – 2002
1979 – 1997
COO EMEA, Global Asset Management, UBS
Various positions, Union Bank of Switzerland
Education
– Swiss Federal Diploma as a Business Analyst
– MBA, INSEAD Fontainebleau
Corporate governance and compensation | Corporate governance
Jeanette Wong
Non-executive member of the Board since 2019
– Member Compensation Committee since 2020
since 2020
– Member of the Audit Committee since 2019
Nationality: Singaporean | Year of birth: 1960
Jeanette Wong has spent more than 30 years working in the financial
sector in Singapore. She retired from DBS Group in 2019, where she was
Group Executive responsible for the institutional banking business, a post
which encompassed corporate banking, global transaction services,
strategic advisory and mergers and acquisitions. Prior to that, she held the
position of CFO at DBS Bank. During a 16-year career with JPMorgan,
Ms. Wong helped build up its Asia and emerging markets business. She
brings extensive experience from serving as a member of the board of
directors of two highly valued listed companies.
Professional experience
2008 – 2019
Group Executive institutional banking business,
DBS Bank, Singapore
2003 – 2008
CFO, DBS Bank
2003
1997 – 2002
1986 – 1997
Chief Administration Officer, DBS Bank, Singapore
Country Manager Singapore, JPMorgan Chase, Singapore
Various roles in Global Markets and Emerging Markets
Sales and Trading business, Asia, JPMorgan Chase,
Singapore
1984 – 1986 Manager, Private Banking, Citibank, Singapore
1982 – 1984 Manager, Corporate Banking, Paribas, Singapore
– Bachelor’s degree, business administration, the National University
Education
of Singapore
– MBA, University of Chicago
Listed company boards
– Member of the Board of Prudential plc
– Member of the Board of Singapore Airlines Limited
Non-listed company boards
– Member of the Board Risk Committee of GIC Pte Ltd
– Member of the Board of Jurong Town Corporation
– Member of the Board of PSA International
Other activities and functions
– Chairman of the CareShield Life Council
– Member of the Securities Industry Council
– Member of the Board of Trustees of the National University
of Singapore
Key competencies
– Banking (wealth management, asset management,
personal and corporate banking) and insurance
– Investment banking, capital markets
– Finance, audit, accounting
– ESG (environmental, social and governance)
Leadership experience
– Executive board leadership
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 130 minutes and covered both UBS Group AG and
UBS AG. Additionally, 10 ad hoc calls were held, 6 of which were
attended by GEB members. The BoD held a number of strategy
workshops throughout the year, during which the results of the
new CEO’s in-depth strategy review were covered. These strategy
workshops included deep dives on each business division and
geographical region, and topics such as the definition of the
purpose, vision and strategic imperatives, as well as the
digitalization of the business, sustainable finance, cultural and
behavioral aspects, including agile approaches to ways of
working. The strategy discussions were completed in October
2021, when the overarching strategy and implementation plans
were agreed upon.
At the BoD meetings, each committee Chairperson provides
the BoD with an update on current activities of his or her
committee and important committee issues.
In 2021, 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 continued with the coordination and exchange of
information between UBS Group AG and its significant group
entities. Joint meetings between the BoD of UBS Group AG and
the boards of directors of the significant group entities, as well as
between the respective chairs of the risk and audit committees,
have been held. As in prior years, an annual workshop, attended
by independent members of the boards of the Group and
significant group entities, was held.
200
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Corporate governance and compensation Corporate governance and compensation | Corporate governance
Performance assessment
Every third year, an external assessment of the effectiveness of the
BoD is conducted. In 2022, this review concluded that the UBS
BoD and committees operate effectively, in line with best practice,
and set a high standard in comparison with leading international
peers. The review also confirmed that the BoD agenda covers all
important and relevant topics and that these are addressed
professionally and in great depth. It further found that the BoD
members are independent, highly committed and of the highest
integrity, and that the Chairman provides effective leadership and
direction. The review emphasized that the cooperation between
the BoD and the GEB is based on mutual trust, respect and
constructive dialogue. The mix of expertise in the BoD is broad-
based and the quality of BoD members is high. The BoD and GEB
have responded well to the economic environment, including
successfully managing the firm through the COVID-19 pandemic
and other
significant challenges, while maintaining an
appropriate focus on control and regulatory issues. The review
highlights the successful CEO transition and onboarding and the
well-planned and professionally executed Chairman succession
process. No significant weaknesses were identified in the review,
areas to be further focused on included the maintaining of a
balanced agenda that provides sufficient room for business
performance, strategic review and growth initiatives.
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 our Organization Regulations,
available at ubs.com/governance. The committees meet as often
as their business requires, but no less than four times a year in the
case of the Audit Committee, the Risk Committee and the
Compensation Committee, and no less than two times a year in
the case of the Corporate Culture and Responsibility Committee
and the Governance and Nominating Committee. Topics of
common interest or affecting more than one committee are
discussed at joint committee meetings.
During 2021, a total of nine joint committee meetings were
held for UBS Group AG (seven joint committee meetings were
held simultaneously for UBS AG). The Risk Committee held two
meetings with the Compensation Committee, two with the
Corporate Culture and Responsibility Committee, and five with
the Audit Committee.
Board of Directors
Members in 2021
Axel A. Weber, Chairman
Jeremy Anderson
Claudia Böckstiegel1
William C. Dudley
Patrick Firmenich1
Reto Francioni
Fred Hu
Mark Hughes
Nathalie Rachou
Julie G. Richardson
Beatrice Weder di Mauro2
Dieter Wemmer
Jeanette Wong
Meeting attendance
without GEB3
Meeting attendance
with GEB4
Key responsibilities include:
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
12/12
12/12
10/10
12/12
10/10
12/12
11/12
12/12
12/12
12/12
2/2
12/12
12/12
100%
100%
100%
100%
100%
100%
92%
100%
100%
100%
100%
100%
100%
12/12
12/12
100%
100%
8/8
100%
12/12
100%
8/8
100%
12/12
11/12
12/12
12/12
12/12
100%
92%
100%
100%
100%
4/4
100%
12/12
12/12
100%
100%
11 Claudia Böckstiegel and Patrick Firmenich were elected to the Board at the 2021 AGM; indicated are their attended and total meetings after their election. 22 Beatrice Weder di Mauro did not stand for re-election at
the 2021 AGM; indicated are her attended and total meetings up to the 2021 AGM. 33 Additionally, four ad hoc calls took place in 2021. 44 Additionally, six ad hoc calls took place in 2021.
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Performance assessment
BoD committees
Every third year, an external assessment of the effectiveness of the
The committees listed on the following pages assist the BoD in
BoD is conducted. In 2022, this review concluded that the UBS
the performance of its responsibilities. These committees and
BoD and committees operate effectively, in line with best practice,
their charters are described in our Organization Regulations,
and set a high standard in comparison with leading international
available at ubs.com/governance. The committees meet as often
peers. The review also confirmed that the BoD agenda covers all
as their business requires, but no less than four times a year in the
important and relevant topics and that these are addressed
case of the Audit Committee, the Risk Committee and the
professionally and in great depth. It further found that the BoD
Compensation Committee, and no less than two times a year in
members are independent, highly committed and of the highest
the case of the Corporate Culture and Responsibility Committee
integrity, and that the Chairman provides effective leadership and
and the Governance and Nominating Committee. Topics of
direction. The review emphasized that the cooperation between
common interest or affecting more than one committee are
the BoD and the GEB is based on mutual trust, respect and
discussed at joint committee meetings.
constructive dialogue. The mix of expertise in the BoD is broad-
During 2021, a total of nine joint committee meetings were
based and the quality of BoD members is high. The BoD and GEB
held for UBS Group AG (seven joint committee meetings were
have responded well to the economic environment, including
held simultaneously for UBS AG). The Risk Committee held two
successfully managing the firm through the COVID-19 pandemic
meetings with the Compensation Committee, two with the
and other
significant challenges, while maintaining an
Corporate Culture and Responsibility Committee, and five with
appropriate focus on control and regulatory issues. The review
the Audit Committee.
highlights the successful CEO transition and onboarding and the
well-planned and professionally executed Chairman succession
process. No significant weaknesses were identified in the review,
areas to be further focused on included the maintaining of a
balanced agenda that provides sufficient room for business
performance, strategic review and growth initiatives.
Board of Directors
Axel A. Weber, Chairman
Jeremy Anderson
Claudia Böckstiegel1
William C. Dudley
Patrick Firmenich1
Reto Francioni
Fred Hu
Mark Hughes
Nathalie Rachou
Julie G. Richardson
Dieter Wemmer
Jeanette Wong
12/12
12/12
10/10
12/12
10/10
12/12
11/12
12/12
12/12
12/12
2/2
12/12
12/12
100%
100%
100%
100%
100%
100%
92%
100%
100%
100%
100%
100%
100%
12/12
11/12
12/12
12/12
12/12
12/12
12/12
100%
92%
100%
100%
100%
100%
100%
Beatrice Weder di Mauro2
4/4
100%
Members in 2021
without GEB3
with GEB4
Key responsibilities include:
Meeting attendance
Meeting attendance
12/12
12/12
100%
100%
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
8/8
100%
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.
12/12
100%
8/8
100%
› Refer to the Organization Regulations of UBS Group AG,
available at ubs.com/governance, for more information
11 Claudia Böckstiegel and Patrick Firmenich were elected to the Board at the 2021 AGM; indicated are their attended and total meetings after their election. 22 Beatrice Weder di Mauro did not stand for re-election at
the 2021 AGM; indicated are her attended and total meetings up to the 2021 AGM. 33 Additionally, four ad hoc calls took place in 2021. 44 Additionally, six ad hoc calls took place in 2021.
Audit Committee
Throughout 2021, the Audit Committee consisted of four BoD
members, 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 Audit Committee oversees the relationship with, and
assesses the qualifications, expertise, 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.
During 2021, the Audit Committee held 13 committee
meetings, with a participation rate of 100%. The meetings had
an average duration of approximately 145 minutes and covered
both UBS Group AG and UBS AG. Additional attendees included
the Chairman of the BoD, the Group CEO, the Group CFO, the
Group Controller and Chief Accounting Officer, the Head Group
Internal Audit (GIA) and the external auditors. 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 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 2021, 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 2021
Meeting attendance3 Key responsibilities include:
Jeremy Anderson (Chairperson)
13/13
100%
Patrick Firmenich1
Beatrice Weder di Mauro2
Dieter Wemmer
Jeanette Wong
9/9
4/4
13/13
13/13
100%
100%
100%
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.
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.
› Refer to the Organization Regulations of UBS Group AG,
available at ubs.com/governance, for more information
11 Patrick Firmenich was elected to this committee at the 2021 AGM; indicated are his attended and total meetings after his election. 22 Beatrice Weder di Mauro did not stand for re-election at the 2021 AGM; indicated
are her attended and total meetings up to the 2021 AGM. 33 Additionally, the Audit Committee held one ad hoc call.
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Corporate governance and compensation Corporate governance and compensation | Corporate governance
Compensation Committee
The Compensation Committee consisted of four independent
BoD members throughout 2021, 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 2021, the Compensation Committee held nine
meetings, with an average participation rate of 97%. The
meetings had an average duration of approximately 90 minutes
and covered both UBS Group AG and UBS AG. All meetings were
held in the presence of the Chairman and the Group CEO and
most were attended by external advisors.
In 2021, the
Chairperson met regularly with core supervisory authorities.
› Refer to “Compensation for the Board of Directors” in the
“Compensation” section on page 252 of this report for more
information about the Compensation Committee’s decision-
making procedures
Corporate Culture and Responsibility Committee
In 2021, the Corporate Culture and Responsibility Committee
consisted of the Chairperson and four independent BoD
members. The Group CEO, the Group Chief Regulatory Officer,
the President Asset Management and GEB lead for Sustainability
and Impact, and the Chief Sustainability Officer are permanent
guests of the Corporate Culture and Responsibility Committee.
During 2021, six meetings were held, with a participation rate of
100%. The average duration of each of the meetings was
approximately 80 minutes.
Compensation Committee
Members in 2021
Meeting attendance1 Key responsibilities include:
Julie G. Richardson (Chairperson)
Reto Francioni
Dieter Wemmer
Jeanette Wong
9/9
8/9
9/9
9/9
100%
89%
100%
100%
The Compensation Committee is responsible for:
(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) proposing, upon proposal of the Chairman, financial and non-financial performance targets
and objectives for the Group CEO for approval by the Board and reviewing, upon the proposal
of the Group CEO, the performance framework for the other GEB members;
(iv) proposing, upon proposal of the Chairman, the Group CEO’s performance assessment for
approval by the Board, as well as informing the Board of the performance assessments of
all GEB members, including the Group CEO;
(v) proposing, upon proposal of the Chairman, the total compensation for the Group CEO for
approval by the Board; and
(vi)proposing, upon proposal of the Group CEO, the individual total compensation for the other
GEB members for approval by the Board.
› Refer to the Organization Regulations of UBS Group AG,
available at ubs.com/governance, for more information
11 Additionally, the Compensation Committee held four ad hoc calls.
Corporate Culture and Responsibility Committee
Members in 2021
Meeting attendance Key responsibilities include:
Axel A. Weber (Chairperson)
William C. Dudley
Patrick Firmenich1
Mark Hughes
Beatrice Weder di Mauro2
Jeanette Wong
6/6
6/6
4/4
6/6
2/2
6/6
100%
100%
100%
100%
100%
100%
The Corporate Culture and Responsibility Committee supports the Board in its duties to safeguard
and 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 Responsibility 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, including sustainability.
› Refer to the Organization Regulations of UBS Group AG,
available at ubs.com/governance, for more information
11 Following the 2021 AGM, Patrick Firmenich became a member of this committee; indicated are his attended and total meetings after his election. 22 Beatrice Weder di Mauro did not stand for re-election at the 2021
AGM; indicated are her attended and total meetings up to the 2021 AGM.
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Compensation Committee
Corporate Culture and Responsibility Committee
The Compensation Committee consisted of four independent
In 2021, the Corporate Culture and Responsibility Committee
BoD members throughout 2021, as indicated in the table below.
consisted of the Chairperson and four independent BoD
In addition to the key responsibilities indicated in the same table,
members. The Group CEO, the Group Chief Regulatory Officer,
the Compensation Committee
reviews
the compensation
the President Asset Management and GEB lead for Sustainability
disclosures included in this report.
and Impact, and the Chief Sustainability Officer are permanent
During 2021, the Compensation Committee held nine
guests of the Corporate Culture and Responsibility Committee.
meetings, with an average participation rate of 97%. The
During 2021, six meetings were held, with a participation rate of
meetings had an average duration of approximately 90 minutes
100%. The average duration of each of the meetings was
and covered both UBS Group AG and UBS AG. All meetings were
approximately 80 minutes.
held in the presence of the Chairman and the Group CEO and
most were attended by external advisors.
In 2021, the
Chairperson met regularly with core supervisory authorities.
› Refer to “Compensation for the Board of Directors” in the
“Compensation” section on page 252 of this report for more
information about the Compensation Committee’s decision-
making procedures
Compensation Committee
Members in 2021
Meeting attendance1 Key responsibilities include:
Julie G. Richardson (Chairperson)
The Compensation Committee is responsible for:
Reto Francioni
Dieter Wemmer
Jeanette Wong
9/9
8/9
9/9
9/9
100%
89%
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) proposing, upon proposal of the Chairman, financial and non-financial performance targets
and objectives for the Group CEO for approval by the Board and reviewing, upon the proposal
of the Group CEO, the performance framework for the other GEB members;
(iv) proposing, upon proposal of the Chairman, the Group CEO’s performance assessment for
approval by the Board, as well as informing the Board of the performance assessments of
all GEB members, including the Group CEO;
(v) proposing, upon proposal of the Chairman, the total compensation for the Group CEO for
approval by the Board; and
(vi)proposing, upon proposal of the Group CEO, the individual total compensation for the other
GEB members for approval by the Board.
› Refer to the Organization Regulations of UBS Group AG,
available at ubs.com/governance, for more information
11 Additionally, the Compensation Committee held four ad hoc calls.
Corporate Culture and Responsibility Committee
Members in 2021
Meeting attendance Key responsibilities include:
Axel A. Weber (Chairperson)
William C. Dudley
Patrick Firmenich1
Mark Hughes
Beatrice Weder di Mauro2
Jeanette Wong
6/6
6/6
4/4
6/6
2/2
6/6
100%
100%
100%
100%
100%
The Corporate Culture and Responsibility Committee supports the Board in its duties to safeguard
and 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
100%
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 Responsibility 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, including sustainability.
› Refer to the Organization Regulations of UBS Group AG,
available at ubs.com/governance, for more information
11 Following the 2021 AGM, Patrick Firmenich became a member of this committee; indicated are his attended and total meetings after his election. 22 Beatrice Weder di Mauro did not stand for re-election at the 2021
AGM; indicated are her attended and total meetings up to the 2021 AGM.
Governance and Nominating Committee
In 2021, the Governance and Nominating Committee consisted
of the Chairperson and five independent members. During 2021,
nine meetings were held, with a participation rate of 100%. The
average duration of each of the meetings was approximately 75
minutes. The Group CEO attended meetings as appropriate.
Risk Committee
In 2021, the Risk Committee consisted of six independent
members. During 2021, the Risk Committee held 11 committee
meetings, with a participation rate of 100%. The average
duration of each of the meetings was approximately 205 minutes,
covering both UBS Group AG and UBS AG. The Group CEO, the
Group CFO, the Group Chief Risk Officer, Group COO and later
the Group Chief Digital and Information Officer, the Group
Treasurer, the Group Chief Compliance and Governance Officer,
the Group General Counsel, and the Head GIA attended the
meetings. In 2021, 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.
Leading up the 2021 AGM, the Special Committee was
composed of four BoD members. Jeremy Anderson chaired the
Special Committee, with Nathalie Rachou, Julie G. Richardson,
and Axel A. Weber as its members; after the AGM, Claudia
Böckstiegel joined the Special Committee. 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 2021, the key focus
was the French cross-border matter. The Group CEO and the
Group General Counsel are permanent guests. During 2021, six
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 A. Weber chaired the Strategy
Committee, with William C. Dudley, Fred Hu and Dieter Wemmer
as its members. During 2021, one meeting was held, covering
both UBS Group AG and UBS AG. The Group CEO, the Group
CFO and the Head Corporate Development & Performance were
present.
Governance and Nominating Committee
Members in 2021
Meeting attendance1 Key responsibilities include:
Axel A. Weber (Chairperson)
Jeremy Anderson
William C. Dudley
Fred Hu
Julie G. Richardson
Dieter Wemmer
9/9
9/9
9/9
9/9
9/9
9/9
100%
100%
100%
100%
100%
100%
11 Additionally, the Governance and Nominating Committee held five ad hoc calls.
Risk Committee
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
Members in 2021
Meeting attendance1
Key responsibilities include:
Mark Hughes (Chairperson)
William C. Dudley
Reto Francioni
Fred Hu
Nathalie Rachou
Julie G. Richardson
11/11
11/11
11/11
11/11
11/11
11/11
100%
100%
100%
100%
100%
100%
11 Additionally, the Risk Committee held four ad hoc calls.
The function of the Risk Committee is to oversee and support the Board in fulfilling its duty to set
and supervise an appropriate risk management and control framework in the areas of:
(i)
(ii) balance sheet, treasury and capital management, including funding,
financial and non-financial risks; and
liquidity and equity attribution.
› Refer to the Organization Regulations of UBS Group AG,
available at ubs.com/governance, for more information
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205
Corporate governance and compensation Corporate governance and compensation | Corporate governance
Roles and responsibilities of the Chairman of the Board of
Directors
Important business connections of independent members
of the Board of Directors
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
to be independent. For this purpose, independence is determined
in accordance with FINMA Circular 2017/1 “Corporate
governance – banks” and the NYSE rules.
In 2021, 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 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 397 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 executive 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 remain with the BoD. The
authorities and responsibilities of the two bodies are governed by
the AoA and the Organization Regulations.
At the 2022 AGM, Axel A. Weber will step down and Colm
Kelleher will stand for election 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, the Chairman undertakes
responsibility for UBS’s reputation, and is responsible 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.
› Refer to “Employees” in the “How we create value for our
regulators
stakeholders” section on page 44 and the fold-out pages of this
report for information about our Pillars, Principles and Behaviors
In 2021, the Chairman met regularly with core supervisory
authorities in all major locations where UBS is active. Meetings
with important supervisory authorities 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, at least 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 the Vice Chairman and Senior
Independent Director since 2020 and it is planned that he will
remain Senior Independent Director following the 2022 AGM.
Lukas Gähwiler will be appointed as Vice Chairman following the
2022 AGM. 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 2021, two independent BoD meetings were held,
covering both UBS Group AG and UBS AG, with an average
participation rate of 81% and an average duration of
approximately 85 minutes. 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.
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Corporate governance and compensation | Corporate governance
Roles and responsibilities of the Chairman of the Board of
Important business connections of independent members
Skills, expertise and training of the Board of Directors
Directors
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 CEO 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
stakeholders” section on page 44 and the fold-out pages of this
Regulations for the percentage of directors who are considered
and corporate banking) and 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 CEO or chairperson
– executive board leadership experience (e.g., as CFO, chief risk
officer or COO 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 2021 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, 10 of the 12 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 103 of this report for information about
our risk governance framework
tasked with the ongoing monitoring and the annual evaluation of
functions of Chairman and Group CEO are assigned to two
Investment banking, capital markets
Terms of office¹
Geographic diversity ²
Gender
4
6
1
1
< 3 years
3 – 6 years
7 – 9 years
> 9 years
42%
Switzerland
17%
Europe
25% USA / Canada
17% Asia
67% male
33%
female
Competencies and experience ³
Key competencies
Banking 4 and insurance
0
2
4
6
8
10
Finance, audit, accounting
Risk management, compliance and legal
HR management, including compensation
Technology, cybersecurity
Regulatory authority, central bank
ESG 5
Leadership experience
0
2
4
6
8
10
Chief executive officer or chairman
Executive board 6
1 Terms of office until the 2022 AGM. 2 In the case of dual-nationals, the domicile applies. 3 The number of BoD members identifying a key competency as one of his / her
key competencies; each member identified up to four key competencies (although not every sub-area of the respective competency might be applicable), plus one leadership
experience. 4 Wealth management, asset management, and personal and corporate banking. 5 Environmental, social and governance. 6 For example, a CFO, chief risk
officer or COO of a listed company.
At the 2022 AGM, Axel A. Weber will step down and Colm
As a global financial services provider and a major Swiss bank, we
Kelleher will stand for election as the full-time Chairman of the
enter into business relationships with many large companies,
BoD. The Chairman coordinates tasks within the BoD, calls BoD
including some in which our BoD members have management or
meetings and sets their agendas. He presides over all general
independent board
responsibilities. The Governance and
meetings of shareholders and works with the committee
Nominating Committee determines in each instance whether the
Chairpersons to coordinate the work of all BoD committees.
nature of the Group’s business relationship with such a company
Together with the Group CEO, the Chairman undertakes
might compromise our BoD members’ capacity to express
responsibility for UBS’s reputation, and is responsible for effective
independent judgment.
communication with shareholders and other stakeholders,
Our Organization Regulations require three-quarters of the
including government officials,
regulators
and public
UBS Group AG BoD members and one-third of those at UBS AG
organizations. This is in addition to establishing and maintaining
to be independent. For this purpose, independence is determined
close working relationships with the Group CEO and other GEB
in accordance with FINMA Circular 2017/1 “Corporate
members, and providing advice and support when appropriate.
governance – banks” and the NYSE rules.
› Refer to “Employees” in the “How we create value for our
In 2021, our BoD met the standards of the Organization
report for information about our Pillars, Principles and Behaviors
independent under the criteria described above. Since our
Chairman has a full-time contract with UBS Group AG, he is not
In 2021, the Chairman met regularly with core supervisory
considered independent. No other BoD member has a significant
authorities in all major locations where UBS is active. Meetings
business connection to UBS or any of its subsidiaries. No BoD
with important supervisory authorities were scheduled on an ad
member currently carries out, or has carried out over the past
hoc or needs-driven basis.
Roles and responsibilities of the Vice Chairmen and the
Senior Independent Director
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
The BoD appoints one or more Vice Chairmen and a Senior
time for comparable transactions with non-affiliated persons. All
Independent Director. If the BoD appoints more than one Vice
relationships and transactions with BoD members’ associated
Chairman, at least one of them must be independent. Both the
companies are conducted at arm’s length.
Vice Chairman and the Senior Independent Director support the
› Refer to “Note 31 Related parties” in the “Consolidated financial
Chairman with regard to his responsibilities and authorities and
statements” section on page 397 of this report for more
provide him with advice. In conjunction with the Chairman and
information
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.
Executive Board
Checks and balances: Board of Directors and Group
Jeremy Anderson has been the Vice Chairman and Senior
We operate under a strict dual board structure, as mandated by
Independent Director since 2020 and it is planned that he will
Swiss banking law. The separation of responsibilities between the
remain Senior Independent Director following the 2022 AGM.
BoD and the GEB is clearly defined in the Organization
Lukas Gähwiler will be appointed as Vice Chairman following the
Regulations. The BoD decides on the strategy of the Group, upon
2022 AGM. The Vice Chairman is required to lead and has led
recommendations by the Group CEO, and exercises ultimate
meetings of the BoD in the temporary absence of the Chairman.
supervision over management; whereas the GEB, headed by the
Together with the Governance and Nominating Committee, he is
Group CEO, has executive management responsibility. The
the Chairman. He also represents UBS on behalf of the Chairman
different people, leading to a separation of power. This structure
in meetings with internal or external stakeholders. The Senior
establishes checks and balances and preserves the institutional
Independent Director enables and supports communication and
independence of the BoD from the executive management of the
the flow of information among the independent BoD members.
Group, for which responsibility is delegated to the GEB, under the
At least twice a year, he organizes and leads a meeting of the
leadership of the Group CEO. No member of one board may
independent BoD members without the participation of the
simultaneously be a member of the other.
Chairman. In 2021, two independent BoD meetings were held,
Supervision and control of the GEB remain with the BoD. The
covering both UBS Group AG and UBS AG, with an average
authorities and responsibilities of the two bodies are governed by
participation rate of 81% and an average duration of
the AoA and the Organization Regulations.
approximately 85 minutes. 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.
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207
207
Corporate governance and compensation Corporate governance and compensation | Corporate governance
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. Although 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.
launched several strategic
In 2021, the Chairman and the members of the BoD and the
GEB
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.
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
the diversity and the 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 both the CEO and Chairman, as well as of
GEB members, was smoothly planned and is being carried out,
demonstrating the strength and success of the succession
planning at UBS.
Board of Directors’ succession planning process
Strategy / environment
Onboarding
Existing board
composition
AGM
election
Search
Selection
208
208
Corporate governance and compensation | Corporate governance
Succession planning is one of the key responsibilities of both the
as they define the key competencies required on the BoD. Taking
BoD and the GEB. Across all divisions and regions, an inclusive
the diversity and the tenure of the existing BoD into account, the
talent development and succession planning process is in place
Governance and Nominating Committee defines the recruiting
that aims to foster the personal development and Group-wide
profile for the search. Both external and internal sources
mobility of our employees. Although the recruiting process for
contribute to identifying suitable candidates. The Chairman and
BoD and GEB members takes into account a broad spectrum of
the members of the Governance and Nominating Committee
factors, such as skills, backgrounds, experience and expertise, our
meet with potential candidates and, with the support of the full
approach with regard to diversity considerations does not
BoD, nominations are submitted to the AGM for approval. New
constitute a diversity policy within the meaning of the EU Directive
BoD members follow an in-depth onboarding process designed to
on Non-Financial Reporting, and Swiss law does not require UBS
enable them to integrate efficiently and become effective in their
to maintain such a policy.
new role. Due to this succession planning process, the
In 2021, the Chairman and the members of the BoD and the
composition of the BoD is in line with the demanding
GEB
launched several strategic
initiatives with the close
requirements of a leading global financial services firm.
involvement of the BoD and with the aim of further strengthening
The succession of both the CEO and Chairman, as well as of
UBS. The succession plans for the GEB and the management layer
GEB members, was smoothly planned and is being carried out,
below it are managed under the lead of the Group CEO. The BoD
demonstrating the strength and success of the succession
reviews and approves the succession plans of the GEB.
planning at UBS.
For the BoD, the Chairman leads a systematic succession
planning process as illustrated in the chart below.
Succession planning
Our strategy and the business environment constitute the main
drivers in our succession planning process for new BoD members,
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.
in discharging
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.
The Head GIA reports directly to the Chairman. In addition, GIA
has a functional reporting line to the Audit Committee in
accordance with its responsibilities as set forth 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 an overview of significant
audit results and key issues, as well as themes and trends, based
on results of individual audits, continuous risk assessment and
issue assurance. 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,
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.
requirements and other
resourcing
› 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 108 of this report for information about
reporting to the BoD
208
209
209
Corporate governance and compensation Corporate governance and compensation | Corporate governance
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
As of 31 December 2021, the GEB, under the leadership of the
Group CEO, consisted of 12 members.
It has executive
management responsibility for the steering of the Group and its
business and assumes overall responsibility for developing the
strategies of the Group, business divisions and Group Functions
and implements the BoD approved strategies. 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 2021, the GEB held a total of 66 meetings for UBS Group
AG.
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 2021, all members of the GEB were members of UBS AG’s
Executive Board, with the exception of Sabine Keller-Busse, who
served as President UBS Switzerland AG. The Executive Board held
66 combined meetings with the GEB and four standalone
meetings for UBS AG in 2021.
› 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
Changes to the Group Executive Board
Effective 1 February 2021, Axel P. Lehmann ended his tenure at
UBS and Sabine Keller-Busse succeeded to the posts of President
Personal & Corporate Banking and President UBS Switzerland. 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. Effective
1 April 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. Effective
1 May 2021, Mike Dargan was appointed Group Chief Digital and
Information Officer (CDIO) and member of the GEB. The Group
CDIO organization succeeded the function of the Group Chief
Operating Officer. Effective 1 November 2021, and after 13 years
of service, Markus U. Diethelm stepped down from his role as
Group General Counsel and member of the GEB; he remains with
UBS into 2022 as a senior advisor for selected legacy litigation
matters. Barbara Levi assumed the role of Group General Counsel
210
210
and member of the GEB. Ms. Levi joined UBS from Rio Tinto
Group, where she served as Chief Legal Officer & External Affairs
and before that as Group General Counsel and a member of the
Executive Committee.
On 1 December 2021, UBS announced that Kirt Gardner will
step down from his role as Group CFO in May 2022. Sarah
Youngwood will join UBS and the GEB in March 2022 and will
take over as Group CFO in May 2022. Ms. Youngwood has been
CFO of JPMorgan Chase’s consumer and community banking line
of business since 2016. She also led Finance for its Global
Technology unit.
The biographies on the following pages provide information
about the GEB members in office as of 31 December 2021. The
biographies of Piero Novelli and Markus U. Diethelm can be found
on page 208 and 203 of the UBS Group AG Annual Report 2020,
available under “Annual reporting” at ubs.com/investors. 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 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
in associations, charitable
company and eight mandates
organizations,
trusts and employee welfare
foundations. On 31 December 2021, no member of the GEB
reached the aforementioned thresholds.
foundations,
Responsibilities and authorities of the Asset and Liability
Committees
The Asset and Liability Committees (the ALCOs) of UBS Group AG
and UBS AG are sub-committees of the GEB and the Executive
Board that are responsible for managing assets and liabilities in
line with the strategy, risk appetite, 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 2021, 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.
Corporate governance and compensation | Corporate governance
Group Executive Board
The BoD delegates the management of the business to the Group
and member of the GEB. Ms. Levi joined UBS from Rio Tinto
Executive Board (the GEB).
Responsibilities, authorities and organizational principles
Executive Committee.
of the Group Executive Board
Group, where she served as Chief Legal Officer & External Affairs
and before that as Group General Counsel and a member of the
On 1 December 2021, UBS announced that Kirt Gardner will
step down from his role as Group CFO in May 2022. Sarah
Committee.
AG.
As of 31 December 2021, the GEB, under the leadership of the
Youngwood will join UBS and the GEB in March 2022 and will
Group CEO, consisted of 12 members.
It has executive
take over as Group CFO in May 2022. Ms. Youngwood has been
management responsibility for the steering of the Group and its
CFO of JPMorgan Chase’s consumer and community banking line
business and assumes overall responsibility for developing the
of business since 2016. She also led Finance for its Global
strategies of the Group, business divisions and Group Functions
Technology unit.
and implements the BoD approved strategies. The GEB is also the
The biographies on the following pages provide information
risk council of the Group, with overall responsibility for
about the GEB members in office as of 31 December 2021. The
establishing and supervising
the
implementation of
risk
biographies of Piero Novelli and Markus U. Diethelm can be found
management and control principles, as well as for managing the
on page 208 and 203 of the UBS Group AG Annual Report 2020,
risk profile of the Group, as determined by the BoD and the Risk
available under “Annual reporting” at ubs.com/investors. In
In 2021, the GEB held a total of 66 meetings for UBS Group
memberships and other activities or functions, as required by the
addition to information on mandates, the biographies include
SIX Swiss Exchange Corporate Governance Directive.
At UBS AG, management of the business is also delegated, and
In line with Swiss law, article 36 of UBS Group AG’s Articles of
its Executive Board, under the leadership of its President, has
Association limits the number of mandates that GEB members
executive management responsibility for UBS AG and its business.
may hold outside UBS Group to one mandate in a listed company
In 2021, all members of the GEB were members of UBS AG’s
and five additional mandates in non-listed companies. Mandates
Executive Board, with the exception of Sabine Keller-Busse, who
in companies that are controlled by UBS or that control UBS are
served as President UBS Switzerland AG. The Executive Board held
not subject to this limitation. In addition, GEB members may not
66 combined meetings with the GEB and four standalone
hold more than 10 mandates at a time at the request of the
meetings for UBS AG in 2021.
› Refer to the Organization Regulations of UBS Group AG,
company and eight mandates
in associations, charitable
organizations,
foundations,
trusts and employee welfare
available at ubs.com/governance, for more information about
foundations. On 31 December 2021, no member of the GEB
the authorities of the Group Executive Board
reached the aforementioned thresholds.
Changes to the Group Executive Board
Responsibilities and authorities of the Asset and Liability
Effective 1 February 2021, Axel P. Lehmann ended his tenure at
Committees
Personal & Corporate Banking and President UBS Switzerland. In
and UBS AG are sub-committees of the GEB and the Executive
addition to his responsibility as Co-President Global Wealth
Board that are responsible for managing assets and liabilities in
Management, Iqbal Khan assumed the role of President UBS
line with the strategy, risk appetite, regulatory commitments and
EMEA from Sabine Keller-Busse as of 1 February 2021. Effective
the interests of shareholders and other stakeholders. The ALCO
1 April 2021, Robert Karofsky was appointed sole President
of UBS Group AG proposes the framework for capital
Investment Bank, following Piero Novelli’s decision to step down
management, capital allocation, funding and liquidity risk, and
as Co-President Investment Bank as of 31 March 2021. Effective
proposes limits and targets for the Group to the BoD for approval.
1 May 2021, Mike Dargan was appointed Group Chief Digital and
It oversees the balance sheet management of the Group, its
Information Officer (CDIO) and member of the GEB. The Group
business divisions and Group Functions. In 2021, the ALCOs of
CDIO organization succeeded the function of the Group Chief
UBS Group AG and UBS AG held 11 meetings.
Operating Officer. Effective 1 November 2021, and after 13 years
of service, Markus U. Diethelm stepped down from his role as
Management contracts
Group General Counsel and member of the GEB; he remains with
UBS into 2022 as a senior advisor for selected legacy litigation
We have not entered into management contracts with any
matters. Barbara Levi assumed the role of Group General Counsel
companies or natural persons that do not belong to the Group.
Ralph Hamers
Christian Bluhm
Group Chief Executive Officer, member of the GEB since 2020
Group Chief Risk Officer, member of the GEB since 2016
Nationality: Dutch | Year of birth: 1966
Nationality: German | Year of birth: 1969
Ralph Hamers has been Group CEO of UBS Group AG and President of
the Executive Board of UBS AG since November 2020. Before joining UBS,
he served as CEO and Chairman of the Executive Board of ING Group.
During his time as CEO of ING, he steered the bank to profitability after
the financial crisis and supported the firm’s digital transformation. He also
played a leading role in driving sustainability efforts in the financial
industry, and firmly continues to do so.
Christian Bluhm has been Group Chief Risk Officer since 2016. He held
several positions in academia before starting his banking career in 1999
with Deutsche Bank in credit risk management, and subsequently working
for Hypovereinsbank and Credit Suisse in the same area. Before joining
UBS, he used his expertise and skills as Chief Risk & Financial Officer at
FMS Wertmanagement. Mr. Bluhm is responsible for the development of
the Group’s risk management and control framework for various risk
categories and implementation of its independent control frameworks.
Professional experience
2020 – date
2013 – 2020
Group CEO of UBS Group AG and President of the
Executive Board of UBS AG
CEO and Chairman of the Executive Board, ING
Supervisory Board member of NN Group (2014 – 2015);
Management Board Banking and Management Board NN
Group (2013 – 2014)
2011 – 2013
2010 – 2011
2007 – 2010
2005 – 2007
2002 – 2005
1999 – 2002
CEO of ING Belgium and Luxembourg, ING
Head of Network Management for Retail Banking Direct &
International, ING
Global Head of the Commercial Banking network, ING
CEO of ING Bank Netherlands, ING
General Manager of the ING Bank branch network, ING
General Manager of ING Romania, ING
Professional experience
2016 – date
2012 – 2015
Group Chief Risk Officer of UBS Group AG and Chief Risk
Officer of UBS AG
Spokesman of the Executive Board,
FMS Wertmanagement
Chief Risk & Financial Officer, FMS Wertmanagement
2008 – 2009
2010 – 2015
2004 – 2009 Managing Director, Credit Risk Management (Switzerland
and Private Banking worldwide), Credit Suisse
Head Credit Risk Management Analytics & Instruments,
Credit Suisse
Head of Credit Portfolio Management, Credit Suisse
Head Structured Finance Analytics, Group Credit Portfolio
Management, Hypovereinsbank
Credit Risk Management, Deutsche Bank
2004 – 2008
1999 – 2000
2001 – 2004
UBS and Sabine Keller-Busse succeeded to the posts of President
The Asset and Liability Committees (the ALCOs) of UBS Group AG
Tilburg University
mathematics, University of Erlangen-Nuremberg
Education
– Master’s degree, business econometrics and operations research,
Education
– Master’s degree, mathematics and informatics, and doctorate,
Other activities and functions
– Member of the Board of the Swiss-American Chamber of Commerce
– Member of the Institut International d’Etudes Bancaires
– Member of the IMD Foundation Board
– 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
– 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 Institute
210
211
211
Corporate governance and compensation Corporate governance and compensation | Corporate governance
Mike Dargan
Kirt Gardner
Group Chief Digital and Information Officer,
member of the GEB since 2021
Nationality: British | Year of birth: 1977
Group Chief Financial Officer, member of the GEB since 2016
Nationality: American (US) | Year of birth: 1959
Mike Dargan was appointed Group Chief Digital and Information Officer
(CDIO) in May 2021. The Group CDIO organization consists of the Group
Technology teams and Group Corporate Services. In October 2021, he
took up the additional role of UBS GEB sponsor to co-lead the AI, Data
and Analytics center of expertise, along with Robert Karofsky. From his
former roles at Standard Chartered Bank, Mr. Dargan brings proven
experience in technology strategy and operations.
Kirt Gardner became Group CFO in 2016. Earlier in his career, he worked
for the management and technology consulting firms BearingPoint and
Barents Group in the US, Asia, Latin America and Europe. Before joining
UBS as CFO Wealth Management in 2013, Mr. Gardner held various
leadership positions at Citigroup, including CFO and Head of Strategy
within Global Transaction Services, Head of Strategy, Planning and Risk
Strategy for the Corporate and Institutional Division, and Head of Global
Strategy and Cost Management for the Consumer Bank.
Professional experience
2016 – date
2013 – 2015
2010 – 2013
2006 – 2010
2004 – 2006
Group CFO of UBS Group AG and CFO of UBS AG
CFO Wealth Management, UBS
CFO and Head of Strategy Global Transaction Services,
Citigroup
Head of Strategy, Planning and Risk Strategy for the
Corporate and Institutional Division, Citigroup
Head of Global Strategy and Cost Management for the
Consumer Bank, Citigroup
Global Head of Financial Services Strategy, BearingPoint
2000 – 2004
1994 – 2000 Managing Director and Head of Financial Services
Consulting, Barents Group
Education
– Master’s degree, international studies, University of Pennsylvania
– MBA, finance, the Wharton School
Other activities and functions
– Member of the Board of UBS Business Solutions AG
Professional experience
May 2021 – date Group CDIO, UBS Group AG and UBS AG
Oct. 2021 – date
2016 – 2021
2015 – 2016
2014 – 2015
2013 – 2014
2009 – 2013
2005 – 2009
1999 – 2005
President of the Executive Board,
UBS Business Solutions AG
Head Group Technology, UBS
CIO for Corporate and
Institutional Banking, Standard Chartered Bank
Global Group Technology and Operations Head for
Global Markets, Wealth Management, Private Banking
and Securities Services, Group Technology and
Operations Engineering, Standard Chartered Bank
CIO for Financial Markets, Standard Chartered Bank
Global Head of Strategy and Corporate M&A, Global
Markets, Standard Chartered Bank
Head Corporate Strategy & M&A, EMEA and Pacific
Rim, Merrill Lynch
Head of Corporate and Institutional Banking Practice,
Asia Pacific, Oliver Wyman
Education
– Master’s degree, politics, philosophy and economics,
St. John’s College, Oxford University
Non-listed company boards
– Member of the Board of Directors of Done Next Holdings AG
Other activities and functions
– Member of the Board of UBS Business Solutions AG
– Member of the Board of Trustees of the Inter-Community
School Zurich
212
212
Corporate governance and compensation | Corporate governance
member of the GEB since 2021
Nationality: British | Year of birth: 1977
Mike Dargan was appointed Group Chief Digital and Information Officer
for the management and technology consulting firms BearingPoint and
(CDIO) in May 2021. The Group CDIO organization consists of the Group
Barents Group in the US, Asia, Latin America and Europe. Before joining
Technology teams and Group Corporate Services. In October 2021, he
UBS as CFO Wealth Management in 2013, Mr. Gardner held various
took up the additional role of UBS GEB sponsor to co-lead the AI, Data
leadership positions at Citigroup, including CFO and Head of Strategy
and Analytics center of expertise, along with Robert Karofsky. From his
within Global Transaction Services, Head of Strategy, Planning and Risk
former roles at Standard Chartered Bank, Mr. Dargan brings proven
Strategy for the Corporate and Institutional Division, and Head of Global
experience in technology strategy and operations.
Strategy and Cost Management for the Consumer Bank.
Kirt Gardner became Group CFO in 2016. Earlier in his career, he worked
Professional experience
Professional experience
May 2021 – date Group CDIO, UBS Group AG and UBS AG
2016 – date
Group CFO of UBS Group AG and CFO of UBS AG
Oct. 2021 – date
President of the Executive Board,
2013 – 2015
CFO Wealth Management, UBS
2016 – 2021
2015 – 2016
UBS Business Solutions AG
Head Group Technology, UBS
CIO for Corporate and
2010 – 2013
CFO and Head of Strategy Global Transaction Services,
Citigroup
2006 – 2010
Head of Strategy, Planning and Risk Strategy for the
Institutional Banking, Standard Chartered Bank
Corporate and Institutional Division, Citigroup
2014 – 2015
Global Group Technology and Operations Head for
2004 – 2006
Head of Global Strategy and Cost Management for the
Global Markets, Wealth Management, Private Banking
Consumer Bank, Citigroup
and Securities Services, Group Technology and
Operations Engineering, Standard Chartered Bank
2000 – 2004
Global Head of Financial Services Strategy, BearingPoint
1994 – 2000 Managing Director and Head of Financial Services
2013 – 2014
2009 – 2013
CIO for Financial Markets, Standard Chartered Bank
Global Head of Strategy and Corporate M&A, Global
Markets, Standard Chartered Bank
Education
Consulting, Barents Group
2005 – 2009
Head Corporate Strategy & M&A, EMEA and Pacific
– Master’s degree, international studies, University of Pennsylvania
1999 – 2005
Head of Corporate and Institutional Banking Practice,
Rim, Merrill Lynch
Asia Pacific, Oliver Wyman
– MBA, finance, the Wharton School
Other activities and functions
– Member of the Board of UBS Business Solutions AG
Education
– Master’s degree, politics, philosophy and economics,
St. John’s College, Oxford University
Non-listed company boards
– Member of the Board of Directors of Done Next Holdings AG
Other activities and functions
– Member of the Board of UBS Business Solutions AG
– Member of the Board of Trustees of the Inter-Community
School Zurich
Mike Dargan
Kirt Gardner
Suni Harford
Robert Karofsky
Group Chief Digital and Information Officer,
Group Chief Financial Officer, member of the GEB since 2016
President Asset Management, member of the GEB since 2019
President Investment Bank, member of the GEB since 2018
Nationality: American (US) | Year of birth: 1959
Nationality: American (US) | Year of birth: 1962
Nationality: American (US) | Year of birth: 1967
Suni Harford was appointed President Asset Management in 2019 and is
the Chair of UBS Optimus Foundation. Ms. Harford has been the UBS GEB
lead for Sustainability and Impact since May 2021. She started her Wall
Street career at Merrill Lynch & Co., in investment banking, before
embarking on a 24-year career at Citigroup Inc., the last nine years of
which she was the Regional Head of Markets for North America.
Ms. Harford then joined UBS, bringing with her a broad experience from
across the industry, including in research, client coverage and risk
management, and successfully led UBS Asset Management’s integrated
investments capabilities, driving performance for its clients.
Robert Karofsky was appointed Co-President of the Investment Bank in
2018. He became sole President in April 2021. Before joining UBS, he
acquired know-how in investment banking as an analyst and trader,
working for various financial institutions such as Morgan Stanley,
Deutsche Bank, and AllianceBernstein. He then became Global Head of
Equities at UBS, responsible for driving UBS’s growth strategy for equities
globally. In October 2021, Mr. Karofsky was appointed to the additional
role of UBS GEB sponsor to co-lead the AI, Data and Analytics center of
expertise, along with Mike Dargan.
Professional experience
2019 – date
2017 – 2019
2008 – 2017
2004 – 2008
President Asset Management, UBS Group AG
and UBS AG
Head of Investments, Asset Management, UBS
Regional Head of Markets for North Americas,
Citigroup Inc.
Global Head of Fixed Income Research, Citigroup Inc.
Education
– Bachelor’s degree, physics and mathematics, Denison University, Ohio
– MBA, Tuck School of Business, Dartmouth College
Other activities and functions
– Chairman of the Board of Directors of UBS Asset Management AG
– Chair of the Board of UBS Optimus Foundation
– Member of the Leadership Council of the Bob Woodruff Foundation
Professional experience
Apr. 2021 – date
2018 – Mar. 2021 Co-President Investment Bank, UBS
President Investment Bank, UBS Group AG and UBS AG
2015 – 2021
2014 – 2018
2011 – 2014
2008 – 2010
2005 – 2008
1994 – 2005
President UBS Securities LLC, UBS
Global Head Equities, UBS
Global Head of Equity Trading, AllianceBernstein
Co-Head of Global Equities, Deutsche Bank
Head of North American Equities, Deutsche Bank
Head of North American Trading, Morgan Stanley
Education
– Bachelor’s degree, economics, Hobart and William Smith Colleges
– MBA, finance and statistics, University of Chicago’s Booth School
of Business
Other activities and functions
– Member of the Board of UBS Americas Holding LLC
– Member of the Board of UBS Optimus Foundation
– Trustee of the UBS Americas Inc. Political Action Committee
212
213
213
Corporate governance and compensation Corporate governance and compensation | Corporate governance
Sabine Keller-Busse
Iqbal Khan
President Personal & Corporate Banking and
President UBS Switzerland, member of the GEB since 2016
Co-President Global Wealth Management and
President UBS EMEA, member of the GEB since 2019
Nationality: Swiss and German | Year of birth: 1965
Nationality: Swiss | Year of birth: 1976
Sabine Keller-Busse was appointed President Personal & Corporate
Banking and President UBS Switzerland in 2021, heading the leading
Universal Bank in Switzerland. In her previous role, Group COO, she
oversaw global functions such as technology, operations, human
resources and corporate services. She has been pivotal in driving business
alignment, and digital and cultural transformation, while also facilitating
business growth as President UBS Europe, Middle East and Africa. Ms.
Keller-Busse also brings in-depth experience regarding financial market
infrastructure, having served on the Board of SIX Group for nine years.
Iqbal Khan has been Co-President Global Wealth Management, which he
leads with Tom Naratil, since 2019. He was appointed President UBS
EMEA in February 2021. Mr. Khan joined Ernst & Young (EY) in 2001,
holding many leadership positions and becoming the youngest ever
partner of the firm’s Swiss arm; when leaving EY, he was lead auditor of
UBS. In 2013, he moved to Credit Suisse, holding senior leadership
positions as CFO Private Banking & Wealth Management and later CEO
International Wealth Management.
Professional experience
Feb. 2021 – date
Feb. 2021 – date
2018 – 2021
2019 – 2021
2016 – 2021
2014 – 2017
2010 – 2014
2008 – 2010
1995 – 2008
President Personal & Corporate Banking and
President UBS Switzerland, UBS Group AG
President of the Executive Board, UBS Switzerland AG
Group COO of UBS and President of the Executive
Board, UBS Business Solutions AG
President UBS Europe, Middle East and Africa, UBS
Member of the Executive Board of UBS AG
Group Head Human Resources, UBS
COO UBS Switzerland, UBS
Head Private Clients Region Zurich, Credit Suisse
Partner (2002), McKinsey & Company
Education
– Master’s degree and doctorate, economics, University of St. Gallen
Listed company boards
– Member of the Board of Zurich Insurance Group
Other activities and functions
– Member of the Foundation Council of the UBS International Center
of Economics in Society
– Member of the Board and Board Committee of Zurich Chamber
of Commerce
– Member of the Board of the University Hospital Zurich Foundation
Professional experience
2019 – date
Feb. 2021 – date
2015 – 2019
2013 – 2015
2011 – 2013
2009 – 2011
2001 – 2009
Co-President Global Wealth Management,
UBS Group AG and UBS AG
President UBS Europe, Middle East and Africa,
UBS Group AG and UBS AG
CEO International Wealth Management, Credit Suisse
CFO Private Banking & Wealth Management,
Credit Suisse
Managing Partner Assurance and Advisory Services –
Financial Services, Ernst & Young
Industry Lead Partner Banking and Capital Markets,
Switzerland and EMEA Private Banking, Ernst & Young
Various positions in Ernst & Young
Education
– Swiss Certified Public Accountant
– Advanced Master of International Business Law degree (LLM),
University of Zurich
Other activities and functions
– Member of the Supervisory Board of UBS Europe SE
– Member of the Board of UBS Optimus Foundation
– Member of the Board of Room to Read Switzerland
214
214
Corporate governance and compensation | Corporate governance
President Personal & Corporate Banking and
Co-President Global Wealth Management and
President UBS Switzerland, member of the GEB since 2016
President UBS EMEA, member of the GEB since 2019
Nationality: Swiss and German | Year of birth: 1965
Nationality: Swiss | Year of birth: 1976
Sabine Keller-Busse was appointed President Personal & Corporate
Iqbal Khan has been Co-President Global Wealth Management, which he
Banking and President UBS Switzerland in 2021, heading the leading
leads with Tom Naratil, since 2019. He was appointed President UBS
Universal Bank in Switzerland. In her previous role, Group COO, she
EMEA in February 2021. Mr. Khan joined Ernst & Young (EY) in 2001,
oversaw global functions such as technology, operations, human
holding many leadership positions and becoming the youngest ever
resources and corporate services. She has been pivotal in driving business
partner of the firm’s Swiss arm; when leaving EY, he was lead auditor of
alignment, and digital and cultural transformation, while also facilitating
UBS. In 2013, he moved to Credit Suisse, holding senior leadership
business growth as President UBS Europe, Middle East and Africa. Ms.
positions as CFO Private Banking & Wealth Management and later CEO
Keller-Busse also brings in-depth experience regarding financial market
International Wealth Management.
infrastructure, having served on the Board of SIX Group for nine years.
Professional experience
Professional experience
2019 – date
Co-President Global Wealth Management,
Feb. 2021 – date
President Personal & Corporate Banking and
UBS Group AG and UBS AG
President UBS Switzerland, UBS Group AG
Feb. 2021 – date
President UBS Europe, Middle East and Africa,
Feb. 2021 – date
President of the Executive Board, UBS Switzerland AG
UBS Group AG and UBS AG
2018 – 2021
Group COO of UBS and President of the Executive
CEO International Wealth Management, Credit Suisse
2015 – 2019
2013 – 2015
Board, UBS Business Solutions AG
CFO Private Banking & Wealth Management,
President UBS Europe, Middle East and Africa, UBS
Credit Suisse
Member of the Executive Board of UBS AG
2011 – 2013
Managing Partner Assurance and Advisory Services –
Group Head Human Resources, UBS
COO UBS Switzerland, UBS
Head Private Clients Region Zurich, Credit Suisse
Partner (2002), McKinsey & Company
Financial Services, Ernst & Young
2009 – 2011
Industry Lead Partner Banking and Capital Markets,
Switzerland and EMEA Private Banking, Ernst & Young
2001 – 2009
Various positions in Ernst & Young
2019 – 2021
2016 – 2021
2014 – 2017
2010 – 2014
2008 – 2010
1995 – 2008
Education
– Master’s degree and doctorate, economics, University of St. Gallen
Listed company boards
– Member of the Board of Zurich Insurance Group
Other activities and functions
– Member of the Foundation Council of the UBS International Center
– Member of the Board and Board Committee of Zurich Chamber
of Economics in Society
of Commerce
– Member of the Board of the University Hospital Zurich Foundation
Education
– Swiss Certified Public Accountant
– Advanced Master of International Business Law degree (LLM),
University of Zurich
Other activities and functions
– Member of the Supervisory Board of UBS Europe SE
– Member of the Board of UBS Optimus Foundation
– Member of the Board of Room to Read Switzerland
Sabine Keller-Busse
Iqbal Khan
Edmund Koh
Barbara Levi
President UBS Asia Pacific, member of the GEB since 2019
Group General Counsel, member of the GEB since 2021
Nationality: Singaporean | Year of birth: 1960
Nationality: Italian | Year of birth: 1971
Edmund Koh has been President UBS Asia Pacific since 2019. He is a
financial sector veteran, with more than 30 years in senior roles in financial
services, including as Head Wealth Management Asia Pacific, Country
Head Singapore and Head Wealth Management South East Asia and Asia
Pacific Hub for UBS. Before working for DBS Bank in Singapore, Mr. Koh
was CEO for Prudential Assurance and Alverdine Pte Ltd, both companies
based in Singapore. He joined UBS from Taiwan-based Ta Chong Bank,
where he served as President and Director.
Professional experience
2019 – date
2012 – 2018
2016 – 2018
President UBS Asia Pacific at UBS Group AG and UBS AG
Head Wealth Management Asia Pacific, UBS
Country Head Singapore, UBS
Head Wealth Management South East Asia and
Asia Pacific Hub, UBS
President and Director, Ta Chong Bank, Taiwan
2008 – 2012
2001 – 2008 Managing Director and Regional Head, Consumer Banking
2012 – 2015
Group, DBS Bank, Singapore
Education
– Bachelor’s degree, psychology, University of Toronto
Non-listed company boards
– 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
Other activities and functions
– Member of a sub-committee of the Singapore Ministry
of Finance’s Committee on the Future Economy
– Member of the Financial Centre Advisory Panel of the Monetary
Authority of Singapore
– Council member of the Asian Bureau of Finance and
Economic Research
– Council member of the KidSTART program of the Early Childhood
Development Agency, Singapore (until 31 January 2022)
– Trustee of the Cultural Matching Fund, Singapore
– Member of University of Toronto’s International Leadership
Council for Asia
Barbara Levi has been Group General Counsel since November 2021. A
qualified attorney-at-law, she has been admitted to the Supreme Court of
the United States, the New York State bar and the bar of Milan, Italy, and
has worked in several law firms in New York and Milan. Ms. Levi began
her corporate career with Novartis Group in 2004 and worked there for
16 years, holding a number of senior legal roles across Europe. Before
joining UBS, she served as Chief Legal Officer & External Affairs at Rio
Tinto Group and, before that, as General Counsel. In both roles, she was
a member of that company’s executive committee.
Professional experience
Nov. 2021 – date Group General Counsel for UBS Group AG and UBS AG
2021
2020 – 2021
2019
2016 – 2019
2014 – 2016
2013 – 2014
2009 – 2013
Chief Legal Officer & External Affairs, Rio Tinto Group
Group General Counsel, Rio Tinto Group
Group Legal Head, M&A and Strategic Transactions,
Novartis
Global General Counsel, Sandoz International GmbH,
Novartis
Global Legal Head, Product Strategy &
Commercialization, Novartis
Global Legal Head, TechOps, Primary Care and
Established Medicines, Novartis
Head of Legal & Compliance, Region Asia-Pacific,
Middle East, and African Countries, Region Group
Emerging Markets, Novartis
Education
– Master’s degree, law, University of Milan
– LL.M., banking, corporate and finance law, Fordham University
School of Law, New York
Other activities and functions
– Member of the Employers’ Board of the Global Institute for
Women’s Leadership, King’s College London
– Member of the Board of Directors of the European General
Counsel Association
214
215
215
Corporate governance and compensation Corporate governance and compensation | Corporate governance
Tom Naratil
Markus Ronner
Co-President Global Wealth Management and
President UBS Americas, member of the GEB since 2011
(UBS Group AG: 2014, UBS AG: 2011)
Nationality: American (US) | Year of birth: 1961
Group Chief Compliance and Governance Officer,
member of the GEB since 2018
Nationality: Swiss | Year of birth: 1965
Tom Naratil has been Co-President Global Wealth Management since
2018, which he leads with Iqbal Khan. He also is CEO of UBS Americas
Holding LLC. He started his career in finance in 1983, when he joined the
brokerage firm Paine Webber Jackson & Curtis, and is an experienced
veteran in the banking sector. UBS acquired Paine Webber in 2000; since
then, Mr. Naratil has held various senior management positions at UBS
Group, including CFO and COO. He served as President Wealth
Management Americas from 2016 and was also appointed President UBS
Americas at UBS Group AG and UBS AG in 2016.
Markus Ronner has been Group Chief Compliance and Governance
Officer since 2018. He has been with UBS for 40 years and held various
positions across the firm, including manager of the Group-wide too-big-
to-fail program, COO Wealth Management & Swiss Bank, Head Products
and Services of Wealth Management & Swiss Bank, COO Asset
Management, and Head Group Internal Audit. In his current position, he
is responsible at the Group level for compliance and operational risk
control, governmental and regulatory affairs, as well as investigations and
governance matters.
Professional experience
Professional experience
2018 – date
Group Chief Compliance and Governance Officer,
UBS Group AG and UBS AG
Head Group Regulatory and Governance, UBS
2012 – 2018
2011 – 2013 Manager Group-wide too-big-to-fail program, UBS
2010 – 2011
2009 – 2010
2007 – 2009
2001 – 2007
COO Wealth Management & Swiss Bank, UBS
Head Products and Services of Wealth Management &
Swiss Bank, UBS
COO Asset Management, UBS
Head Group Internal Audit, UBS
Education
– Swiss Banking Diploma
Other activities and functions
None
2018 – date
2016 – date
2016 – date
2016 – 2018
2015 – 2016
2014 – 2015
2011 – 2015
2009 – 2011
1983 – 2009
Co-President Global Wealth Management,
UBS Group AG and UBS AG
President UBS Americas, UBS Group AG and UBS AG
CEO of UBS Americas Holding LLC
President Wealth Management Americas, UBS
President of the Executive Board,
UBS Business Solutions AG
Group COO, UBS
Group CFO, UBS
CFO and Chief Risk Officer,
Wealth Management Americas, UBS
Various positions at PaineWebber and UBS
Education
– Bachelor’s degree, history, Yale University
– MBA, economics, 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
216
216
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
(whether directly, indirectly or in concert with third parties)
more than 331⁄3% of all voting rights of a company listed in
Switzerland, 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
holding key functions within the company 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 222
for more information
Corporate governance and compensation | Corporate governance
Tom Naratil
Markus Ronner
Co-President Global Wealth Management and
Group Chief Compliance and Governance Officer,
President UBS Americas, member of the GEB since 2011
member of the GEB since 2018
(UBS Group AG: 2014, UBS AG: 2011)
Nationality: American (US) | Year of birth: 1961
Nationality: Swiss | Year of birth: 1965
Tom Naratil has been Co-President Global Wealth Management since
Officer since 2018. He has been with UBS for 40 years and held various
2018, which he leads with Iqbal Khan. He also is CEO of UBS Americas
positions across the firm, including manager of the Group-wide too-big-
Holding LLC. He started his career in finance in 1983, when he joined the
to-fail program, COO Wealth Management & Swiss Bank, Head Products
brokerage firm Paine Webber Jackson & Curtis, and is an experienced
and Services of Wealth Management & Swiss Bank, COO Asset
veteran in the banking sector. UBS acquired Paine Webber in 2000; since
Management, and Head Group Internal Audit. In his current position, he
then, Mr. Naratil has held various senior management positions at UBS
is responsible at the Group level for compliance and operational risk
Group, including CFO and COO. He served as President Wealth
control, governmental and regulatory affairs, as well as investigations and
Markus Ronner has been Group Chief Compliance and Governance
Management Americas from 2016 and was also appointed President UBS
governance matters.
Americas at UBS Group AG and UBS AG in 2016.
Professional experience
Professional experience
2018 – date
Group Chief Compliance and Governance Officer,
2018 – date
Co-President Global Wealth Management,
UBS Group AG and UBS AG
UBS Group AG and UBS AG
2016 – date
2016 – date
President UBS Americas, UBS Group AG and UBS AG
CEO of UBS Americas Holding LLC
2016 – 2018
President Wealth Management Americas, UBS
2012 – 2018
Head Group Regulatory and Governance, UBS
2011 – 2013 Manager Group-wide too-big-to-fail program, UBS
2010 – 2011
COO Wealth Management & Swiss Bank, UBS
2009 – 2010
Head Products and Services of Wealth Management &
2015 – 2016
President of the Executive Board,
UBS Business Solutions AG
2014 – 2015
Group COO, UBS
2011 – 2015
Group CFO, UBS
2009 – 2011
CFO and Chief Risk Officer,
Wealth Management Americas, UBS
1983 – 2009
Various positions at PaineWebber and UBS
Education
– Bachelor’s degree, history, Yale University
– MBA, economics, 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
Swiss Bank, UBS
2007 – 2009
COO Asset Management, UBS
2001 – 2007
Head Group Internal Audit, UBS
Education
– Swiss Banking Diploma
Other activities and functions
None
216
217
217
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 2021 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. In
2021, Hannes Smit became the Lead Auditor to the Swiss
Financial Market Supervisory Authority
(FINMA) 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 2021, the Audit Committee held 13 meetings with the
external auditors.
Review of UBS Group AG and UBS AG audit engagement
EU rules require UBS Europe SE to rotate its external auditor in the
financial year 2024. In connection with this required change, and
in consideration of governance best practices, the Board of
Directors considered whether it would propose to shareholders a
rotation of the Group auditor concurrent with the change at UBS
Europe SE. Under the direction of the Audit Committee, UBS
conducted a formal review of the Group audit engagement
including soliciting proposals from potential auditors. Based on
the results of this assessment, the Board of Directors has decided
to retain Ernst & Young as the Group’s external auditor.
Audit effectiveness assessment
The Audit Committee assesses the performance, effectiveness
and independence of the external auditors on an annual basis.
The assessment is generally 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 team, value added as part of
the audit, insightfulness, and the overall relationship with EY.
Based on its own analysis and the assessment results, including
feedback received as part of the review of the Group audit
engagement described above, the Audit Committee concluded
that EY’s audit has been effective.
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
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..2211
31.12.20
5533
88
6611
99
44
55
00
11
53
10
64
8
3
5
0
1
All other fees
TToottaall nnoonn--aauuddiitt11
11 Total audit and non-audit fees amounted to USD 72 million for UBS Group AG consolidated as of 31 December 2021 (31 December 2020: USD 73 million), of which USD 43 million related to UBS AG consolidated
(31 December 2020: USD 46 million).
1100
00
0
9
218
218
Corporate governance and compensation | Corporate governance
Auditors
Audit is an integral part of corporate governance. While
Review of UBS Group AG and UBS AG audit engagement
safeguarding their independence, the external auditors closely
EU rules require UBS Europe SE to rotate its external auditor in the
coordinate their work with Group Internal Audit (GIA). The Audit
financial year 2024. In connection with this required change, and
Committee and, ultimately, the BoD supervise the effectiveness of
in consideration of governance best practices, the Board of
audit work.
› Refer to “Board of Directors” in this section for more
information about the Audit Committee
External independent auditors
Directors considered whether it would propose to shareholders a
rotation of the Group auditor concurrent with the change at UBS
Europe SE. Under the direction of the Audit Committee, UBS
conducted a formal review of the Group audit engagement
including soliciting proposals from potential auditors. Based on
the results of this assessment, the Board of Directors has decided
The AGM in 2021 re-elected Ernst & Young Ltd (EY) as auditors
to retain Ernst & Young as the Group’s external auditor.
for the Group for a one-year term of office. EY assumes virtually
all auditing functions according to laws, regulatory requests and
Audit effectiveness assessment
the AoA. Bob Jacob is the EY lead partner in charge of the overall
The Audit Committee assesses the performance, effectiveness
coordination of the UBS Group financial and regulatory audits and
and independence of the external auditors on an annual basis.
the co-signing partner of the financial audit. In 2020, Maurice
The assessment is generally based on interviews with senior
McCormick became the lead audit partner for the financial
management and survey feedback from stakeholders across the
statement audit and has an incumbency limit of five years. In
Group. Assessment criteria include quality of service delivery,
2021, Hannes Smit became the Lead Auditor to the Swiss
quality and competence of the audit team, value added as part of
Financial Market Supervisory Authority
(FINMA) with an
the audit, insightfulness, and the overall relationship with EY.
incumbency limit of seven years. Daniel Martin has been the co-
Based on its own analysis and the assessment results, including
signing partner for the FINMA audit since 2019, with an
feedback received as part of the review of the Group audit
incumbency limit of seven years.
engagement described above, the Audit Committee concluded
During 2021, the Audit Committee held 13 meetings with the
that EY’s audit has been effective.
external auditors.
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
11 Total audit and non-audit fees amounted to USD 72 million for UBS Group AG consolidated as of 31 December 2021 (31 December 2020: USD 73 million), of which USD 43 million related to UBS AG consolidated
(31 December 2020: USD 46 million).
For the year ended
3311..1122..2211
31.12.20
5533
88
6611
99
44
55
00
11
00
1100
53
10
64
8
3
5
0
1
0
9
auditors.
USD million
Audit
Global audit fees
TToottaall aauuddiitt11
Non-audit
Audit-related fees
Tax fees
All other fees
TToottaall nnoonn--aauuddiitt11
218
Special auditors for potential capital increases
At the AGM on 8 April 2021, 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 UBS 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 scope of services.
The fees (including expenses) paid to EY are set forth in the
table on the previous page. In addition, EY received USD 34.1
million in 2021 (USD 32.7 million in 2020) 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 include
statutory and regulatory audits, attestation services and the
review of documents to be filed with regulatory bodies. The
additional services classified as audit in 2021 included several
engagements for which EY was mandated at the request of
FINMA.
Audit-related work consists of assurance and related services
traditionally performed by auditors, such as attestation services
related to financial reporting, internal control reviews and
performance standard reviews, as well as consultation concerning
financial accounting and reporting standards.
Tax work involves services performed by professional staff in
EY’s tax division and includes tax compliance and tax consultation
with respect to our own affairs.
“Other” services are permitted services, which
include
technical IT security control reviews and assessments.
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 correctly and highlight where
UBS needs to better manage current and emerging risks. In 2021,
it operated with an average headcount of 586 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:
soundness of the Group’s risk and control culture;
(i)
reliability and
financial and operational
(ii)
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
requirements,
internal policies, and
constitutional documents and contracts.
risks are
they are
regulatory
the Group’s
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 ensure 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 Charter
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.
219
219
Corporate governance and compensation Corporate governance and compensation | Corporate governance
Information policy
We provide regular information to our shareholders and to the
wider financial community.
– consistency within each reporting period and between
reporting periods;
Financial reports for UBS Group AG are expected to be
published on the following dates:
First quarter 2022
Second quarter 2022
Third quarter 2022
26 April 2022
26 July 2022
25 October 2022
– 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
The annual general meetings of the shareholders of UBS
Group AG will take place on the following dates:
an ongoing commitment.
Financial reporting policies
2022
2023
6 April 2022
5 April 2023
› 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 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. Additionally, they may also access our digital annual
review at ubs.com/annualreview, 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 436 of this
report for more information
› Refer to “Corporate information” and “Contacts” on page 6 of
this report for more information
Financial disclosure principles
We fully support transparency, and consistent and informative
disclosure. We aim to communicate our strategy and results in a
manner that enables stakeholders to gain a good understanding
of how our Group operates, 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;
220
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 material accounting policies” in the
“Consolidated financial statements” section on page 292 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 2021. 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
267 of this report for more information
Compensation
Compensation
Julie G. Richardson
Chairperson of the
Compensation Committee
of the Board of Directors
Dear Shareholders,
The Board of Directors (the BoD) and I wish to thank you for your
support once again at last year’s Annual General Meeting (the
AGM) and for sharing your views on our compensation practices
over the past year. As the Chairperson of the Compensation
Committee, I am pleased to present our Compensation Report for
2021.
The arrival of our new CEO in late 2020 and the launch of our
purpose in early 2021 resulted in a review of our Total Reward
Principles and compensation framework to ensure that they are
fully aligned with our purpose and strategic imperatives.
Throughout 2021, the BoD Compensation Committee also
continued to oversee that reward reflects performance, that risk-
taking is appropriate and that employee interests are aligned with
those of our stakeholders. Following these reviews, we applied
selected enhancements to our principles while keeping our overall
compensation framework broadly unchanged, as we concluded
that it still remains well suited to support us in achieving our
ambitions for the Group and that it provides strong alignment
with shareholders’ interests. Nevertheless, we have updated our
Group-wide performance management approach, including
evolving our Group Executive Board (GEB) performance review to
reflect our strategic refresh, digital initiatives and elevated focus
on sustainability. The restructured approach fosters an even
greater focus on GEB priorities and the success of the overall
Group by assessing all GEB members against Group financial
targets.
Strategy execution
We made significant progress in delivering on our strategic vision
and putting clients at the center of all we do. The benefits of
delivering our ecosystem to clients in a seamless way as One UBS
are visible in our financial performance for 2021.
Our clients continued to put their trust in us, as was evident
from the ongoing momentum in flows and volume growth
throughout the year. Together with favorable market conditions
and investor sentiment, this led to growth across the firm. Our
business momentum, our focus on fueling growth and disciplined
execution led to strong financial results.
Sustainability is core to our purpose and ecosystem; to help us
maximize our impact and direct capital to where it is needed most,
we are focusing on three key areas to drive the sustainability
transition: Planet, People and Partnerships. As a result, our
sustainability focus and impact investing assets grew 78% in 2021
and amounted to USD 251 billion. Furthermore, UBS was again
named as a member of the Dow Jones Sustainability Index and
we are proud to be recognized once again for our industry
leadership in the Environmental dimension.
› Refer to “Financial and operating performance” in our Annual
Report 2021 for further details about our Group and business
division performance
Alignment to purpose
– Our purpose articulates why we do what we do, and why it matters. Our culture impacts how we do things, and it is firmly
grounded in our three keys to success: our Pillars, Principles and Behaviors. We refreshed our three keys to success in 2021 to
reflect our purpose, client promise and strategic imperatives, and to help ensure that our culture advances our strategic goals.
– For the past decade, those keys have defined how we work together and what we stand for, as a firm and as individuals. They
continue to drive daily business decisions and are integrated into our people management processes, including hiring,
performance management, compensation, promotion, talent development, training, and succession planning.
– Following the launch of the purpose, we reviewed our Total Reward Principles, performance management approach,
and compensation framework to ensure they are fully aligned with our purpose and strategic imperatives. While we made
modest adjustments, no fundamental changes were made to our compensation framework for 2021 as a result of our review.
– Fair and effective people management processes are key for our long-term success. Our global performance management
approach underwent a comprehensive review in 2021 as part of our broader strategic refresh. Consequently, we made
changes to our year-end review, objective-setting and employee feedback processes that aim to support our strategic priorities,
to reinforce our high performance culture and to be simpler and more transparent. Additionally, our GEB performance review
process includes more tangible measurement on quantitative outcomes and a greater focus on strategy, digitalization and
sustainability matters.
Find out more: ubs.com/global/en/our-firm/our-purpose
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222
Compensation
Julie G. Richardson
Chairperson of the
Compensation Committee
of the Board of Directors
Dear Shareholders,
evolving our Group Executive Board (GEB) performance review to
reflect our strategic refresh, digital initiatives and elevated focus
on sustainability. The restructured approach fosters an even
greater focus on GEB priorities and the success of the overall
Group by assessing all GEB members against Group financial
targets.
Strategy execution
We made significant progress in delivering on our strategic vision
and putting clients at the center of all we do. The benefits of
delivering our ecosystem to clients in a seamless way as One UBS
The Board of Directors (the BoD) and I wish to thank you for your
are visible in our financial performance for 2021.
support once again at last year’s Annual General Meeting (the
Our clients continued to put their trust in us, as was evident
AGM) and for sharing your views on our compensation practices
from the ongoing momentum in flows and volume growth
over the past year. As the Chairperson of the Compensation
throughout the year. Together with favorable market conditions
Committee, I am pleased to present our Compensation Report for
and investor sentiment, this led to growth across the firm. Our
The arrival of our new CEO in late 2020 and the launch of our
execution led to strong financial results.
purpose in early 2021 resulted in a review of our Total Reward
Sustainability is core to our purpose and ecosystem; to help us
Principles and compensation framework to ensure that they are
maximize our impact and direct capital to where it is needed most,
fully aligned with our purpose and strategic imperatives.
we are focusing on three key areas to drive the sustainability
Throughout 2021, the BoD Compensation Committee also
transition: Planet, People and Partnerships. As a result, our
continued to oversee that reward reflects performance, that risk-
sustainability focus and impact investing assets grew 78% in 2021
taking is appropriate and that employee interests are aligned with
and amounted to USD 251 billion. Furthermore, UBS was again
those of our stakeholders. Following these reviews, we applied
named as a member of the Dow Jones Sustainability Index and
selected enhancements to our principles while keeping our overall
we are proud to be recognized once again for our industry
compensation framework broadly unchanged, as we concluded
leadership in the Environmental dimension.
that it still remains well suited to support us in achieving our
ambitions for the Group and that it provides strong alignment
with shareholders’ interests. Nevertheless, we have updated our
Group-wide performance management approach, including
› Refer to “Financial and operating performance” in our Annual
Report 2021 for further details about our Group and business
division performance
Alignment to purpose
– Our purpose articulates why we do what we do, and why it matters. Our culture impacts how we do things, and it is firmly
grounded in our three keys to success: our Pillars, Principles and Behaviors. We refreshed our three keys to success in 2021 to
reflect our purpose, client promise and strategic imperatives, and to help ensure that our culture advances our strategic goals.
– For the past decade, those keys have defined how we work together and what we stand for, as a firm and as individuals. They
continue to drive daily business decisions and are integrated into our people management processes, including hiring,
performance management, compensation, promotion, talent development, training, and succession planning.
– Following the launch of the purpose, we reviewed our Total Reward Principles, performance management approach,
and compensation framework to ensure they are fully aligned with our purpose and strategic imperatives. While we made
modest adjustments, no fundamental changes were made to our compensation framework for 2021 as a result of our review.
– Fair and effective people management processes are key for our long-term success. Our global performance management
approach underwent a comprehensive review in 2021 as part of our broader strategic refresh. Consequently, we made
changes to our year-end review, objective-setting and employee feedback processes that aim to support our strategic priorities,
to reinforce our high performance culture and to be simpler and more transparent. Additionally, our GEB performance review
process includes more tangible measurement on quantitative outcomes and a greater focus on strategy, digitalization and
sustainability matters.
Find out more: ubs.com/global/en/our-firm/our-purpose
222
Financial performance
Commitment to return capital to shareholders
In 2021, the ongoing momentum in flows and volume growth
Financial performance
together with favorable market conditions and investor sentiment
In 2021, the ongoing momentum in flows and volume growth
led to growth across the firm. Our financial results outperformed
together with favorable market conditions and investor sentiment
our financial targets and we saw the highest profit before tax
led to growth across the firm. Our financial results outperformed
since 2006. This growth outpaces our performance award pool
our financial targets and we saw the highest profit before tax
development. We also maintained our high level of return on
since 2006. This growth outpaces our performance award pool
CET1 capital.
development. We also maintained our high level of return on
CET1 capital.
Group profit before tax
Return on CET1 capital
USD billion
in %
+25% excluding provision for French cross-border matter
We remain committed to returning excess capital to our
Commitment to return capital to shareholders
shareholders. We repurchased USD 2.6 billion of shares in 2021
We remain committed to returning excess capital to our
and we intend to repurchase up to USD 5 billion during 2022. For
shareholders. We repurchased USD 2.6 billion of shares in 2021
2021, the BoD intends to propose a dividend of USD 0.50 per
and we intend to repurchase up to USD 5 billion during 2022. For
share for approval at the Annual General Meeting of shareholders
2021, the BoD intends to propose a dividend of USD 0.50 per
in 2022.
share for approval at the Annual General Meeting of shareholders
in 2022.
Cost / income ratio
in %
+16%
+ 0.1ppts
+ 0.4 ppts
8.2
9.5
17.4
17.5
73.3
73.6
2020
2021
2020
2021
2020
2021
Group performance award pool
GEB performance award pool
Per capita GEB performance award pool
2021.
business momentum, our focus on fueling growth and disciplined
USD billion
CHF million
CHF million
+10%
– 6%
–1%
3.3
3.7
85.0
79.8
6.4
6.3
2021 performance award pool
2020
2021
2020
The performance award pool continues to reflect our strict pay-
2021 performance award pool
for-performance philosophy, our disciplined approach
in
The performance award pool continues to reflect our strict pay-
managing compensation over business cycles and alignment to
in
for-performance philosophy, our disciplined approach
shareholder interests.
managing compensation over business cycles and alignment to
The 2021 performance award pool was USD 3.7 billion, an
shareholder interests.
increase of 10% compared with 2020. It factors in the strong
The 2021 performance award pool was USD 3.7 billion, an
financial performance, as well as the financial and reputational
increase of 10% compared with 2020. It factors in the strong
impact resulting from the loss related to the default of a US-based
financial performance, as well as the financial and reputational
client of our prime brokerage business. The seriousness of this
impact resulting from the loss related to the default of a US-based
event led to a significant downward revision of the Group
client of our prime brokerage business. The seriousness of this
performance award pool. As a reminder regarding the French
event led to a significant downward revision of the Group
cross-border matter, in 2019 we reflected this matter in our
performance award pool. As a reminder regarding the French
compensation decisions, including linking a meaningful portion of
cross-border matter, in 2019 we reflected this matter in our
GEB compensation (as well as the Chairman’s compensation) to
compensation decisions, including linking a meaningful portion of
the final outcome of this matter which is still not resolved.
GEB compensation (as well as the Chairman’s compensation) to
Furthermore, our performance award pool decision also
the final outcome of this matter which is still not resolved.
reflected our achievements relative to non-financial objectives,
Furthermore, our performance award pool decision also
such as our good progress toward delivering on our sustainability
reflected our achievements relative to non-financial objectives,
strategy, as well as the positive total shareholder return (TSR) of
such as our good progress toward delivering on our sustainability
UBS shares. It also reflected other factors, such as the growing
strategy, as well as the positive total shareholder return (TSR) of
competition to attract and retain a talented and diverse workforce
UBS shares. It also reflected other factors, such as the growing
that continues to deliver on our purpose and strategy.
competition to attract and retain a talented and diverse workforce
For 2021, the GEB performance award pool was CHF 79.8
that continues to deliver on our purpose and strategy.
million, a reduction of 1% on a per capita basis and a reduction
For 2021, the GEB performance award pool was CHF 79.8
of 6% overall. This decrease in an otherwise exceptionally good
million, a reduction of 1% on a per capita basis and a reduction
financial year contrasts with the Group pool increase of 10%. The
of 6% overall. This decrease in an otherwise exceptionally good
decision for the GEB pool considers the excellent financial result
financial year contrasts with the Group pool increase of 10%. The
offset by a proportionally larger downward adjustment than the
decision for the GEB pool considers the excellent financial result
Group pool to reflect the accountability of the GEB for the loss
offset by a proportionally larger downward adjustment than the
resulting from the default of a US-based client of our prime
Group pool to reflect the accountability of the GEB for the loss
brokerage business.
resulting from the default of a US-based client of our prime
brokerage business.
2021
2021
2020
› Refer to the “2021 key compensation themes” section of this
report for more information about the compensation impact
› Refer to the “2021 key compensation themes” section of this
resulting from the significant loss event, the French cross-border
report for more information about the compensation impact
matter, environmental, social and governance (ESG)
resulting from the significant loss event, the French cross-border
achievements, and other key compensation themes
matter, environmental, social and governance (ESG)
achievements, and other key compensation themes
more information
› Refer to the “Group compensation” section of this report for
› Refer to the “Group compensation” section of this report for
2022 Annual General Meeting
more information
At the 2022 AGM on 6 April, we will seek your support on the
2022 Annual General Meeting
following compensation-related items:
At the 2022 AGM on 6 April, we will seek your support on the
– the maximum aggregate amount of compensation for the BoD
following compensation-related items:
– the maximum aggregate amount of compensation for the BoD
– the maximum aggregate amount of fixed compensation for
for the period from the 2022 AGM to the 2023 AGM;
for the period from the 2022 AGM to the 2023 AGM;
the GEB for 2023;
– the maximum aggregate amount of fixed compensation for
– the aggregate amount of variable compensation for the GEB
the GEB for 2023;
for 2021; and
– the aggregate amount of variable compensation for the GEB
– shareholder endorsement
in an advisory vote for this
for 2021; and
Compensation Report.
in an advisory vote for this
– shareholder endorsement
On behalf of the Compensation Committee and the BoD, I
Compensation Report.
thank you again for your feedback and we respectfully ask for
On behalf of the Compensation Committee and the BoD, I
your continued support at the upcoming AGM.
thank you again for your feedback and we respectfully ask for
your continued support at the upcoming AGM.
Julie G. Richardson
Chairperson of the Compensation Committee of the
Julie G. Richardson
Board of Directors
Chairperson of the Compensation Committee of the
Board of Directors
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223
Corporate governance and compensation Advisory vote
Corporate governance and compensation | Compensation
2021 key compensation themes
The feedback we seek from our shareholders on compensation-
related topics is very important to us, as we are committed to
maintaining a strong link between the interests of our employees
and those of our shareholders. We continued engaging with
shareholders during 2021 and received overall positive feedback
about our compensation framework.
The text below summarizes key compensation themes for 2021
and provides answers to the questions we most frequently receive
from shareholders.
Summary of 2021 key compensation themes / responses to frequently asked questions
How do the refreshed financial targets announced in
February 2022 impact compensation?
The compensation decisions for 2021 reflect the achievements
relative to the 2021 objectives that were set in early 2021 and
consider the previous externally communicated targets. Similarly,
we have set objectives for 2022 that consider the refreshed
targets as communicated in February 2022.
In addition, for our Long-Term Incentive Plan (LTIP) awards for
2021 performance, we have reviewed the three-year average
return on common equity tier 1 (RoCET1) performance metric to
reflect our strategic return ambitions, our revised financial targets
and cost of capital.
Specifically, for our awards granted in early 2022 for 2021
performance, the required performance threshold for the
minimum payout has been raised to 8%, from 6% in prior-year
awards, to reflect our new financial targets. The required RoCET1
performance for a maximum payout is set at 18%, which
represents the upper end of our target range. The raised threshold
also increases the mid-point of the payout thresholds to better
reflect our cost of capital. The linear payout design between
threshold and maximum level supports our growth ambitions and
our focus on delivering sustainable performance without
encouraging excessive risk-taking.
How was the loss resulting from the default of a US-based
client of our prime brokerage business reflected in the
compensation process?
Despite our excellent financial performance in 2021, our
reputation and financial results were negatively impacted by a
significant USD 861 million pre-tax loss that we incurred in the
first half of 2021 related to the default of a US-based client of our
prime brokerage business.
We conducted a thorough review of the event and its root
causes, and took decisive actions reflecting the significance of the
event and its impact on our shareholders and reputation. The
outcomes of the review and the actions taken by management
were reviewed by the Joint Risk and Compensation Committees,
as well as other internal governance bodies, as appropriate.
The 2021 Group performance award pool was reduced
significantly as a consequence of this event. Our funding
approach for the performance award pool resulted in a direct and
substantial reduction, which was supplemented by an additional
and significant negative adjustment to the pool. Overall,
compensation was reduced by an amount equivalent to over half
of the post-tax loss. This reduction had a direct impact on
compensation for business and control functions, as well as for
the Group Executive Board (the GEB).
The GEB performance award pool had a proportionally larger
downward adjustment than the Group pool, to reflect the
accountability of the GEB for the event. The GEB per-capita
performance pool decreased in an otherwise exceptionally good
financial year.
On an individual level, we conducted a detailed accountability
review of employees involved in the event. The fact-finding for
the review was supported by external legal counsel, as well as our
internal investigation functions. The accountability review covered
30 employees, including relevant individuals in the GEB. The
outcomes of the review impacted performance reviews and
compensation decisions substantially, where appropriate.
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Advisory vote
Corporate governance and compensation | Compensation
2021 key compensation themes
The feedback we seek from our shareholders on compensation-
The text below summarizes key compensation themes for 2021
related topics is very important to us, as we are committed to
and provides answers to the questions we most frequently receive
maintaining a strong link between the interests of our employees
from shareholders.
and those of our shareholders. We continued engaging with
shareholders during 2021 and received overall positive feedback
about our compensation framework.
Summary of 2021 key compensation themes / responses to frequently asked questions
How was the loss resulting from the default of a US-based
How do the refreshed financial targets announced in
client of our prime brokerage business reflected in the
February 2022 impact compensation?
compensation process?
The compensation decisions for 2021 reflect the achievements
Despite our excellent financial performance in 2021, our
relative to the 2021 objectives that were set in early 2021 and
reputation and financial results were negatively impacted by a
consider the previous externally communicated targets. Similarly,
significant USD 861 million pre-tax loss that we incurred in the
we have set objectives for 2022 that consider the refreshed
first half of 2021 related to the default of a US-based client of our
targets as communicated in February 2022.
prime brokerage business.
In addition, for our Long-Term Incentive Plan (LTIP) awards for
We conducted a thorough review of the event and its root
2021 performance, we have reviewed the three-year average
causes, and took decisive actions reflecting the significance of the
return on common equity tier 1 (RoCET1) performance metric to
event and its impact on our shareholders and reputation. The
reflect our strategic return ambitions, our revised financial targets
outcomes of the review and the actions taken by management
and cost of capital.
were reviewed by the Joint Risk and Compensation Committees,
Specifically, for our awards granted in early 2022 for 2021
as well as other internal governance bodies, as appropriate.
performance, the required performance threshold for the
The 2021 Group performance award pool was reduced
minimum payout has been raised to 8%, from 6% in prior-year
significantly as a consequence of this event. Our funding
awards, to reflect our new financial targets. The required RoCET1
approach for the performance award pool resulted in a direct and
performance for a maximum payout is set at 18%, which
substantial reduction, which was supplemented by an additional
represents the upper end of our target range. The raised threshold
and significant negative adjustment to the pool. Overall,
also increases the mid-point of the payout thresholds to better
compensation was reduced by an amount equivalent to over half
reflect our cost of capital. The linear payout design between
of the post-tax loss. This reduction had a direct impact on
threshold and maximum level supports our growth ambitions and
compensation for business and control functions, as well as for
our focus on delivering sustainable performance without
the Group Executive Board (the GEB).
encouraging excessive risk-taking.
The GEB performance award pool had a proportionally larger
downward adjustment than the Group pool, to reflect the
accountability of the GEB for the event. The GEB per-capita
performance pool decreased in an otherwise exceptionally good
financial year.
On an individual level, we conducted a detailed accountability
review of employees involved in the event. The fact-finding for
the review was supported by external legal counsel, as well as our
internal investigation functions. The accountability review covered
30 employees, including relevant individuals in the GEB. The
outcomes of the review impacted performance reviews and
compensation decisions substantially, where appropriate.
What progress has been made on resolving the French
cross-border matter and how is this reflected in GEB
compensation?
In December 2021, UBS filed an appeal with the French Supreme
Court regarding the decision of the Court of Appeal relating to
the French cross-border matter. This matter remains ongoing and
was considered in the decision-making process for our 2021
performance award pool.
The use of the RoCET1 metric aims to ensure the cost of
litigation matters, including the French cross-border matter, has
an ongoing and direct impact on the compensation awarded and
realized by our most senior
including the GEB.
Additionally, when determining the 2019 performance award
pool, the impact of the French cross-border matter was
considered in our decision making.
leaders,
Furthermore, as outlined in our 2019 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. This matter
continues to be ongoing and, once resolved, the final outcome
will be reflected in the final amounts delivered to relevant current
and former employees.
Impact of litigation matters on the LTIP
(all years)
) LTIP design
P
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Added
measure for
2019 LTIP
award
(GEB members
active in
March 2017)
Performance metric
(RoCET1 directly impacted by litigation costs)
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 does UBS support diversity and pay fairness?
Ensuring fair treatment and strengthening our commitment to
diversity, equity and inclusion (DE&I) are vital to our sustainable
business success. We find diverse teams better understand and
relate to the needs of our equally diverse clients. Through the
diversity of our employees’ backgrounds and experiences, we
drive innovation and better decision making.
Gender diversity is a key priority for the firm. We are
particularly focused on increasing the representation of women at
senior management levels. We take a multi-pronged approach in
this respect, analyzing and adapting various factors that support
the hiring, development and retention of women at all levels.
Increasing the ethnic minority diversity of our workforce, and
a related commitment to support underrepresented talent and
communities, is also a top priority across all business divisions and
regions. We focus on four areas: accountability and transparency;
investing in our talent; improving our culture; and leveraging our
business strengths in underrepresented communities.
Compensating employees fairly and consistently is key to
ensuring equal opportunities. We pay for performance, and we
take pay equity seriously. A strong commitment to both is
embedded in our compensation policies, and we regularly
conduct both internal reviews and independent external audits as
quality checks. Additionally, these reviews also allow us to
maintain our certification status from the EQUAL-SALARY
Foundation for our equal pay practices in Switzerland, the US, the
UK, Hong Kong SAR and Singapore.
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
excessive risks on such matters. In addition, the use of RoCET1,
which includes both current and legacy matters, in our
performance assessment for GEB performance, as well as the LTIP
design, supports the focus on ensuring the cost of litigation
matters has in our compensation plans a direct impact on the
compensation awarded to and realized by our most senior
leaders, including the GEB.
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Corporate governance and compensation
Advisory vote
Corporate governance and compensation | Compensation
How does UBS promote and support the health and well-
being of employees?
Supporting employee health and well-being remained a priority in
2021. We are committed to helping employees thrive in their
current roles and deliver sustainable performance over time.
Regular “pulse” surveys gauged employees’ views on remote
work, stress, communication and other aspects. Resources to
support holistic well-being featured a bespoke eLearning
curriculum, physical and mental health initiatives, volunteering
opportunities, increased certain local benefits offerings, and
financial education events.
› Refer to the Sustainability Report 2021, available from 11 March
2022 under “Annual reporting” at ubs.com/investors, for more
information
How does UBS respond to the increasing competition for
talent?
We continue to see increasing competition for talent. These
pressures come from our direct competitors but also other
organizations including technology, consulting and new entrants
or disruptors, such as fintech firms. As a recognized employer of
choice, we continue to broaden and deepen our talent pools
through ongoing talent development and continued investment
in our employees. We take careful consideration to reflect pay for
performance and competitive pay in our decision making.
Furthermore, as our compensation approach includes substantial
deferral, we balance incentivizing performance with retention in
order to promote a sustainable workforce.
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 evaluation and compensation decisions.
ESG-related objectives have been embedded in our Pillars and
Principles since they were established in 2011. In 2021, we revised
the Group CEO and GEB scorecards and further enhanced the link
between ESG and compensation by
introducing explicit
sustainability objectives under “Strategic & Growth” in the non-
financial goal category. These sustainability objectives are linked
to our priorities, and their progress is measured via robust
quantitative metrics and qualitative criteria. Sustainability
objectives are individually assessed for each GEB member, and
consequently directly impact their performance assessments and
compensation decisions.
In addition, in the performance award pool funding across the
Group, ESG is also reflected through an assessment of progress
made toward targets linked to our focus areas of Planet, People
(including progress made toward our diversity ambitions) and
Partnerships, alongside other key dimensions.
Therefore ESG
into consideration when the
Compensation Committee assesses not only what results were
achieved but also how they were achieved.
is taken
For 2021, we established robust and concrete targets, and
made good progress toward achieving them. We continue to
increase our focus on this topic.
› Refer to “Environmental, Social and Governance considerations”
in the “Compensation philosophy and governance” section of
this report for more information
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226
How is ESG considered in the compensation process?
How does UBS promote and support the health and well-
ESG objectives are considered in the compensation determination
being of employees?
process in objective setting, performance award pool funding,
Supporting employee health and well-being remained a priority in
performance evaluation and compensation decisions.
2021. We are committed to helping employees thrive in their
ESG-related objectives have been embedded in our Pillars and
current roles and deliver sustainable performance over time.
the Group CEO and GEB scorecards and further enhanced the link
work, stress, communication and other aspects. Resources to
between ESG and compensation by
introducing explicit
support holistic well-being featured a bespoke eLearning
sustainability objectives under “Strategic & Growth” in the non-
curriculum, physical and mental health initiatives, volunteering
financial goal category. These sustainability objectives are linked
opportunities, increased certain local benefits offerings, and
to our priorities, and their progress is measured via robust
financial education events.
quantitative metrics and qualitative criteria. Sustainability
objectives are individually assessed for each GEB member, and
› Refer to the Sustainability Report 2021, available from 11 March
2022 under “Annual reporting” at ubs.com/investors, for more
consequently directly impact their performance assessments and
information
compensation decisions.
In addition, in the performance award pool funding across the
How does UBS respond to the increasing competition for
Group, ESG is also reflected through an assessment of progress
talent?
made toward targets linked to our focus areas of Planet, People
We continue to see increasing competition for talent. These
(including progress made toward our diversity ambitions) and
pressures come from our direct competitors but also other
Partnerships, alongside other key dimensions.
organizations including technology, consulting and new entrants
Therefore ESG
is taken
into consideration when the
or disruptors, such as fintech firms. As a recognized employer of
Compensation Committee assesses not only what results were
choice, we continue to broaden and deepen our talent pools
achieved but also how they were achieved.
through ongoing talent development and continued investment
For 2021, we established robust and concrete targets, and
in our employees. We take careful consideration to reflect pay for
made good progress toward achieving them. We continue to
performance and competitive pay in our decision making.
increase our focus on this topic.
› Refer to “Environmental, Social and Governance considerations”
Furthermore, as our compensation approach includes substantial
deferral, we balance incentivizing performance with retention in
in the “Compensation philosophy and governance” section of
order to promote a sustainable workforce.
this report for more information
Advisory vote
Corporate governance and compensation | Compensation
Principles since they were established in 2011. In 2021, we revised
Regular “pulse” surveys gauged employees’ views on remote
Say-on-pay votes at the AGM
Say-on-pay
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 report 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
Audited |
Approved fixed compensation
At the 2020 AGM, shareholders approved a maximum aggregate
fixed compensation amount of CHF 33.0 million for GEB
members for the 2021 performance year. This budget reflects
base salaries, role-based allowances in response to EU Capital
Requirements Directive IV, and estimated standard contributions
to retirement benefit plans, as well as other benefits.
Our expenses related to fixed compensation for our continuing
GEB members were within the budget; however, the amount of
fixed compensation related to the hiring of Barbara Levi as new
Group General Counsel resulted in exceeding this budget.
Therefore, as authorized by article 46 para. 5 of our Articles of
Association, an amount of CHF 2.2 million was used to pay the
portion of her fixed compensation (including replacement awards)
that exceeded the approved amount.
› Refer to “2021 total compensation for the GEB members” in the
“Compensation for GEB members” section of this report
Say on pay – compensation-related votes at the 2021 AGM
2021 AGM say-on-pay voting schemes
2021 AGM actual shareholder votes
Binding vote on GEB variable compensation
Shareholders approved CHF 85,000,000 for the 2020 financial year1,2,3
Binding vote on GEB fixed compensation
Shareholders approved CHF 33,000,000 for the 2022 financial year1,2,3
Binding vote on BoD compensation
Shareholders approved CHF 13,000,000 for the period from the 2021 AGM
to the 2022 AGM1,2,4
Vote “for”
84.8%
91.8%
91.1%
Advisory vote on the Compensation Report
Shareholders approved the UBS Group AG Compensation Report 2020 in an advisory vote
85.7%
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 2021. 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 2021, twelve GEB members were
in office on 31 December 2021 and thirteen GEB members on 31 December 2020. 44 Twelve BoD members were in office on 31 December 2021.
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227
227
Corporate governance and compensation
Advisory vote
Corporate governance and compensation | Compensation
Compensation-related proposals for 2022
At the 2022 AGM, we will ask our shareholders to vote on the
variable compensation for the GEB for 2021, the fixed
compensation for the GEB for 2023 and the compensation for the
BoD from the 2022 AGM to the 2023 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
2022 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 2022 AGM
Item
Proposal
Rationale
GEB variable
compensation
GEB fixed
compensation
The Board of Directors proposes an
aggregate amount of variable
compensation of CHF 79,750,000
for the members of the GEB for the
2021 financial year.
The proposed amount reflects a reduction of 1% on a per capita basis and a reduction of 6%
overall compared with the previous year. This decrease in an otherwise exceptionally good financial
year contrasts with the Group pool increase of 10%. The decision for the GEB pool considers the
excellent financial result offset by a proportionally larger downward adjustment than the Group
pool to reflect the accountability of the GEB for the loss resulting from the default of a US-based
client of our prime brokerage business.
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 2023 financial
year.
The proposed amount is unchanged from the previous year, reflecting consistency in planning over
time and unchanged base salaries for the Group CEO and other GEB members. In addition to the
base salaries, it also includes role-based allowances in response to EU Capital Requirements
Directive IV, estimated standard contributions to retirement benefit plans, and other benefits. The
proposed amount provides flexibility in light of potential changes of GEB composition or roles,
competitive considerations where potential additional role-based allowances may be required, and
other factors (e.g., changes in FX rates or benefits).
BoD
compensation
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
2022 AGM to the 2023 AGM.
The proposed amount is unchanged compared with the previous period and includes the total
compensation of the nominated Chairman and Vice Chairman. For the new Chairman we expect
his total compensation would be approximately CHF 0.4 million lower compared with the current
Chairman (a reduction of approximately 8%). The fees for BoD members other than the nominated
Chairman and Vice Chairman are unchanged.
228
228
Advisory vote
Corporate governance and compensation | Compensation
Compensation-related proposals for 2022
The table below outlines our compensation proposals,
including supporting rationales, that we plan to submit to the
Compensation philosophy and governance
At the 2022 AGM, we will ask our shareholders to vote on the
2022 AGM for binding votes (in line with the Swiss Ordinance
variable compensation for the GEB for 2021, the fixed
against Excessive Compensation in Listed Stock Corporations and
compensation for the GEB for 2023 and the compensation for the
our Articles of Association (AoA)).
Our compensation philosophy
Total Reward Principles
This ensures that the interests of our employees are aligned
with those of our clients and other stakeholders.
Our Total Reward Principles provide a strong link to our strategic
imperatives and encourage employees to live our strong and
inclusive culture that is grounded in our three keys to success: our
Pillars, Principles and Behaviors.
to
These guiding principles underpin our approach
compensation and define our compensation framework. In 2021,
following the launch of our purpose, we reviewed our Total
Reward Principles and compensation framework to confirm they
are fully aligned with our purpose and support our strategic
imperatives.
Therefore, our compensation approach supports our capital
strength and risk management, and provides for simplification
and efficiency. It encourages employees to focus on client
centricity, connectivity and sustainable impact in everything we
do. Moreover, we reward behaviors that help build and protect
the firm’s reputation, specifically accountability with integrity,
collaboration and innovation. 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 globally, but vary in certain locations according to local legal requirements and
regulations and practices. The table below provides a summary of our Total Reward Principles.
Support our purpose and strategy
Our compensation approach supports the firm’s purpose and strategy, fosters engagement among
employees and aligns their long-term interests with those of clients and stakeholders.
Attract, retain and connect a diverse, talented
workforce
We embrace a culture of diversity, equity, and inclusiveness. Pay at UBS is fair, reflects equal
treatment and is competitive. In this way, our investment in a connected workforce supports the
sustainability of the organization.
Apply a pay-for-performance approach to
support development and our ways of working
The setting of clear objectives and a thorough evaluation of what was achieved and how it was
achieved, combined with effective communication, promote clarity, accountability and establish a
strong link between pay and performance. This approach emphasizes our Behaviors, which are
accountability with integrity, collaboration and innovation.
Reinforce sustainable growth and support long-
term value creation
Compensation is appropriately balanced between fixed and variable elements and delivered over an
appropriate period to support our growth ambitions and sustainable performance.
Support risk awareness and appropriate risk-
taking
Our compensation structure encourages employees to have a focus on risk management and behave
consistently with the firm’s risk framework and appetite, thereby anticipating and managing risks
effectively to protect our capital and reputation.
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, deferred contingent capital awards and deferred share-
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 “Compensation elements for all employees” in the
“Group compensation” section of this report for more
information
Total Reward
Total compensation
Performance award
Deferred Contingent Capital Plan
Base salary /
fixed
compensation
Deferred share-based awards:
– Long-Term Incentive Plan (GEB
and selected senior management)
– Equity Ownership Plan (all other
employees, as applicable)
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
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229
BoD from the 2022 AGM to the 2023 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.
Compensation-related proposals for binding votes at the 2022 AGM
Item
Proposal
Rationale
GEB variable
compensation
The Board of Directors proposes an
The proposed amount reflects a reduction of 1% on a per capita basis and a reduction of 6%
aggregate amount of variable
overall compared with the previous year. This decrease in an otherwise exceptionally good financial
compensation of CHF 79,750,000
year contrasts with the Group pool increase of 10%. The decision for the GEB pool considers the
for the members of the GEB for the
excellent financial result offset by a proportionally larger downward adjustment than the Group
2021 financial year.
pool to reflect the accountability of the GEB for the loss resulting from the default of a US-based
client of our prime brokerage business.
GEB fixed
The Board of Directors proposes a
The proposed amount is unchanged from the previous year, reflecting consistency in planning over
compensation
maximum aggregate amount of
time and unchanged base salaries for the Group CEO and other GEB members. In addition to the
fixed compensation of
base salaries, it also includes role-based allowances in response to EU Capital Requirements
CHF 33,000,000 for the members
Directive IV, estimated standard contributions to retirement benefit plans, and other benefits. The
of the GEB for the 2023 financial
proposed amount provides flexibility in light of potential changes of GEB composition or roles,
year.
competitive considerations where potential additional role-based allowances may be required, and
other factors (e.g., changes in FX rates or benefits).
BoD
The Board of Directors proposes a
The proposed amount is unchanged compared with the previous period and includes the total
compensation
maximum aggregate amount of
compensation of the nominated Chairman and Vice Chairman. For the new Chairman we expect
compensation of CHF 13,000,000
his total compensation would be approximately CHF 0.4 million lower compared with the current
for the members of the Board of
Chairman (a reduction of approximately 8%). The fees for BoD members other than the nominated
Directors for the period from the
Chairman and Vice Chairman are unchanged.
2022 AGM to the 2023 AGM.
228
Corporate governance and compensation Advisory vote
Corporate governance and compensation | Compensation
Compensation governance
Board of Directors and Compensation Committee
The BoD is ultimately responsible for approving the compensation
strategy and principles proposed by
the Compensation
Committee, which determines compensation-related matters in
line with the principles set forth in the AoA.
to
thereof,
approve
implementation
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
certain
oversee
compensation and to scrutinize executive compensation. The
Compensation Committee consists of
independent BoD
members, who are elected annually by shareholders at the AGM,
is responsible for governance and oversight of our
and
compensation process and practices. This includes the alignment
between pay and performance, and ensuring
the
compensation framework supports appropriate risk awareness
and management, as well as appropriate risk-taking. In 2021, to
additionally support the connection between the Compensation
Committee and the Risk Committee, the Compensation
Committee Chairperson was also a member of the Risk
Committee.
that
Annually, and on behalf of the BoD, the Compensation
Committee:
– reviews our Total Reward Principles;
– approves key features of the compensation framework and
plans for the non-independent Board members and GEB
members;
– reviews performance award funding throughout the year and
proposes, upon proposal of the Group CEO, the final annual
Group performance award pool for BoD approval;
– upon proposal of the Group CEO, reviews the performance
framework of the other GEB members;
– upon proposal of the Group CEO, proposes the performance
assessments and the individual total compensation for the
other GEB members for approval by the BoD;
– upon proposal of the Chairman, proposes financial and non-
financial performance targets and objectives for the Group
CEO and the Group CEO’s performance assessment for
approval by the Board;
– approves the total compensation for the Chairman and the
non-independent Board members;
– proposes, upon proposal of the Chairman, the total
compensation for the Group CEO for approval by the Board;
– proposes to the BoD the maximum aggregate amounts of BoD
compensation and GEB fixed compensation and the aggregate
amount of variable compensation for the GEB for approval by
the general meeting of the shareholders;
– upon proposal of the Chairman, proposes the remuneration /
fee framework for independent Board members for approval
by the Board;
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230
– upon proposal of the Chairman and Group CEO, approves the
remuneration / fee frameworks for external supervisory board
members of Significant Group Entities and be informed of
remuneration / fee frameworks for external supervisory board
members of Significant Regional Entities; and
– proposes to the BoD for approval the annual compensation
report and approves other material public disclosures on UBS
compensation matters.
The Compensation Committee is required to meet at least four
times each year. All meetings in 2021 were held in the presence
of the Chairman and the Group CEO and most were attended by
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.
After the meetings, the Chairperson of the Compensation
Committee reports to the BoD on the Compensation Committee’s
activities and discussions and, if necessary, submits proposals for
approval by the full BoD. Compensation Committee meeting
minutes are also sent to all members of the BoD.
On 31 December 2021, the members of the Compensation
(Chairperson), Reto
Committee were Julie G. Richardson
Francioni, Dieter Wemmer and Jeanette Wong.
› Refer to “Board of Directors” in the “Corporate governance”
section of our Annual Report 2021 for more information
External advisors
The Compensation Committee may retain external advisors to
support it in fulfilling its duties. In 2021, 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
risk
reflects
appropriately
The Risk Committee, a committee of the BoD, works closely with
the Compensation Committee to ensure that our compensation
framework
and
management, and ensures appropriate risk-taking. 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
in
Risk Control and Compliance and Operational Risk
the
compensation and
compensation process.
risk-related aspects of
awareness
reviews
› Refer to ubs.com/governance for more information
Advisory vote
Corporate governance and compensation | Compensation
Compensation governance
Compensation Committee 2021 / 2022 key activities and timeline
May
June
July
Sept
Oct
Nov¹
Dec¹
Jan
Feb
Board of Directors and Compensation Committee
– upon proposal of the Chairman and Group CEO, approves the
SSttrraatteeggyy,, ppoolliiccyy aanndd ggoovveerrnnaannccee
Total Reward Principles
The BoD is ultimately responsible for approving the compensation
members of Significant Group Entities and be informed of
strategy and principles proposed by
the Compensation
remuneration / fee frameworks for external supervisory board
Committee, which determines compensation-related matters in
members of Significant Regional Entities; and
line with the principles set forth in the AoA.
– proposes to the BoD for approval the annual compensation
Compensation disclosure and stakeholder communication matters
AGM reward-related items
Compensation Committee governance
As determined in the AoA and the firm’s Organization
report and approves other material public disclosures on UBS
AAnnnnuuaall ccoommppeennssaattiioonn rreevviieeww
remuneration / fee frameworks for external supervisory board
Sustainability / ESG in the compensation process
Accruals and full-year forecast of the performance award pool funding
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
RRiisskk aanndd rreegguullaattoorryy
Risk management in the compensation approach and joint meeting with
BoD Risk Committee
Regulatory activities impacting employees and engagement with regulators
Annually, and on behalf of the BoD, the Compensation
Francioni, Dieter Wemmer and Jeanette Wong.
11 The Compensation Committee held two meetings in November 2021 and three meetings in December 2021.
› Refer to “Board of Directors” in the “Corporate governance”
section of our Annual Report 2021 for more information
Compensation governance
The table below provides an overview of compensation governance by specific role.
Recipients
Compensation recommendations proposed by
Approved by
Chairman of the BoD
Chairperson of the Compensation Committee
Compensation Committee1
Independent BoD members
(remuneration / fee framework)
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.
Regulations, the Compensation Committee supports the BoD
compensation matters.
with its duties to set guidelines on compensation and benefits, to
oversee
implementation
thereof,
to
approve
certain
The Compensation Committee is required to meet at least four
compensation and to scrutinize executive compensation. The
times each year. All meetings in 2021 were held in the presence
Compensation Committee consists of
independent BoD
of the Chairman and the Group CEO and most were attended by
members, who are elected annually by shareholders at the AGM,
external advisors. Individuals, including the Chairman and the
and
is responsible for governance and oversight of our
Group CEO, are not permitted to attend a meeting or participate
compensation process and practices. This includes the alignment
in a discussion on their own performance and compensation.
between pay and performance, and ensuring
that
the
After the meetings, the Chairperson of the Compensation
compensation framework supports appropriate risk awareness
Committee reports to the BoD on the Compensation Committee’s
and management, as well as appropriate risk-taking. In 2021, to
activities and discussions and, if necessary, submits proposals for
additionally support the connection between the Compensation
approval by the full BoD. Compensation Committee meeting
Committee and the Risk Committee, the Compensation
minutes are also sent to all members of the BoD.
Committee Chairperson was also a member of the Risk
On 31 December 2021, the members of the Compensation
Committee were Julie G. Richardson
(Chairperson), Reto
Committee.
Committee:
members;
– reviews our Total Reward Principles;
– approves key features of the compensation framework and
plans for the non-independent Board members and GEB
External advisors
– reviews performance award funding throughout the year and
The Compensation Committee may retain external advisors to
proposes, upon proposal of the Group CEO, the final annual
support it in fulfilling its duties. In 2021, HCM International Ltd.
Group performance award pool for BoD approval;
(HCM) provided independent advice on compensation matters.
– upon proposal of the Group CEO, reviews the performance
HCM holds no other mandates with UBS. Additionally, Willis
framework of the other GEB members;
Towers Watson provided the Compensation Committee with data
– upon proposal of the Group CEO, proposes the performance
on market trends and pay levels. Various subsidiaries of Willis
assessments and the individual total compensation for the
Towers Watson provide similar information to Human Resources
other GEB members for approval by the BoD;
in relation to compensation for employees. Willis Towers Watson
– upon proposal of the Chairman, proposes financial and non-
holds no other compensation-related mandates with UBS.
financial performance targets and objectives for the Group
CEO and the Group CEO’s performance assessment for
The Risk Committee’s role in compensation
approval by the Board;
– approves the total compensation for the Chairman and the
The Risk Committee, a committee of the BoD, works closely with
non-independent Board members;
the Compensation Committee to ensure that our compensation
– proposes, upon proposal of the Chairman, the total
framework
appropriately
reflects
risk
awareness
and
compensation for the Group CEO for approval by the Board;
management, and ensures appropriate risk-taking. It supervises
– proposes to the BoD the maximum aggregate amounts of BoD
and sets appropriate risk management and risk control principles
compensation and GEB fixed compensation and the aggregate
and is regularly briefed on how risk is factored into the
amount of variable compensation for the GEB for approval by
compensation process. It also monitors the involvement of Group
the general meeting of the shareholders;
Risk Control and Compliance and Operational Risk
in
– upon proposal of the Chairman, proposes the remuneration /
compensation and
reviews
risk-related aspects of
the
fee framework for independent Board members for approval
compensation process.
by the Board;
› Refer to ubs.com/governance for more information
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Corporate governance and compensation | Compensation
Environmental, Social and Governance considerations
ESG in the compensation determination process
Fair pay and pay for performance
Compensating employees fairly and consistently is key to ensuring
equal opportunities. We pay for performance, and we take pay
equity seriously. A strong commitment to both is embedded in our
compensation policies, and we conduct both internal reviews and
independent external audits as quality checks. If we uncover gaps
that cannot be explained by business factors or appropriate
personal factors – such as experience, role, responsibility,
performance or location – we explore the root causes of those gaps
and address them.
Additionally, our regular monitoring and review processes also
allow us to maintain our certification status with the EQUAL-
SALARY Foundation for our equal pay practices in Switzerland, the
US, the UK, Hong Kong SAR and Singapore. The firm also
successfully completed an equal pay analysis in Switzerland in 2020,
as required by the Swiss Federal Act on Gender Equality. The results
of the analysis confirmed that we are fully compliant with Swiss
equal pay standards. These holistic certifications are a testament to
our well-established equal opportunity environment and the
strength of our human resources practices, including performance
and reward. In 2021, we continued to monitor pay fairness and
addressed any unexplained gaps to ensure that all employees are
paid fairly.
ESG objectives are considered in the compensation determination
process in objective setting, performance award pool funding,
performance evaluation and compensation decisions.
ESG-related objectives have been embedded in our Pillars and
Principles since they were established in 2011. In 2021, we revised
the Group CEO and GEB scorecards and further enhanced the link
between ESG and compensation by
introducing explicit
sustainability objectives under “Strategic & Growth” in the non-
financial goal category. These sustainability objectives are linked
to our priorities, and their progress is measured via robust
quantitative metrics and qualitative criteria. The table below
provides an overview of our metrics and progress achieved in
2021. Sustainability objectives are individually assessed for each
GEB member, and consequently directly impact their performance
assessments and compensation decisions.
In addition, in the performance award pool funding across the
Group, ESG is also reflected through an assessment of progress
made against targets linked to our focus areas of Planet, People
(including progress made against our diversity ambitions) and
Partnerships, alongside other key dimensions. Therefore ESG is
taken into consideration when the Compensation Committee
assesses not only what results were achieved but also how they
were achieved.
For 2021, we established robust and concrete targets, and
made good progress toward achieving them. We continue to
increase our focus on this topic.
› Refer to “GEB performance assessments“ in the “Compensation
for GEB members” section of this report for more information
about the GEB performance measurement process
› Refer to “Our focus on sustainability and climate,” “Employees”
and “Society” in the “How we create value for our stakeholders”
section of our Annual Report 2021 for more information
› Refer to ubs.com/gri for more information about ESG-related
topics
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Corporate governance and compensation | Compensation
Environmental, Social and Governance considerations
Our targets and progress
ESG in the compensation determination process
Fair pay and pay for performance
ESG objectives are considered in the compensation determination
Compensating employees fairly and consistently is key to ensuring
process in objective setting, performance award pool funding,
equal opportunities. We pay for performance, and we take pay
performance evaluation and compensation decisions.
equity seriously. A strong commitment to both is embedded in our
ESG-related objectives have been embedded in our Pillars and
compensation policies, and we conduct both internal reviews and
Principles since they were established in 2011. In 2021, we revised
independent external audits as quality checks. If we uncover gaps
the Group CEO and GEB scorecards and further enhanced the link
that cannot be explained by business factors or appropriate
between ESG and compensation by
introducing explicit
personal factors – such as experience, role, responsibility,
sustainability objectives under “Strategic & Growth” in the non-
performance or location – we explore the root causes of those gaps
financial goal category. These sustainability objectives are linked
and address them.
to our priorities, and their progress is measured via robust
Additionally, our regular monitoring and review processes also
quantitative metrics and qualitative criteria. The table below
allow us to maintain our certification status with the EQUAL-
provides an overview of our metrics and progress achieved in
SALARY Foundation for our equal pay practices in Switzerland, the
2021. Sustainability objectives are individually assessed for each
US, the UK, Hong Kong SAR and Singapore. The firm also
GEB member, and consequently directly impact their performance
successfully completed an equal pay analysis in Switzerland in 2020,
assessments and compensation decisions.
as required by the Swiss Federal Act on Gender Equality. The results
In addition, in the performance award pool funding across the
of the analysis confirmed that we are fully compliant with Swiss
Group, ESG is also reflected through an assessment of progress
equal pay standards. These holistic certifications are a testament to
made against targets linked to our focus areas of Planet, People
our well-established equal opportunity environment and the
(including progress made against our diversity ambitions) and
strength of our human resources practices, including performance
Partnerships, alongside other key dimensions. Therefore ESG is
and reward. In 2021, we continued to monitor pay fairness and
taken into consideration when the Compensation Committee
addressed any unexplained gaps to ensure that all employees are
assesses not only what results were achieved but also how they
paid fairly.
were achieved.
For 2021, we established robust and concrete targets, and
made good progress toward achieving them. We continue to
increase our focus on this topic.
› Refer to “GEB performance assessments“ in the “Compensation
for GEB members” section of this report for more information
about the GEB performance measurement process
› Refer to “Our focus on sustainability and climate,” “Employees”
and “Society” in the “How we create value for our stakeholders”
section of our Annual Report 2021 for more information
› Refer to ubs.com/gri for more information about ESG-related
topics
Our priorities
Our targets
Our progress in 2021
Planet,
people,
partnerships
Planet
USD 400 billion invested assets in sustainable investments
by 2025.
Increased invested assets in sustainable investments to
USD 251 billion (compared with USD 141 billion in 2020).
Set decarbonization targets for 2030 for financing of the
fossil fuels, power generation and real estate sectors (from
2020 levels):
Estimated baselines and development of net-zero-aligned
pathways for the fossil fuel, power generation and real
estate (commercial and residential) sectors.
– reduce absolute financed emissions associated with UBS
loans to fossil fuel companies by 71%;
– reduce emissions intensity associated with UBS loans to
power generation companies by 49%;
– reduce emissions intensity of UBS’s commercial real
estate lending portfolio by 44%; and
– reduce emissions intensity of UBS’s residential real estate
lending portfolio by 42%.
Align USD 235 billion of invested assets to net zero by
2030 (Asset Management).
Achieve net-zero emissions across discretionary client
portfolios by 2050.
Achieve net-zero energy emissions resulting from our own
operations (scope 1 and 2) by 2025; cut energy
consumption by 15% by 2025 (compared with 2020).
Established Asset Management baseline covering the
weighted average carbon intensity of the respective
benchmark for each strategy and fund included in our
target.
Expanded discretionary offering with climate transition-
focused solutions and built more detailed carbon footprint
data into our research and reporting toolkits.
Reduced net greenhouse gas footprint for scope 1 and 2
emissions by 75% and energy consumption by 5%
(compared with 2020); continued implementation of the
replacement of fossil fuel heating systems and investing in
credible carbon removal projects; maintained 100%
renewable electricity coverage.
Offset historical emissions back to the year 2000 by
sourcing carbon offsets (by end 2021) and by offsetting
credit delivery and full retirement in registry (by end 2025).
Completed the sourcing process for a portfolio of
transparent carbon offsets from the voluntary carbon
market across a range of project types and geographies.
Engage with key vendors on targeting net zero by 2035.
Commenced working on understanding and quantifying
the scope 3 emissions in our supply chain.
People
30% global female representation at Director level and
above by 2025.
Increased to 26.7% (2020: 26.0%) female representation
at Director level and above.
26% US ethnic minority representation at Director level
and above by 2025.
Increased to 20.1% (2020: 19.5%) ethnic minority
representation at Director level and above in the US.
26% UK ethnic minority representation at Director level
and above by 2025.
Increased to 21.3% (2020: 20.7%) ethnic minority
representation at Director level and above in the UK.
Raise USD 1 billion in donations to our client philanthropy
foundations and funds and reach 25 million beneficiaries
by 2025 (cumulative for years 2021-2025).
Achieved UBS Optimus Foundation donations volume of
USD 161 million (including UBS matching contributions)
and reached 4.6 million beneficiaries.
Support one million beneficiaries through our community
impact activities by 2025 (cumulative for years 2020-
2024).
Reached 1.199 million beneficiaries through strategic
community impact activities cumulatively during 2020 and
2021, surpassing our 2025 target in two years.
Partnerships
Establish UBS as a leading facilitator of discussion, debate
and idea generation.
Drive standards, research and development, and product
development through partnerships across the financial
ecosystem.
Launched the UBS Sustainability and Impact Institute, with
the objective of delivering original, best-in-class
sustainability and impact thought leadership.
Continued implementation of the Principles for
Responsible Banking by expanding the scope of our
impact analyses and improving upon our existing
methodologies in partnership with the UN Environment
Program and peers.
› Refer to the Sustainability Report 2021, available from 11 March 2022 under “Annual reporting“ at ubs.com/investors, for more
information
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Corporate governance and compensation | Compensation
Our commitment to diversity, equity and inclusion
Ensuring fair treatment and strengthening our commitment to
DE&I are vital to our sustainable business success. We find diverse
teams better understand and relate to the needs of our equally
diverse clients. Through the diversity of our employees’
backgrounds and experiences, we drive innovation and better
decision making. Our aim, therefore, is to shape a diverse and
inclusive organization that is innovative, provides outstanding
service to our clients and offers equitable opportunities so that
every employee can thrive.
UBS is a strong supporter of the UN Standards of Conduct for
Business anti-discrimination guidelines. Additionally, we are
signatories to the UN-backed Women’s Empowerment Principles,
the UK’s Women in Finance Charter and Race at Work Charter,
and the Corporate Call to Action in the US. Philosophically, we
take a broad approach to DE&I, focusing on a range of aspects,
including inclusive leadership, age, gender, race and ethnicity,
LGBTQ+, disability, and veterans. Building inclusive leadership
skills, increasing gender and ethnic diversity, and equitable
policies and practices were our leading priorities in 2021.
Gender diversity is a key priority for the firm. We are particularly
focused on increasing the representation of women at senior
management levels. We take a multi-pronged approach in this
respect, analyzing and adapting various factors that support the
hiring, development and retention of women at all levels. For
example, our interviews for open roles are expected to include
qualified diverse candidates, and our interview questions seek to
gauge inclusive leadership competencies for executive roles.
To ensure we are making progress, we hold ourselves and our
leaders accountable. For example, in early 2020 we publicly stated
our aspiration to have 30% of all Director and above roles held
by women by 2025. At the end of 2021, that figure stood at
26.7%, up from 26.0% in 2020. As of 31 December 2021, 25%
of GEB members were female and we expect to increase this ratio
to 33% in early 2022 after the designated Group Chief Financial
Officer joins the firm. In addition, 27% of senior managers who
reported directly to the Group Executive Board (the GEB) in 2021
were
the
determination of the annual performance award pool and are
included in the explicit sustainability objectives under “Strategic &
Growth” for the GEB, as outlined in the table on the previous
page.
female. These aspirations are considered
in
Increasing the ethnic minority diversity of our workforce, and
a related commitment to support underrepresented talent and
communities, is also a top priority across all business divisions and
regions. We focus on four areas: accountability and transparency;
investing in our talent; improving our culture; and leveraging our
business strengths in underrepresented communities.
We take a country-by-country approach, in close collaboration
with relevant business and jurisdictional entities. This is because
legislation, legal requirements and progress toward racial and
ethnic equality vary significantly across the locations in which we
do business. In the short term, the largest share of our efforts is
focused on Switzerland, the US and the UK. In Switzerland, we
began collecting ethnicity data on a voluntary basis in 2021,
aimed at understanding the current representation within our
local workforce. Our 2025 aspiration is to achieve a 26%
representation of ethnic minorities at Director level and above in
the UK and the US. As of the end of 2021, our representation was
20.1% in the US and 21.3% in the UK.
Our employee networks are strong partners in our ethnic
diversity strategy. Throughout 2021, our ethnicity-focused
MOSAIC networks globally facilitated numerous events for staff
in every region to increase awareness and personal accountability
along with specialized educational sessions for network members.
In addition, a community of more than 480 Diversity and Inclusion
Ambassadors acts as a resource for employee advice and coaching
on conversations about various diversity and inclusion-related
topics.
We are committed to ensuring a workplace where employees
are fairly treated, with equitable employment and advancement
opportunities for all. We do not tolerate harassment of any kind,
including sexual harassment, and we take measures to prevent all
forms of harassment, bullying, victimization and retaliation. Our
policies, procedures, employee and line manager education, and
awareness materials all encourage employees to raise concerns,
which they may do openly or anonymously. 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 2021, available from 11 March 2022 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 2021 for more
information.
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Corporate governance and compensation | Compensation
Performance award pool funding
Our compensation philosophy focuses on balancing performance
with appropriate risk-taking, retaining talented employees and
shareholder returns. Our overall performance award pool funding
percentage reduces as financial performance increases. In years of
strong
excessive
compensation and results in an increased proportion of profit
before performance awards being 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.
financial performance,
this prevents
Our performance award pool funding framework is based on
Group and business division performance, including achievements
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, risk-weighted assets and cost
efficiency. The Risk and Compliance functions support our holistic
reflection and consideration of the financial and non-financial
impact (including reputation) of risk matters. We further consider
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 including significant events.
The funding for Group Functions is linked to overall Group
performance and reflects headcount, workforce location and
demographics. For each functional area quantitative and
qualitative assessments evaluate service quality, risk management
and
financial achievements. Our decisions also balance
consideration of financial performance with a range of factors,
including DE&I and other ESG metrics, the impact of litigation,
regulatory costs, the effect of changes in financial accounting
standards, capital returns, and relative total shareholder return.
Before making its final proposal to the BoD, the Compensation
Committee considers the CEO’s proposals and can apply a
positive or negative adjustment to the performance award pool.
For example, despite our excellent financial results in 2021, our
reputation and financial results were negatively impacted by a loss
related to the default of a US-based client of our prime brokerage
business. As a consequence, the 2021 Group performance award
pool was reduced significantly. Our funding approach for the
performance award pool resulted in a direct and substantial
reduction, which was supplemented by a significant negative
adjustment to the pool.
Taking into consideration the above proposals and factors,
over the past nine years the Compensation Committee has
approved adjustments to the performance award pool, resulting
in downward adjustments in all but one year.
› Refer to “2021 Group performance outcomes” in the “Group
compensation” section of this report
› Refer to the “Group performance” section of our Annual Report
2021 for more information about our results
Our commitment to diversity, equity and inclusion
Increasing the ethnic minority diversity of our workforce, and
a related commitment to support underrepresented talent and
Ensuring fair treatment and strengthening our commitment to
communities, is also a top priority across all business divisions and
DE&I are vital to our sustainable business success. We find diverse
regions. We focus on four areas: accountability and transparency;
teams better understand and relate to the needs of our equally
investing in our talent; improving our culture; and leveraging our
diverse clients. Through the diversity of our employees’
business strengths in underrepresented communities.
backgrounds and experiences, we drive innovation and better
We take a country-by-country approach, in close collaboration
decision making. Our aim, therefore, is to shape a diverse and
with relevant business and jurisdictional entities. This is because
inclusive organization that is innovative, provides outstanding
legislation, legal requirements and progress toward racial and
service to our clients and offers equitable opportunities so that
ethnic equality vary significantly across the locations in which we
every employee can thrive.
do business. In the short term, the largest share of our efforts is
UBS is a strong supporter of the UN Standards of Conduct for
focused on Switzerland, the US and the UK. In Switzerland, we
Business anti-discrimination guidelines. Additionally, we are
began collecting ethnicity data on a voluntary basis in 2021,
signatories to the UN-backed Women’s Empowerment Principles,
aimed at understanding the current representation within our
the UK’s Women in Finance Charter and Race at Work Charter,
local workforce. Our 2025 aspiration is to achieve a 26%
and the Corporate Call to Action in the US. Philosophically, we
representation of ethnic minorities at Director level and above in
take a broad approach to DE&I, focusing on a range of aspects,
the UK and the US. As of the end of 2021, our representation was
including inclusive leadership, age, gender, race and ethnicity,
20.1% in the US and 21.3% in the UK.
LGBTQ+, disability, and veterans. Building inclusive leadership
Our employee networks are strong partners in our ethnic
skills, increasing gender and ethnic diversity, and equitable
diversity strategy. Throughout 2021, our ethnicity-focused
policies and practices were our leading priorities in 2021.
MOSAIC networks globally facilitated numerous events for staff
Gender diversity is a key priority for the firm. We are particularly
in every region to increase awareness and personal accountability
focused on increasing the representation of women at senior
along with specialized educational sessions for network members.
management levels. We take a multi-pronged approach in this
In addition, a community of more than 480 Diversity and Inclusion
respect, analyzing and adapting various factors that support the
Ambassadors acts as a resource for employee advice and coaching
hiring, development and retention of women at all levels. For
on conversations about various diversity and inclusion-related
example, our interviews for open roles are expected to include
topics.
qualified diverse candidates, and our interview questions seek to
We are committed to ensuring a workplace where employees
gauge inclusive leadership competencies for executive roles.
are fairly treated, with equitable employment and advancement
To ensure we are making progress, we hold ourselves and our
opportunities for all. We do not tolerate harassment of any kind,
leaders accountable. For example, in early 2020 we publicly stated
including sexual harassment, and we take measures to prevent all
our aspiration to have 30% of all Director and above roles held
forms of harassment, bullying, victimization and retaliation. Our
by women by 2025. At the end of 2021, that figure stood at
policies, procedures, employee and line manager education, and
26.7%, up from 26.0% in 2020. As of 31 December 2021, 25%
awareness materials all encourage employees to raise concerns,
of GEB members were female and we expect to increase this ratio
which they may do openly or anonymously. An internal anti-
to 33% in early 2022 after the designated Group Chief Financial
harassment officer appointed by the Group Head Human
Officer joins the firm. In addition, 27% of senior managers who
Resources provides an independent view of the firm’s various
reported directly to the Group Executive Board (the GEB) in 2021
processes and procedures to prevent harassment and sexual
were
female. These aspirations are considered
in
the
misconduct.
determination of the annual performance award pool and are
included in the explicit sustainability objectives under “Strategic &
Growth” for the GEB, as outlined in the table on the previous
page.
› Refer to ubs.com/diversity for additional information about our
priorities, commitments and progress, and the Sustainability
Report 2021, available from 11 March 2022 under “Annual
reporting” at ubs.com/investors, for our management practices
and detailed employee data, including gender- and region-
› Refer to ”Employees” in the ”How we create value for our
stakeholders” section of our Annual Report 2021 for more
specific data
information.
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Corporate governance and compensation | Compensation
Performance award pool funding process – illustrative overview
Financial
performance
Risk
adjustment
Quantitative and qualitative adjustments
1
Business
division
financial
performance
2
Risk-adjusted
business
division
performance
award pool
Business
division
measures
3
Qualitative,
risk, regulatory
and
sustainability
assessment
Relative
performance
versus peers
Market
position
and trends
Consultation of
Group CEO with
GEB members
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 starting point for the funding process is the 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
Business division
measures
Qualitative, risk,
regulatory and
sustainability
assessment
Predetermined business division-specific funding rates are applied to risk-adjusted performance, which excludes
items that are not reflective of the underlying business performance.
Each division is assessed based on specific measures (e.g., net new fee-generating assets, return on attributed
equity).
Decisions consider the firm’s risk profile and the extent to which operational risks and audit issues have
been identified and resolved. They also consider diversity, equity & inclusion and other ESG metrics,
the impact of litigation and regulatory costs. The Risk and Compliance functions support our holistic reflection
and consideration of the financial and non-financial impact (including reputation) of risk matters.
Relative performance
versus peers
Performance is assessed relative to our peers, including financial performance, returns and relative total
shareholder return.
Market position
and trends
Market intelligence, based on 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, based on quantitative and qualitative
assessments, results in a proposal from the Group CEO (after consultation with the GEB) to the Compensation
Committee for consideration.
Final Group
performance award
pool
The Compensation Committee considers the proposal in the context of the factors outlined above and verifi es 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 proposal of the Group CEO (upward or downward including
proposing a zero award) before making its fi nal proposal to the BoD.
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Advisory vote
Compensation for GEB members
Compensation for GEB members
GEB compensation framework
In 2021, we made no changes to our GEB compensation
GEB compensation framework
framework. The chart below
illustrates the compensation
elements, pay mix and key features for GEB members. Of the
In 2021, we made no changes to our GEB compensation
annual performance award, 20% is paid in the form of cash and
illustrates the compensation
framework. The chart below
80% is deferred over a period of five years1, with 50% of the
elements, pay mix and key features for GEB members. Of the
2021 compensation framework for GEB members (illustrative example)
annual performance award, 20% is paid in the form of cash and
80% is deferred over a period of five years1, with 50% of the
GEB¹
2021 compensation framework for GEB members (illustrative example)
Key features
annual performance awards granted under the Long-Term
Incentive Plan (the LTIP) and 30% under the Deferred Contingent
Capital Plan (the DCCP).
annual performance awards granted under the Long-Term
› Refer to “Our deferred compensation plans” in the “Group
Incentive Plan (the LTIP) and 30% under the Deferred Contingent
compensation” section of this report for more information
Capital Plan (the DCCP).
› Refer to “Our deferred compensation plans” in the “Group
compensation” section of this report for more information
– Notional additional tier 1 (AT1) instruments
– Award vests in year 5 after grant year, subject to a write-down if a viability event occurs or
Business division
Each division is assessed based on specific measures (e.g., net new fee-generating assets, return on attributed
DCCP
30%
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 Group
profit before tax, adjusted for disclosed items generally not representative of underlying
business performance
– Award is subject to employment conditions and harmful acts provisions
~17%
– Notional shares
– 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 period
– Award is subject to employment conditions and harmful acts provisions
LTIP
50%
three-year
performance
period
~17%
~17%
Cash
20%
20%
Corporate governance and compensation | Compensation
Performance award pool funding process – illustrative overview
Financial
performance
Risk
adjustment
Quantitative and qualitative adjustments
Consultation of
Group CEO with
GEB members
Compensation
Committee / BoD
governance and
decision
2
Risk-adjusted
business
division
performance
award pool
3
4
5
Business
division
measures
Qualitative,
Relative
risk, regulatory
performance
Market
position
versus peers
and trends
and
sustainability
assessment
Recommended
business
division
performance
award pools
Final Group
performance
award pool
1
Business
division
financial
performance
Business division
The starting point for the funding process is the business division financial performance, which may be adjusted
1
financial performance
for items that are not reflective of the underlying business division performance.
Predetermined business division-specific funding rates are applied to risk-adjusted performance, which excludes
items that are not reflective of the underlying business performance.
Risk-adjusted business
2
division performance
award pool
measures
equity).
Qualitative, risk,
regulatory and
sustainability
3
assessment
Decisions consider the firm’s risk profile and the extent to which operational risks and audit issues have
been identified and resolved. They also consider diversity, equity & inclusion and other ESG metrics,
the impact of litigation and regulatory costs. The Risk and Compliance functions support our holistic reflection
and consideration of the financial and non-financial impact (including reputation) of risk matters.
Relative performance
Performance is assessed relative to our peers, including financial performance, returns and relative total
versus peers
shareholder return.
Market position
Market intelligence, based on external advisors, helps assess the competitiveness of our pay levels and
and trends
compensation structure. It also provides a prospective view of market trends in terms of absolute compensation
levels, compensation framework and industry practice.
Recommended business
The business division performance award pool determination process, based on quantitative and qualitative
4
division performance
assessments, results in a proposal from the Group CEO (after consultation with the GEB) to the Compensation
award pools
Committee for consideration.
Final Group
5
performance award
pool
The Compensation Committee considers the proposal in the context of the factors outlined above and verifi es 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 proposal of the Group CEO (upward or downward including
proposing a zero award) before making its fi nal proposal to the BoD.
Base
salary
2021
2022
grant
year
year 1 year 2 year 3 year 4 year 5
› Refer to the “Group Compensation” section of this report for more information
› Refer to “Regulated staff” in the “Supplemental information” section of this report for more information
1 Performance awards to GEB members who are SMF / MRT are subject to additional deferral and vesting requirements.
Pay-for-performance safeguards for GEB members
› Refer to the “Group Compensation” section of this report for more information
› Refer to “Regulated staff” in the “Supplemental information” section of this report for more information
– Cap on the 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
Performance
award caps
Pay-for-performance safeguards for GEB members
GEB members)
Performance
award caps
Delivery and
deferral
Delivery and
deferral
Contract
terms
GEB members)
– Cap of 20% of performance award in cash
– Cap on the 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
– 80% of performance awards are at risk of forfeiture
– Long-term deferral over five years (or longer for certain regulated GEB members)
– Cap of 20% of performance award in cash
– Alignment with shareholders (through the LTIP) and bondholders (through the DCCP)
– 80% of performance awards are at risk of forfeiture
– Final payout of equity-based LTIP award (50% of performance award) subject to absolute and relative performance conditions (three-year
– Long-term deferral over five years (or longer for certain regulated GEB members)
– Alignment with shareholders (through the LTIP) and bondholders (through the DCCP)
– No severance terms
– Final payout of equity-based LTIP award (50% of performance award) subject to absolute and relative performance conditions (three-year
– Six-month notice period
performance period)
performance period)
– Share ownership requirements
– No severance terms
– No hedging allowed
– Six-month notice period
Other
Contract
safeguards
terms
11 The Compensation Committee may consider adjustments to profit for items that are not reflective of underlying performance.
Other
safeguards
– Share ownership requirements
– No hedging allowed
236
11 The Compensation Committee may consider adjustments to profit for items that are not reflective of underlying performance.
237
237
237
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
reach their minimum shareholding requirements 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
members may not sell any UBS shares before they reach the
minimum ownership thresholds mentioned below. At the end of
2021, 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 2021, our GEB members held shares with
an aggregate value of approximately USD 191 million,
demonstrating their commitment to our strategy and alignment
with shareholders.
Share ownership requirements
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
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
organizational profile. The Compensation Committee periodically
reviews and approves the peer group composition.
The table below presents the composition of our peer group
as approved by the Compensation Committee for the 2021
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
Each GEB member receives a fixed base salary, which is reviewed
annually by the Compensation Committee. The 2021 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.
Over the course of 2021, two GEB members held a UK Senior
Management Function (SMF) role for one of our UK entities. In
addition to base salary, role-based allowances were part of their
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.
› Refer to the “Supplemental information” section of this report
for more information about MRTs and SMFs
› Refer to the “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 2021, the Group’s profit before tax was USD 9.5 billion and
the total GEB performance award pool was CHF 79.8 million. The
GEB performance award pool as a percentage of Group profit
before tax was 0.9%, 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
Material Risk Takers (MRTs)). For 2021, performance awards
granted to GEB members and the Group CEO were, on average,
3.2
(excluding one-time
replacement awards, benefits and contributions to retirement
plans).
fixed compensation
times
their
› Refer to “Performance award pool funding” in the
“Compensation philosophy and governance” section of this
report for more information
238
238
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
To align the interests of GEB members with those of our
2021, 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 2021, our GEB members held shares with
reach their minimum shareholding requirements within five years
an aggregate value of approximately USD 191 million,
from their appointment and retain it throughout their tenure. The
demonstrating their commitment to our strategy and alignment
total 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
GEB employment contracts and severance terms
Each GEB member receives a fixed base salary, which is reviewed
GEB members’ employment contracts do not include severance
annually by the Compensation Committee. The 2021 annual base
terms or supplementary pension plan contributions and are
salary for the Group CEO role was CHF 2.5 million and has
subject to a notice period of at least six months. A GEB member
remained unchanged since 2011. The other GEB members each
leaving UBS before the end of a performance year may be
received a base salary of CHF 1.5 million (or local currency
considered for a performance award. Such awards are subject to
equivalent), also unchanged since 2011.
approval by the BoD, and ultimately by the shareholders at the
Over the course of 2021, two GEB members held a UK Senior
AGM.
Management Function (SMF) role for one of our UK entities. In
addition to base salary, role-based allowances were part of their
Benchmarking for GEB members
fixed compensation.
At the AGM, shareholders are asked to approve the maximum
When recommending performance awards for the Group CEO
aggregate amount of fixed compensation for GEB members for
and the other GEB members, the Compensation Committee
the following financial year.
› Refer to the “Supplemental information” section of this report
for more information about MRTs and SMFs
› Refer to the “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
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
The size of the GEB performance award pool may not exceed
role considers the compensation paid by our peers for a
2.5% of the Group profit before tax. This limits the overall GEB
comparable role and performance within the context of our
compensation based on the firm’s profitability.
organizational profile. The Compensation Committee periodically
For 2021, the Group’s profit before tax was USD 9.5 billion and
reviews and approves the peer group composition.
the total GEB performance award pool was CHF 79.8 million. The
The table below presents the composition of our peer group
GEB performance award pool as a percentage of Group profit
as approved by the Compensation Committee for the 2021
before tax was 0.9%, well below the 2.5% cap.
performance year.
Bank of America
Goldman Sachs
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
Material Risk Takers (MRTs)). For 2021, performance awards
granted to GEB members and the Group CEO were, on average,
Barclays
BlackRock
BNP Paribas
Citigroup
Credit Suisse
3.2
times
their
fixed compensation
(excluding one-time
Deutsche Bank
replacement awards, benefits and contributions to retirement
› Refer to “Performance award pool funding” in the
“Compensation philosophy and governance” section of this
report for more information
plans).
238
HSBC
JPMorgan Chase
Julius Baer
Morgan Stanley
Standard Chartered
State Street
For 2021, we have further enhanced the performance assessment
for GEB members to ensure it is fully aligned with the firm’s new
purpose and strategic objectives. We assess GEB members against
a set of Group financial targets, non-financial objectives and
Behaviors. Under the non-financial objectives we introduced the
new categories of Core Job, which covers job-specific, risk and
people objectives, as well as Strategic & Growth, which covers
strategy, digital and ESG objectives. The restructured approach
fosters an even greater focus on GEB priorities and the success of
the Group overall among all GEB members, and strengthens the
understanding and importance of interdependence within and
Overview of the GEB compensation determination process
across the GEB. At the same time, it creates stronger individual
accountability, and further increases the focus on core activities.
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
proposals. The Compensation Committee’s proposals are subject
to approval by the BoD.
The Compensation Committee, and then the full BoD, follows
a similar process for the Group CEO, except that the proposal
comes from the Chairman of the BoD.
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, for review and approval by the BoD.
Objective setting
Performance assessment
Compensation determination
Financial targets are based on Group
performance measures.
Non-financial objectives are related to
core job, strategic and growth.
Behaviors objectives are related to the
three UBS Behaviors of accountability
with integrity, collaboration and
innovation.
Financial targets weight: 60%
Non-financial objectives weight: 30%
Behavior objectives weight: 10%
Financial results are assessed quantitatively
based on full-year financial results versus
predetermined targets and plan figures.
Non-financial objectives are assessed
predominantly based on achievements
relative to quantitative key performance
indicators.
Behaviors objectives are assessed
qualitatively.
The achievements of non-financial
measures and Behaviors are determined in
three performance categories, outlined on
the next page. The total of all weighted
achievement scores cannot exceed 100%.
Together with the BoD Chairman, proposes
performance targets and objectives for
the Group CEO for approval by the BoD.
Together with the BoD Chairman, propose
the Group CEO's performance assessment
for approval by the BoD.
Together with the Group CEO, reviews
the performance framework for the other
GEB members.
Together with the Group CEO, propose
the performance assessments of the other
GEB members for approval by the BoD.
s
s
e
c
o
r
p
i
g
n
k
a
m
-
n
o
i
s
i
c
e
D
e
h
t
f
o
l
e
o
R
e
e
t
t
i
m
m
o
C
n
o
i
t
a
s
n
e
p
m
o
C
When determining actual pay levels, the
Compensation Committee factors in:
– 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
proposal (the Group CEO makes no
proposal on his own awards).
Proposes to the BoD:
– together with the BoD Chairman,
the total compensation for the
Group CEO; and
– together with the Group CEO, the
individual total compensation for the
other GEB members.
The final decision on the aggregate
amount is subject to shareholder
approval.
239
239
Corporate governance and compensation
Advisory vote
Corporate governance and compensation | Compensation
Overview of performance assessment measures
We apply a range of quantitative measures to assess GEB member performance against financial and non-financial objectives while
Behaviors are assessed qualitatively. The table below provides a summary of the main metrics and measures used for 2021.
Financial measures
(60%)
– Reported Group profit before tax
– Reported Group cost / income ratio
– Reported Return on CET1 capital
Non-
financial
measures
(30%)
Core Job
Job-specific
– Business-specific criteria such as net new investable asset targets and client engagement-level objectives
– Operating income growth targets for specific client segments and total cost goals
– Post-stress CET1 objectives and Capital ratio guidance
– Execution progress on key client and internal initiatives; e.g., cross-divisional collaboration initiatives,
efficiency and cost saving initiates
Risk
– Operating within risk appetite constraints
– Progress to deliver on risk reduction initiatives
People
– Employee listening / sentiment results and feedback
– Progress to meet 2025 ambitions for female representation and for ethnic minority representation in the
US and UK at Director and above levels (as per ESG disclosure)
– People development, mobility, turnover and succession plan metrics
Strategic &
Growth
Strategy
– Progress on group-wide transformation initiatives
– Delivery on division / function-specific strategic programs and initiatives
Digital
– Progress on digital transformation initiatives
– Delivery of digital offering and user experience for clients
ESG
– Refer to the ”Our targets and progress” table in the ”Environmental, Social and Governance
considerations” section of this report
Behaviors
Accountability with integrity
– Responsible for what they say and do
(10%)
Collaboration
– Takes ownership and makes things happen
– Steps up and acts when something is not right
– Trusts others and helps them to be successful
– Delivers One UBS, together with their colleagues
– Fosters a diverse, inclusive and equitable work environment
Qualitative assessment
against expected
Behaviors:
Innovation
– Challenges perspectives and looks at every opportunity to improve
– Actively seeks and provides feedback
– Learns from every success and failure
Performance assessment categories
The table below presents the three performance categories for the assessment of the performance against non-financial objectives
related to Core Job, Strategic & Growth and Behaviors. The achievement score represents the maximum percentage, and the
Compensation Committee may apply downward adjustments.
Needs focus
Good contribution
Excellent contribution
Achievement score: up to 33%
Achievement score: up to 66%
Achievement score: up to 100%
Non-financial measures
Needs focus
Expected behavior
Exemplary behavior
Achievement score: up to 33%
Achievement score: up to 66%
Achievement score: up to 100%
Behaviors
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240
Advisory vote
2021 performance for the Group CEO
The performance award for the Group CEO is based on the
achievement of financial performance targets and non-financial
objectives related to his Core Job, Strategic & Growth initiatives
and Behaviors, as described earlier in this section.
These objectives were set to reflect the strategic priorities
determined by the Chairman and the BoD.
› Refer to “GEB compensation framework” in this section of this
report for more information
Performance assessment for the Group CEO
The BoD recognized that Ralph Hamers successfully focused on
building on UBS’s strong business momentum, which resulted in
very strong financial results for 2021. He led the Group toward
stronger client centricity and improved the delivery of the bank’s
ecosystem to clients. He also delivered a successful strategic
refresh in 2021 and re-positioned the bank’s sustainability efforts.
Mr. Hamers successfully led the development of the purpose
statement, established
the client promise, and strategic
imperatives, including development of concrete transformation
initiatives to position the firm for future growth. He was the most
important ambassador for the firm’s refreshed culture and
behavior program.
Furthermore, Ralph Hamers continuously displayed high risk
awareness and set a strong and consistent tone from the top to
promote an effective risk culture. He also demonstrated strong
leadership and accountability in dealing with the loss event
resulting from the default of a US-based client of our prime
brokerage business.
Additionally, the BoD recognized that Mr. Hamers personally
championed the drive towards becoming more digital across the
organization, along with his continuous push for technology as a
differentiator for both clients and employees.
The BoD acknowledged that Mr. Hamers also championed key
changes across the organization to further promote agile ways of
working, simplification and empowerment. He continued to
increase the Group’s focus on delivering against diversity and
ethnicity ambitions.
Mr. Hamers demonstrated strong leadership on ESG topics,
including establishing a group-wide sustainability and impact
organization. He drove the definition of a net-zero framework and
focused the organization on delivering against select UN
Sustainable Development goals, as well as establishing ambitions
and making progress on key focus areas, including Planet, People
and Partnerships.
The table below illustrates the assessment criteria used to
evaluate the achievements of Mr. Hamers in 2021.
Corporate governance and compensation | Compensation
Overview of performance assessment measures
We apply a range of quantitative measures to assess GEB member performance against financial and non-financial objectives while
Behaviors are assessed qualitatively. The table below provides a summary of the main metrics and measures used for 2021.
Financial measures
(60%)
Non-
financial
measures
(30%)
– Reported Group profit before tax
– Reported Group cost / income ratio
– Reported Return on CET1 capital
Core Job
Job-specific
– Business-specific criteria such as net new investable asset targets and client engagement-level objectives
– Operating income growth targets for specific client segments and total cost goals
– Post-stress CET1 objectives and Capital ratio guidance
– Execution progress on key client and internal initiatives; e.g., cross-divisional collaboration initiatives,
efficiency and cost saving initiates
Risk
– Operating within risk appetite constraints
– Progress to deliver on risk reduction initiatives
People
– Employee listening / sentiment results and feedback
– Progress to meet 2025 ambitions for female representation and for ethnic minority representation in the
US and UK at Director and above levels (as per ESG disclosure)
– People development, mobility, turnover and succession plan metrics
Strategic &
Strategy
– Progress on group-wide transformation initiatives
Growth
– Delivery on division / function-specific strategic programs and initiatives
Digital
– Progress on digital transformation initiatives
– Delivery of digital offering and user experience for clients
ESG
– Refer to the ”Our targets and progress” table in the ”Environmental, Social and Governance
considerations” section of this report
Behaviors
Accountability with integrity
– Responsible for what they say and do
(10%)
Collaboration
– Takes ownership and makes things happen
– Steps up and acts when something is not right
Qualitative assessment
– Trusts others and helps them to be successful
against expected
– Delivers One UBS, together with their colleagues
Behaviors:
– Fosters a diverse, inclusive and equitable work environment
Innovation
– Challenges perspectives and looks at every opportunity to improve
– Actively seeks and provides feedback
– Learns from every success and failure
Performance assessment categories
2021
targets
2021
results
Achieve-
ment2
Weighted
assess-
ment
2021 commentary
USD 6.9bn
USD 9.5bn
100%2
20%
– Profit before tax increased 16% to USD 9.5 billion,
Financial performance
Weight
Performance measures
20%
Reported Group Profit
before Tax
The table below presents the three performance categories for the assessment of the performance against non-financial objectives
related to Core Job, Strategic & Growth and Behaviors. The achievement score represents the maximum percentage, and the
Compensation Committee may apply downward adjustments.
20%
Reported Cost / Income
Ratio
75%1
73.6%
100%2,3
20%
Needs focus
Good contribution
Excellent contribution
Achievement score: up to 33%
Achievement score: up to 66%
Achievement score: up to 100%
20%
Reported Return on CET1
Capital
16%1
17.5%
100%2
20%
– The return on CET1 capital (RoCET1) was 17.5%,
compared with 17.4% in 2020, exceeding the 2021
performance target.
Needs focus
Expected behavior
Exemplary behavior
Achievement score: up to 33%
Achievement score: up to 66%
Achievement score: up to 100%
11 The return on CET1 capital and cost / income ratio performance targets are set based on the previously communicated targets and reflect 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%.
Non-financial measures
Behaviors
240
241
241
reflecting strong business momentum with income up
in all regions and good cost control. This result
significantly exceeds the 2021 performance
target and also represents the highest result
since 2006.
– The cost / income ratio was 73.6%, better than the
2021 performance target, despite the increase in
litigation provisions of USD 740 million taken for the
French cross-border matter.
Corporate governance and compensation Advisory vote
Corporate governance and compensation | Compensation
Performance assessment for the Group CEO (continued)
Non-financial performance and Behaviors
Weight
Performance
measures
Achieve-
ment
2021 commentary
Weighted
assess-
ment
30%
Good
contribution
(66%)
20%
– The evaluation of each non-financial objective considers quantitative metrics that are
assessed against internal targets / plan:
Core Job
(Job specific,
Risk, People)
Strategic &
Growth
(Strategy, Digital,
ESG)
Core Job
– Progressed on execution of digital transformation initiatives
– Delivered improved digital offering and user experience for clients
– Operated within risk appetite constraints
– Progressed on risk reduction initiatives and strengthened the control framework
– Improved employee listening / sentiment results across key categories
– Increased the ratio of female leaders, stayed on track to meet the 2025 target
– Stayed on track toward the 2025 ambition for ratios of US and UK employees from ethnic
minorities
– Improved statistics on employee mobility and turnover
Strategic & Growth
– Developed and launched UBS’s purpose
– Delivered the refreshed strategy
– Launched new client promise and strategic imperatives
– Refreshed the Sustainability strategy
– Progressed on the execution of key growth initiatives
– Refreshed culture and behavior program
– See ESG metrics and progress in separate table in this report
10%
Behaviors
(Accountability
with integrity,
Collaboration,
Innovation)
7%
Expected
behavior
(66%)
The assessment of the Behavior objectives is qualitative and has resulted in the following
summary assessment:
– Mr. Hamers acted as a role model in accepting ownership and accountability. He further
strengthened collaboration across the Group and at the same time pushed individual
accountability and empowerment across the organization
– He drove innovation in UBS and built the foundation for a successful digitalization through
new ways of working. He continuously promoted simplification, more radical challenge
and innovative thinking and action
Total weighted assessment
(maximum 100%)
87%
In addition to the overall 2021 performance of the Group and Mr.
Hamers’ achievements outlined in the performance evaluation
table above, the BoD also considered other factors, such as the
impact of the significant risk event related to a loss from a US-
based client of our prime brokerage business.
The BoD approved the proposal by the Compensation
Committee to grant Mr. Hamers a performance award of CHF 8.5
million, resulting in a total compensation for 2021 of CHF 11.0
million (excluding benefits and contributions to his retirement
benefit plan).
Aligned with the GEB compensation framework, the Group
CEO’s performance award will be delivered 20% (CHF 1.7 million)
in cash and the remaining 80% (CHF 6.8 million) subject to
deferral and forfeiture provisions, as well as meeting performance
conditions over the next five years.
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Advisory vote
2021 total compensation for the GEB members
The aggregate performance award pool for the GEB for 2021 was
CHF 79.8 million (USD 87.1 million); on a per capita basis this
reflects a decrease of 1% compared with 2020. This contrasts
with the change in the overall performance award pool of the
firm, which increased 10% compared with 2020. The GEB
performance award pool had a proportionally larger downward
adjustment than the Group pool, to reflect the accountability of
the GEB for the significant risk event in the first half of 2021. The
Group’s profit before tax was USD 9.5 billion, up 16% compared
with 2020.
At the 2022 AGM, shareholders will vote on the aggregate
2021 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
› Refer to “Provisions of the Articles of Association related to
compensation” in the “Supplemental Information” section of
The Compensation Committee has
that
performance conditions for all GEB members’ awards due to vest
in March 2022 have been satisfied and the awards will therefore
vest in full.
confirmed
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 (for 2021 Ralph A.J.G Hamers and for 2020 Sergio P. Ermotti)
22002211
2,550,000
1,700,000
4,250,000
2,500,000
22,,999988,,227711
251,856
246,415
88,,550000,,000000
1111,,449988,,227711
3,275,763
9,286,681
12,562,444
220022007
2,500,000
244,353
78,891
22,,882233,,224444
2,100,000
5,250,000
3,150,000
1100,,550000,,000000
1133,,332233,,224444
Group CEO Ralph A.J.G. Hamers (reflects compensation since joining UBS per 1 September 2020)
22002200
33,,000000,,000000
11,,220099,,771177
1,500,000
900,000
600,000
314,260
833,333
62,124
44,,220099,,771177
Aggregate of all GEB members8,9,10,11,12
1,179,512
22002211
24,853,521
2,064,009
2288,,009977,,004411 15,950,000 39,875,000 23,925,000
7799,,775500,,000000
110077,,884477,,004411
30,697,441
87,130,916 117,828,357
22002200
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
11 Swiss franc amounts have been translated into US dollars for reference at the 2021 performance award currency exchange rate of CHF / USD 1.092551. 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 2021 were awarded at a value of 67.7% 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 19.194 or USD 20.700, 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 2021 and 2020, which are estimated at grant at CHF 4,997,243 and CHF 5,497,811, respectively, of which CHF 763,059
and CHF 880,496, 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 2021, twelve GEB
members were in office on 31 December 2021 and thirteen GEB members on 31 December 2020. 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 2021, Barbara Levi received a one-time
replacement award of CHF 7,081,474. This replacement award is not included in the above table; including this, the 2021 total aggregate compensation of all GEB members is CHF 114,928,515. 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. 1122 Base salary may include role-based allowances in line with market practice in response to regulatory requirements.
243
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Corporate governance and compensation | Compensation
Performance assessment for the Group CEO (continued)
Non-financial performance and Behaviors
Weight
Performance
Achieve-
Weighted
2021 commentary
measures
ment
assess-
ment
30%
Good
20%
– The evaluation of each non-financial objective considers quantitative metrics that are
contribution
(66%)
assessed against internal targets / plan:
Core Job
(Job specific,
Risk, People)
Strategic &
Growth
(Strategy, Digital,
ESG)
Expected
behavior
(66%)
(Accountability
with integrity,
Collaboration,
Innovation)
Total weighted assessment
87%
(maximum 100%)
Core Job
– Progressed on execution of digital transformation initiatives
– Delivered improved digital offering and user experience for clients
– Operated within risk appetite constraints
– Progressed on risk reduction initiatives and strengthened the control framework
– Improved employee listening / sentiment results across key categories
– Increased the ratio of female leaders, stayed on track to meet the 2025 target
– Stayed on track toward the 2025 ambition for ratios of US and UK employees from ethnic
minorities
– Improved statistics on employee mobility and turnover
Strategic & Growth
– Developed and launched UBS’s purpose
– Delivered the refreshed strategy
– Launched new client promise and strategic imperatives
– Refreshed the Sustainability strategy
– Progressed on the execution of key growth initiatives
– Refreshed culture and behavior program
– See ESG metrics and progress in separate table in this report
– Mr. Hamers acted as a role model in accepting ownership and accountability. He further
strengthened collaboration across the Group and at the same time pushed individual
accountability and empowerment across the organization
– He drove innovation in UBS and built the foundation for a successful digitalization through
new ways of working. He continuously promoted simplification, more radical challenge
and innovative thinking and action
10%
Behaviors
7%
The assessment of the Behavior objectives is qualitative and has resulted in the following
summary assessment:
In addition to the overall 2021 performance of the Group and Mr.
million (excluding benefits and contributions to his retirement
Hamers’ achievements outlined in the performance evaluation
benefit plan).
table above, the BoD also considered other factors, such as the
Aligned with the GEB compensation framework, the Group
impact of the significant risk event related to a loss from a US-
CEO’s performance award will be delivered 20% (CHF 1.7 million)
based client of our prime brokerage business.
in cash and the remaining 80% (CHF 6.8 million) subject to
The BoD approved the proposal by the Compensation
deferral and forfeiture provisions, as well as meeting performance
Committee to grant Mr. Hamers a performance award of CHF 8.5
conditions over the next five years.
million, resulting in a total compensation for 2021 of CHF 11.0
242
Corporate governance and compensation Advisory vote
Corporate governance and compensation | Compensation
Total realized compensation for the Group CEO
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 Mr. Hamers, including a comparison
with his total awarded compensation.
Total realized compensation vs awarded compensation for Ralph A.J.G Hamers¹
CHF
AAwwaarrddeedd
Total awarded
fixed and variable
compensation3,4
FFoorr tthhee yyeeaarr
11,000,000
22002211
2200220011
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
33,,110000,,000000
833,333
Performance
award under
equity plans2
0
0
Performance
award under
DCCP2
0
0
Deferred cash
award2
0
0
Cash award2
600,000
0
Base salary
2,500,000
833,333
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244
The realized compensation reflects the total amount paid out in
To illustrate the effect of our long-term deferral approach,
the year. It includes the base salary, cash performance award
which has been in place since 2012, we disclose the annual
payments, and all deferred performance awards vested in the
realized compensation of Mr. Hamers, including a comparison
year. As such, realized pay is the natural culmination of awards
with his total awarded compensation.
granted and approved by shareholders in previous years.
Total realized compensation vs awarded compensation for Ralph A.J.G Hamers¹
CHF
FFoorr tthhee yyeeaarr
22002211
2200220011
Base salary
2,500,000
833,333
Cash award2
600,000
0
Deferred cash
award2
Performance
award under
equity plans2
Performance
award under
DCCP2
0
0
0
0
0
0
RReeaalliizzeedd
AAwwaarrddeedd
TToottaall rreeaalliizzeedd
Total awarded
ffiixxeedd aanndd vvaarriiaabbllee
fixed and variable
ccoommppeennssaattiioonn
33,,110000,,000000
833,333
compensation3,4
11,000,000
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.
Advisory vote
Corporate governance and compensation | Compensation
Total realized compensation for the Group CEO
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 2021, 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, 2021 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 in line with applicable local employment conditions
and at the discretion of the firm.
In addition to the firm’s Pillars and Principles, Behaviors related
to accountability with integrity, collaboration and innovation are
part of the performance management approach. Therefore, when
assessing performance, we consider not only what was achieved
but also how it was achieved.
244
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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 believe that our
approach, with a single incentive decision and a mandatory
deferral, is 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 with
regulatory-driven deferral requirements or total compensation
greater than USD / CHF 300,000. Certain regulated employees,
such as Senior Management Functions (SMFs) and Material Risk
Takers (MRTs), are subject to additional requirements (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 after grant.
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 weighted average deferral period (for
non-regulated employees) is 4.4 years for GEB members and
ranges from 3.5 to 4 years for employees below GEB level.
Additionally, from time to time, 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 employment conditions and
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 cases where employment has been terminated for
cause.
Our share delivery obligations related to notional share awards
are satisfied by delivering treasury shares, which are purchased in
the market, to employees at vesting.
› Refer to “Note 28 Employee benefits: variable compensation” in
the “Consolidated financial statements” section of our Annual
Report 2021 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
Employee category
GEB and selected senior management
Asset Management senior management
Employees subject to mandatory deferral framework
Deferred compensation elements
Cash
LTIP
EOP
DCCP
1
1
1 AM employees and selected AM senior staff 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.
246
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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 and selected senior management). For
the 2021 performance year, we granted LTIP awards to 117
employees at a fair value of 67.7% of maximum. The value was
calculated by an independent third party using a well-established
valuation methodology.
The performance metrics of the share-based LTIP awards are
average return on CET1 capital (RoCET1) and relative total
shareholder return (rTSR) over a three-year performance period
starting on 1 January 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 RoCET1 performance metric reflects
our strategic return ambitions and considers our revised financial
targets, as well as our cost of capital as outlined below:
– the required RoCET1 performance for a maximum payout is set
at 18%, which represents the upper end of our target range;
the required performance threshold for the minimum payout
has been raised to 8% from 6% in prior-year awards to reflect
our new financial targets communicated in February 2022,
increasing the mid-point of the payout thresholds to better
reflect our cost of capital; and
the linear payout design between threshold and maximum
level supports our growth ambitions and our focus on
delivering sustainable performance without encouraging
excessive risk-taking.
–
The rTSR performance metric over the three-year period further
aligns the interests of employees with those of shareholders:
– the metric compares the total shareholder return (the 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 (excluding UBS Group);
– the G-SIBs are independently defined and reflect companies
with a comparable risk profile and impact on the global
economy;
To reinforce our emphasis on sustainable performance and risk
rate therefore depends on the amount of the performance award
management, and our focus on achieving growth ambitions, we
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 believe that our
periods in the industry. The weighted average deferral period (for
approach, with a single incentive decision and a mandatory
non-regulated employees) is 4.4 years for GEB members and
deferral, is transparent and well suited to implementing our
ranges from 3.5 to 4 years for employees below GEB level.
compensation
philosophy
and
delivering
sustainable
Additionally, from time to time, we may utilize alternative
performance. This aligns the interests of our employees and
deferred compensation arrangements to remain competitive in
shareholders and appropriately links compensation to longer-term
specific business areas.
sustainable performance.
To further promote sustainable performance, all of our
Our mandatory deferral approach applies to all employees with
deferred compensation plans include employment conditions and
regulatory-driven deferral requirements or total compensation
malus conditions. These enable the firm to reduce or fully forfeit
greater than USD / CHF 300,000. Certain regulated employees,
unvested deferred awards under certain circumstances, pursuant
such as Senior Management Functions (SMFs) and Material Risk
to performance and harmful acts provisions. In addition, forfeiture
Takers (MRTs), are subject to additional requirements (e.g., an
is triggered in cases where employment has been terminated for
additional non-financial conduct-related performance metric
cause.
under the LTIP, more stringent deferral requirements, additional
Our share delivery obligations related to notional share awards
blocking periods). In addition, SMFs and MRTs receive 50% of
are satisfied by delivering treasury shares, which are purchased in
their cash portion in the form of immediately vested shares, which
the market, to employees at vesting.
are blocked for 12 months after grant.
› Refer to “Note 28 Employee benefits: variable compensation” in
the “Consolidated financial statements” section of our Annual
Report 2021 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
Employee category
GEB and selected senior management
Asset Management senior management
Employees subject to mandatory deferral framework
Deferred compensation elements
Cash
LTIP
EOP
DCCP
1
1
1 AM employees and selected AM senior staff 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.
– the index, which includes publicly traded G-SIBs, is equal
weighted, calculated in Swiss francs and maintained by an
independent index provider, so as to 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) that are 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
Mizuho FG
Wells Fargo
Credit Suisse
Morgan Stanley
Deutsche Bank
Royal Bank of Canada
1 As of November 2021. Excludes UBS Group.
Dividend equivalents (granted where applicable regulation
permits) are subject to the same terms as the underlying LTIP
award.
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 in each of the three years following the performance
period for GEB members, and cliff vest in the first year following
the performance period for selected senior management (longer
deferral periods may apply for regulated employees).
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
with a potential downward
adjustment of up to 100% of the
entire award.
Performance metric: average RoCET1 (50% of award)
Below threshold (<8%)
Threshold (8%) up to
maximum (<18%)
Maximum and above (>18%)
Full forfeiture
(payout 0%)
Partial vest
(payout between 33% and <100%)
Full vest
(payout 100%)
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
(payout 0%)
Partial vest
(payout between 33% and <100%)
Full vest
(payout 100%)
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247
Corporate governance and compensation Advisory vote
Corporate governance and compensation | Compensation
Equity Ownership Plan
The EOP is the deferred compensation plan for employees who
are subject to deferral requirements but do not receive LTIP
awards. For the 2021 performance year, we granted EOP awards
to 4,228 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
creates a direct link with shareholder returns as a notional equity
award and have no upward leverage. This approach promotes
growth and sustainable performance.
EOP awards generally vest over three years. For certain
employee populations, EOP awards can be adjusted downwards,
including to zero, based on the average RoCET1 over the
applicable performance period. The Compensation Committee
sets the minimum future performance threshold and may 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 to align their compensation more
closely with industry standards. This plan is generally delivered in
cash and vests over five years.
› 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
Deferred Contingent Capital Plan
The DCCP is a key component of our compensation framework
and supports alignment of the interests of our senior employees
with those of our stakeholders.
All employees subject to deferral requirements receive DCCP
awards. For the 2021 performance year, we granted DCCP
awards to 4,303 employees.
DCCP replicates many of the features of the loss-absorbing
bonds that we issue to investors and may be paid at vesting in
cash or, at the discretion of the firm, a perpetual, marketable
additional tier 1 (AT1) capital instrument. Employees can elect to
have their DCCP awards denominated in Swiss francs or US
dollars.
DCCP awards vest in full after five years (longer deferral
periods may apply for regulated employees). DCCP awards bear
notional interest paid annually (except as limited by regulation for
MRTs), subject to review and confirmation by the Compensation
Committee. The notional interest rate for grants in 2022 was
3.7% for awards denominated in Swiss francs and 5.7% for
awards denominated in US dollars. These interest rates are based
on the current market rates for similar AT1 capital instruments
issued by UBS Group.
Awards are forfeited if a viability event occurs, i.e., if FINMA
notifies the firm that the DCCP awards must be written down to
mitigate the risk of 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%.
In addition, 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. The forfeiture
features of DCCP create a strong alignment with our debt holders
and support the sustainability of the firm.
Over the last five years, USD 1.7 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 capital 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.
3311..1122..2211
31.12.20
11,,773300
00..66
1,875
0.6
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Corporate governance and compensation | Compensation
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. The total 2021 forfeitures of USD 258 million
of previously awarded deferred compensation offset the 2021
total sign-on payments, replacement payments and guarantees of
USD 137 million.
Barbara Levi succeeded Markus Diethelm as Group General
Counsel effective 1 November 2021. Consistent with the terms of
the original awards and included in the above figures, she
received replacement awards for compensation forfeited at her
previous employer as a result of joining UBS. Ms. Levi’s
replacement payment had a total value of CHF 7,081,474 and
consisted of an EOP share award representing 430,732 UBS
shares (denominated in Swiss francs), a deferred cash award as
well as replacement of cash items. The deferred portion of the
award will vest in various installments between 2022 and 2027.
These replacement awards are subject to UBS’s harmful acts
provisions.
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). GEB members
do not receive severance payments.
Sign-on payments, replacement payments, guarantees and severance payments
Equity Ownership Plan
DCCP awards vest in full after five years (longer deferral
periods may apply for regulated employees). DCCP awards bear
The EOP is the deferred compensation plan for employees who
notional interest paid annually (except as limited by regulation for
are subject to deferral requirements but do not receive LTIP
MRTs), subject to review and confirmation by the Compensation
awards. For the 2021 performance year, we granted EOP awards
Committee. The notional interest rate for grants in 2022 was
to 4,228 employees.
3.7% for awards denominated in Swiss francs and 5.7% for
Delivering sustainable performance is a key objective for UBS,
awards denominated in US dollars. These interest rates are based
and we therefore link EOP award vesting with minimum
on the current market rates for similar AT1 capital instruments
performance thresholds over a multi-year time horizon. Our EOP
issued by UBS Group.
creates a direct link with shareholder returns as a notional equity
Awards are forfeited if a viability event occurs, i.e., if FINMA
award and have no upward leverage. This approach promotes
notifies the firm that the DCCP awards must be written down to
growth and sustainable performance.
mitigate the risk of an insolvency, bankruptcy or failure of UBS or
EOP awards generally vest over three years. For certain
if the firm receives a commitment of extraordinary support from
employee populations, EOP awards can be adjusted downwards,
the public sector that is necessary to prevent such an event. DCCP
including to zero, based on the average RoCET1 over the
awards are also written down for GEB members if the Group’s
applicable performance period. The Compensation Committee
CET1 capital ratio falls below 10% and for all other employees if
sets the minimum future performance threshold and may adjust
it falls below 7%.
the award if the performance metric does not reflect a fair
In addition, GEB members forfeit 20% of DCCP awards for
measure of performance.
each loss-making year during the vesting period. This means
Asset Management employees receive some or all of their EOP
100% of the award is subject to risk of forfeiture. The forfeiture
in the form of notional funds to align their compensation more
features of DCCP create a strong alignment with our debt holders
closely with industry standards. This plan is generally delivered in
and support the sustainability of the firm.
cash and vests over five years.
› 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
Deferred Contingent Capital Plan
Over the last five years, USD 1.7 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 capital and the effect on
our TLAC ratio.
The DCCP is a key component of our compensation framework
and supports alignment of the interests of our senior employees
› Refer to the “Supplemental information” section of this report
for more information about performance award and personnel-
with those of our stakeholders.
related expenses
All employees subject to deferral requirements receive DCCP
awards. For the 2021 performance year, we granted DCCP
› Refer to the “Supplemental information” section of this report
for more information about longer vesting and clawback periods
for MRTs and SMFs
awards to 4,303 employees.
DCCP replicates many of the features of the loss-absorbing
bonds that we issue to investors and may be paid at vesting in
cash or, at the discretion of the firm, a perpetual, marketable
additional tier 1 (AT1) capital instrument. Employees can elect to
have their DCCP awards denominated in Swiss francs or US
dollars.
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..2211
31.12.20
11,,773300
00..66
1,875
0.6
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 22002211
ooff wwhhiicchh:: nnoonn--ddeeffeerrrreedd
ccaasshh
of which: deferred
compensation
awards
TToottaall 22002200
NNuummbbeerr ooff bbeenneeffiicciiaarriieess
2266
99
9944
3344
1177
22
116600
1188
44
1111
55
1111
11
22000055
8
5
83
29
6
1
0
20
2
58
17
16
5
134
22002211
222266
66
331100
1122
4400
11
11,,447777
2020
99
3
200
13
32
2
1,019
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
1100
0
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 2021. 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 2021 and for another GEB member in 2020. No GEB
member received a guarantee in 2021 or 2020. 44 Includes legally obligated and standard severance payments as well as payments in lieu of notice. 55 Represents expense recognized in 2021 associated with
payments made in 2021 as well as provisions for expected payments in 2022.
33
0
0
00
248
249
249
Forfeitures1
USD million, except where indicated
TToottaall ffoorrffeeiittuurreess
of which: former GEB members
TToottaall 22002211
Total 2020
225588
2233
145
0
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 2021 (USD 17.87) for 2021. The 2020 data is valued using the share price on 31
December 2020 (USD 14.13). 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 2021 and 2020. 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 2021 or
2020.
88
Corporate governance and compensation Advisory vote
Corporate governance and compensation | Compensation
Benchmarking for employees other than GEB members
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
internally benchmark employee
compensation for comparable roles within and across business
divisions and locations.
firms. We also
Employee share ownership
According to available records on employee shareholdings,
including unvested deferred compensation, as of 31 December
2021, employees held at least USD 4.5 billion of UBS shares (of
which approximately USD 2.9 billion were unvested), representing
approximately 7% of our total shares issued.
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 28 Employee benefits: variable compensation” in
the “Consolidated financial statements” section of our Annual
Report 2021 for more information
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 predominantly includes 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. These awards are
based on strategic performance measures, including production
and length of service with UBS. 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.
250
250
Advisory vote
Corporate governance and compensation | Compensation
2021 Group performance outcomes
Performance awards granted for the 2021 performance year
The “Variable compensation” table below shows the amount of
variable compensation awarded to employees for the 2021
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
22002211
2020
22,,338833
2,167
440055
118833
114400
5544
2299
341
137
112
42
49
Expenses deferred to
future periods4
22002211
2020
00
779977
339933
229999
5500
5566
0
756
306
280
50
120
Accounting
adjustments4
22002211
2020
00
6655
0
51
4466 55
35 5
00
0
1188 55
16 5
00
0
Total
22002211
2020
Number of beneficiaries
2020
22002211
22,,338833
2,167
5577,,778833
58,843
11,,226677
1,148
662233
443388
112222
8844
478
392
109
169
44,,220022
33,,880077
44,,117700
111177
337744
3,937
3,566
3,910
115
335
Benchmarking for employees other than GEB members
employees may purchase UBS shares at market price and receive
We generally consider market practice in our pay decisions and
program. Additional shares vest after a maximum of three years,
framework. Our market review reflects several factors, including
provided the employee remains employed by UBS and has
the comparability of the business division, location, scope and the
retained the purchased shares throughout the holding period.
one additional share for every three shares purchased through 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
› Refer to “Note 28 Employee benefits: variable compensation” in
the “Consolidated financial statements” section of our Annual
Report 2021 for more information
compensation for comparable roles within and across business
Compensation for US financial advisors in Global Wealth
divisions and locations.
Management
Employee share ownership
In line with market practice for US wealth management
businesses, the compensation for US financial advisors in Global
According to available records on employee shareholdings,
Wealth Management predominantly includes production payout
including unvested deferred compensation, as of 31 December
and deferred compensation awards. Production payout, paid
2021, employees held at least USD 4.5 billion of UBS shares (of
monthly, is primarily based on compensable revenue. Financial
which approximately USD 2.9 billion were unvested), representing
advisors may also qualify for deferred compensation awards,
approximately 7% of our total shares issued.
which generally vest over a six-year period. These awards are
The Equity Plus Plan is our employee share purchase program.
based on strategic performance measures, including production
It allows employees at Executive Director level and below to
and length of service with UBS. Production payout rates and
voluntarily invest up to 30% of their base salary and / or regular
deferred compensation awards may be reduced for, among other
commission payments to purchase UBS shares. In addition (where
things, errors, negligence or carelessness, or failure to comply
offered), eligible employees can invest up to 35% of their
with the firm’s rules, standards, practices and / or policies, and /
performance award under the program. Participation in the
or applicable laws and regulations.
program is capped at USD / CHF 20,000 annually. Eligible
2,508
126
3,315
233
22,,778888
119911
33,,993355
55,,227722
11,,001122
11,,009977
2,634
3,378
22,,997799
44,,117755
3,548
4,200
51
(74)6
((5566))
00
(23)
0
779977
221155
756
181
938
822
58,850
5577,,779933
66,,221188
VVaarriiaabbllee ccoommppeennssaattiioonn –– ppeerrffoorrmmaannccee aawwaarrdd ppooooll
Variable compensation – other2
TToottaall vvaarriiaabbllee ccoommppeennssaattiioonn eexxcclluuddiinngg ffiinnaanncciiaall aaddvviissoorr
vvaarriiaabbllee ccoommppeennssaattiioonn
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 Consists 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 2021 and 2020. 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 121
million (2020: USD 74 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.
6655
((112211))66
33,,665500
228855
99,,220077
22,,110099
7,749
77,,115555
1,760
6,012
6,305
((5566))
(23)
2021 performance award pool and expenses
The performance award pool, which includes performance-based
variable awards for 2021, was USD 3.7 billion, reflecting an
increase of 10% compared with 2020. Performance award
expenses for 2021 decreased 1% to USD 3.2 billion, reflecting
the
increased performance award expenses accrued
in
performance year, offset by lower expenses related to prior
performance years, as 2020 included additional expenses that
resulted from 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.
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
22002211
33,,665500
886622
22,,778888
2020
3,315
807
2,508
% change
10
7
11
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 28 Employee benefits: variable compensation” in the “Consolidated financial statements”
section of our Annual Report 2021 for more information
33,,119900
3,209
(43)
440022
701
(1)
250
251
251
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 A. 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 2021 AGM to the 2022 AGM, his
total compensation was CHF 4.9 million, excluding benefits and
pension fund contributions. The Chairman’s total 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
72,939 UBS shares at CHF 19.194 per share. The share
component aligns the Chairman’s pay with the Group’s long-term
performance.
Thus, Mr. Weber’s total reward, including benefits and pension
fund contributions, for his service as Chairman for the current
period, was CHF 5,224,913.
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 Chairperson 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 2021 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
22002211//22002222
22002200//22002211
Base salary
3,500,000
3,500,000
Annual share
award2
1,400,000
Contributions
to retirement
plans and
benefits3
324,913
1,400,000
343,283
USD
(for reference)
TToottaall44
55,,222244,,991133
55,,224433,,228833
Total4,5
5,708,482
11 Axel A. Weber was the only non-independent member in office on 31 December 2021 and 31 December 2020. 22 These shares are blocked for four years. 33 Includes the estimated portion related to UBS’s
contribution to the statutory pension scheme and estimated benefits valued at market price, as applicable. For the period from the 2020 AGM to the 2021 AGM, the actual amount was CHF 336,050. 44 Excludes
the portion related to the legally required social security contributions paid by UBS, which for the period from the 2021 AGM to the 2022 AGM is estimated at CHF 336,428 and for the period from the 2020 AGM to
the 2021 AGM at CHF 332,243. The legally required social security contributions paid by the non-independent BoD members are included in the amounts shown in this table, as appropriate. 55 Swiss franc amounts
have been translated into US dollars for reference at the 2021 performance award currency exchange rate of CHF / USD 1.092551.
252
252
Advisory vote
Corporate governance and compensation | Compensation
Compensation for the Board of Directors
Chairman of the BoD
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
Under the leadership of the Chairman, Axel A. Weber, the BoD
72,939 UBS shares at CHF 19.194 per share. The share
determines, among other things, the strategy for the Group,
component aligns the Chairman’s pay with the Group’s long-term
based on recommendations by the Group CEO, exercises ultimate
performance.
supervision over management and appoints all GEB members.
Thus, Mr. Weber’s total reward, including benefits and pension
The Chairman leads all general meetings and BoD meetings
fund contributions, for his service as Chairman for the current
and works with the committee chairpersons to coordinate their
period, was CHF 5,224,913.
work. Together with the Group CEO, the Chairman is responsible
The Chairman’s employment agreement does not provide for
for effective communication with shareholders and stakeholders,
severance terms or supplementary contributions to pension plans.
including clients, government officials, regulators and public
The benefits for the Chairman are in line with local practices for
organizations. The Chairman works closely with the Group CEO
UBS employees. The Chairperson of
the Compensation
and other GEB members, providing advice and support when
Committee proposes and the Compensation Committee approves
appropriate, and continues to strengthen and promote our
the Chairman’s compensation annually for the upcoming AGM-
culture through the three keys to success: our Pillars, Principles
to-AGM period, taking into consideration fee or compensation
and Behaviors.
levels for comparable roles based on our core financial industry
The Chairman’s total compensation for the period from AGM
peers and other relevant leading Swiss companies included in the
to AGM is contractually fixed without any variable component.
Swiss Market Index.
For the current period from the 2021 AGM to the 2022 AGM, his
total compensation was CHF 4.9 million, excluding benefits and
pension fund contributions. The Chairman’s total compensation
› Refer to “Board of Directors” in the “Corporate governance”
section of our Annual Report 2021 for more information about
the responsibilities of the Chairman
Compensation details and additional information for non-independent BoD members
FFoorr tthhee ppeerriioodd
AAGGMM ttoo AAGGMM
22002211//22002222
22002200//22002211
Base salary
3,500,000
3,500,000
Annual share
award2
1,400,000
1,400,000
Contributions
to retirement
plans and
benefits3
324,913
343,283
USD
(for reference)
TToottaall44
55,,222244,,991133
55,,224433,,228833
Total4,5
5,708,482
11 Axel A. Weber was the only non-independent member in office on 31 December 2021 and 31 December 2020. 22 These shares are blocked for four years. 33 Includes the estimated portion related to UBS’s
contribution to the statutory pension scheme and estimated benefits valued at market price, as applicable. For the period from the 2020 AGM to the 2021 AGM, the actual amount was CHF 336,050. 44 Excludes
the portion related to the legally required social security contributions paid by UBS, which for the period from the 2021 AGM to the 2022 AGM is estimated at CHF 336,428 and for the period from the 2020 AGM to
the 2021 AGM at CHF 332,243. The legally required social security contributions paid by the non-independent BoD members are included in the amounts shown in this table, as appropriate. 55 Swiss franc amounts
have been translated into US dollars for reference at the 2021 performance award currency exchange rate of CHF / USD 1.092551.
Audited |
CHF, except where indicated
Name, function1
Axel A. Weber, Chairman
At each AGM, shareholders are invited to approve the
aggregate amount of BoD remuneration, including compensation
for the Chairman, which applies until the next AGM. The tables
below and on the following page provide details on the fee
structure for the independent BoD members.
The fee structure for independent BoD members is reviewed
annually based on the Chairman’s proposal to the Compensation
Committee, which in turn submits a proposal to the BoD for
approval. In our regular review of the BoD fee structure, we
concluded that our overall approach for independent BoD
member compensation remains appropriate and thus unchanged.
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
CHF
Fixed base fee
2021 AGM to 2022 AGM1
300,000
Pay mix
Delivery
Additional fees
Senior Independent Director / Vice Chairman
150,000
Blocked
shares
At
least
50%
Additional committee fees
Audit Committee
Compensation Committee
Governance and Nominating Committee
Corporate Culture and Responsibility Committee
Risk Committee
Chair
Member
300,000
200,000
350,000
200,000
100,000
100,000
50,000
200,000
Cash
Up to
50%
AGM-
to-AGM
period
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.
252
253
253
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
22002211//22002222
22002200//22002211
TToottaall11
1122,,112244,,991133
1111,,884433,,228833
USD (for reference)
Total1,2
13,247,082
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 2021 AGM to the 2022
AGM is estimated at grant at CHF 739,615 and for the period from the 2020 AGM to the 2021 AGM at CHF 719,763. 22 Swiss franc amounts have been translated into US dollars for reference at the 2021
performance award currency exchange rate of CHF / USD 1.092551
Audited |
Remuneration details and additional information for independent BoD members
CHF, except where indicated
FFoorr tthhee ppeerriioodd
AAGGMM ttoo AAGGMM
22002211//22002222
Base fee
300,000
Committee
fee(s)
400,000
Additional
payments2
150,000
TToottaall33
885500,,000000
Share
percentage4
50
Number of
shares5,6
22,142
22002200//22002211
300,000
400,000
150,000
885500,,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
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
Claudia Böckstiegel, member
William C. Dudley, member
Patrick Firmenich, member
M
Reto Francioni, member
Fred Hu, member
Mark Hughes, member
Nathalie Rachou, member
Julie G. Richardson, member
Beatrice Weder di Mauro,
former member
Dieter Wemmer, member
Jeanette Wong, member
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
M
M
M
M
M
M
C
C
M
M
M
M
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
M
TToottaall 22002211//22002222
Total 2021/2022 in USD
(for reference)7
TToottaall 22002200//22002211
Legend: C = Chairperson of the respective Committee, M = Member of the respective Committee
22002211//22002222
22002200//22002211
22002211//22002222
22002200//22002211
22002211//22002222
22002200//22002211
22002211//22002222
22002200//22002211
22002211//22002222
22002200//22002211
22002211//22002222
22002200//22002211
22002211//22002222
22002200//22002211
22002211//22002222
22002200//22002211
22002211//22002222
22002200//22002211
22002211//22002222
22002200//22002211
22002211//22002222
22002200//22002211
300,000
-
300,000
300,000
300,000
-
300,000
300,000
300,000
300,000
300,000
300,000
300,000
300,000
300,000
300,000
-
300,000
300,000
300,000
300,000
300,000
0
350,000
350,000
250,000
300,000
300,000
300,000
300,000
400,000
400,000
200,000
200,000
500,000
500,000
250,000
400,000
400,000
350,000
350,000
50
50
-
50
50
100
-
50
50
100
100
50
50
50
50
50
50
-
50
50
50
100
100
30,774
7,814
-
16,932
23,533
27,275
-
15,629
21,723
23,062
32,053
18,234
25,343
13,024
18,102
20,839
28,964
-
19,913
18,234
25,343
24,988
34,730
330000,,000000
--
665500,,000000
665500,,000000
555500,,000000
--
660000,,000000
660000,,000000
660000,,000000
660000,,000000
770000,,000000
770000,,000000
550000,,000000
550000,,000000
880000,,000000
880000,,000000
--
555500,,000000
770000,,000000
770000,,000000
665500,,000000
665500,,000000
66,,990000,,000000
7,538,600
66,,660000,,000000
11 Eleven independent BoD members were in office on 31 December 2021. At the 2021 AGM, Claudia Böckstiegel and Patrick Firmenich were newly elected and Beatrice Weder di Mauro did not stand for re-election.
Ten independent BoD members were in office on 31 December 2020. 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 2021 AGM to the 2022 AGM is estimated at grant at CHF 403,187 and which for the period from the 2020 AGM to the 2021 AGM was
estimated at grant at CHF 387,520. 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 2021, UBS shares were valued at CHF 19.194 (average
closing price of UBS shares over the last 10 trading days leading up to and including the grant date). For 2020, UBS shares, 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). 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 2021 performance award currency exchange
rate of CHF / USD 1.092551.
254
254
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 22002211
NNoott ddeeffeerrrreedd
TToottaall ccoommppeennssaattiioonn
Amount5
Number of beneficiaries
FFiixxeedd ccoommppeennssaattiioonn55,,66
Cash-based
Equity-based
VVaarriiaabbllee ccoommppeennssaattiioonn
Cash7
110055
110000
1155
2255
2222
33
8800
1166
2244
2211
33
7766
1155
4411
2255
2222
33
1166
1166
%%
3399
110000
2200
DDeeffeerrrreedd44
AAmmoouunntt
6644
00
00
00
6644
00
%%
6611
00
8800
Total for 2020
Amount
112
16
27
24
4
85
17
4400
2244
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 2021, Barbara Levi received a one-time replacement award of CHF 7
million. This replacement award is not included in the above table; including this, the 2021 total aggregate compensation of all GEB members is CHF 112 million. 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. 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.
4400
2244
3388
2233
43
26
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 2021 AGM to the 2022
AGM is estimated at grant at CHF 739,615 and for the period from the 2020 AGM to the 2021 AGM at CHF 719,763. 22 Swiss franc amounts have been translated into US dollars for reference at the 2021
performance award currency exchange rate of CHF / USD 1.092551
Remuneration details and additional information for independent BoD members
Audited |
CHF, except where indicated
FFoorr tthhee ppeerriioodd AAGGMM ttoo AAGGMM
22002211//22002222
22002200//22002211
TToottaall11
1122,,112244,,991133
1111,,884433,,228833
USD (for reference)
Total1,2
13,247,082
FFoorr tthhee ppeerriioodd
AAGGMM ttoo AAGGMM
22002211//22002222
Base fee
300,000
Committee
fee(s)
400,000
Additional
payments2
150,000
Share
Number of
TToottaall33
percentage4
22002200//22002211
300,000
400,000
150,000
885500,,000000
300,000
0
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
Patrick Firmenich, member
M
Name, function1
Jeremy Anderson,
Vice Chairman and Senior
Independent Director
Claudia Böckstiegel, member
William C. Dudley, member
Reto Francioni, member
Fred Hu, member
Mark Hughes, member
Nathalie Rachou, member
Julie G. Richardson, member
Beatrice Weder di Mauro,
former member
Dieter Wemmer, member
Jeanette Wong, member
TToottaall 22002211//22002222
Total 2021/2022 in USD
(for reference)7
TToottaall 22002200//22002211
M
M
M
M
M
M
M
M
M
M
C
C
M
M
M
M
M
M
M
M
M
e
e
t
t
i
m
m
o
C
k
s
i
R
M
M
M
M
M
M
C
C
M
M
M
M
M
M
M
M
M
M
M
M
M
M
22002211//22002222
22002200//22002211
22002211//22002222
22002200//22002211
22002211//22002222
22002200//22002211
22002211//22002222
22002200//22002211
22002211//22002222
22002200//22002211
22002211//22002222
22002200//22002211
22002211//22002222
22002200//22002211
22002211//22002222
22002200//22002211
22002211//22002222
22002200//22002211
22002211//22002222
22002200//22002211
22002211//22002222
22002200//22002211
300,000
300,000
300,000
300,000
300,000
300,000
300,000
300,000
300,000
300,000
300,000
300,000
300,000
-
-
-
300,000
300,000
300,000
300,000
300,000
350,000
350,000
250,000
300,000
300,000
300,000
300,000
400,000
400,000
200,000
200,000
500,000
500,000
250,000
400,000
400,000
350,000
350,000
885500,,000000
330000,,000000
665500,,000000
665500,,000000
555500,,000000
660000,,000000
660000,,000000
660000,,000000
660000,,000000
770000,,000000
770000,,000000
550000,,000000
550000,,000000
880000,,000000
880000,,000000
--
--
--
555500,,000000
770000,,000000
770000,,000000
665500,,000000
665500,,000000
66,,990000,,000000
7,538,600
66,,660000,,000000
100
100
100
50
50
50
-
50
50
-
50
50
50
50
50
50
50
50
-
50
50
50
100
100
shares5,6
22,142
30,774
7,814
-
-
16,932
23,533
27,275
15,629
21,723
23,062
32,053
18,234
25,343
13,024
18,102
20,839
28,964
-
19,913
18,234
25,343
24,988
34,730
Legend: C = Chairperson of the respective Committee, M = Member of the respective Committee
11 Eleven independent BoD members were in office on 31 December 2021. At the 2021 AGM, Claudia Böckstiegel and Patrick Firmenich were newly elected and Beatrice Weder di Mauro did not stand for re-election.
Ten independent BoD members were in office on 31 December 2020. 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 2021 AGM to the 2022 AGM is estimated at grant at CHF 403,187 and which for the period from the 2020 AGM to the 2021 AGM was
estimated at grant at CHF 387,520. 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 2021, UBS shares were valued at CHF 19.194 (average
closing price of UBS shares over the last 10 trading days leading up to and including the grant date). For 2020, UBS shares, 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). 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 2021 performance award currency exchange
rate of CHF / USD 1.092551.
254
255
255
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 2021, in addition to GEB members, 699
employees were classified as KRTs throughout UBS Group
globally, including 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 22002211
AAmmoouunntt
NNoott ddeeffeerrrreedd
%%
AAmmoouunntt
TToottaall ccoommppeennssaattiioonn
Amount
Number of beneficiaries
FFiixxeedd ccoommppeennssaattiioonn33,,44
Cash-based
Equity-based
VVaarriiaabbllee ccoommppeennssaattiioonn
11,,556611
110000
669999
447777
447744
33
11,,008844
3311
3300
00
6699
889955
447777
447744
33
441188
%%
5577
110000
DDeeffeerrrreedd22
AAmmoouunntt
666666
00
3399
666666
Total for 2020
Amount
1,400
647
417
417
1
983
%%
4433
00
6611
441188
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 2021, 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.
404
213
442233
224433
442233
224433
2277
1166
365
441188
2277
256
256
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
2021. For notional funds, it is determined using the latest
available market price for the underlying funds at year-end 2021,
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
employees were classified as KRTs throughout UBS Group
subject to forfeiture or reduction if the KRT commits harmful acts.
KKRRTTss
Deferred Contingent Capital Plan
Equity Ownership Plan (including notional funds)
Long-Term Incentive Plan
USD million, except where indicated
GGEEBB
Deferred Contingent Capital Plan
Equity Ownership Plan (including notional funds)
Long-Term Incentive Plan
RReellaattiinngg ttoo aawwaarrddss
ffoorr 2200221144
Relating to
awards for prior
years5
2266
4444
224444
335577
6677
72
78
76
940
1,057
169
Total
98
78
119
1,183
1,414
235
of which: exposed to
ex-post explicit and /
or implicit adjustments
Total deferred
compensation
year-end 2020
Total amount of
deferred compensation
paid out in 20216
100%
100%
100%
100%
100%
100%
126
102
85
1,000
1,059
109
8
19
172
344
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 28 Employee
benefits: variable compensation” in the “Consolidated financial statements” section of the Annual Report 2021 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 2021. LTIP values reflect the fair value awarded at grant.
66 Valued at distribution price and FX rate for all awards distributed in 2021.
2,391
3,127
2,480
544
773366
The table below shows the value of actual ex-post explicit and
implicit adjustments to outstanding deferred compensation in the
2021 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 2021, based on the approximately 8.1 million
shares forfeited during 2021, is a reduction of USD 142 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..2211
31.12.20
EExx--ppoosstt iimmpplliicciitt aaddjjuussttmmeennttss
ttoo uunnvveesstteedd aawwaarrddss22
3311..1122..2211
31.12.20
00
00
00
((1144))
((1166))
((11))
0
0
0
(3)
(3)
0
00
1177
2211
00
225500
4477
0
13
5
0
98
6
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 and
apply). A KRT’s deferred compensation award will only vest if the
an important element in ensuring we incentivize only appropriate
Group performance conditions are met. Consistent with all other
risk-taking. For 2021, in addition to GEB members, 699
employees, the deferred portion of a KRT’s compensation is also
globally, including 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.
Fixed and variable compensation for Key Risk Takers1
USD million, except where indicated
TToottaall ffoorr 22002211
AAmmoouunntt
NNoott ddeeffeerrrreedd
%%
AAmmoouunntt
DDeeffeerrrreedd22
AAmmoouunntt
Total for 2020
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,,556611
110000
669999
447777
447744
33
11,,008844
441188
442233
224433
3311
3300
00
6699
2277
2277
1166
%%
5577
110000
3399
889955
447777
447744
33
441188
441188
%%
4433
00
6611
1,400
647
417
417
1
983
365
404
213
666666
00
666666
442233
224433
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 2021, 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.
TToottaall GGEEBB aanndd KKRRTTss
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 2021 (USD 17.87) for 2021 (which may differ from the expense
recognized in the income statement in accordance with IFRS). The 2020 data is valued using the share price on 31 December 2020 (USD 14.13). 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 2021 and 2020. 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 2021 and 2020. For the GEB member who was appointed to the GEB during 2021, awards have been fully reflected in the GEB entries.
((3311))
333355
122
(6)
256
257
257
Corporate governance and compensation Advisory vote
Corporate governance and compensation | Compensation
Material Risk Takers
UK Senior Managers and Certification Regime
For relevant EU- or UK-regulated entities, we identify individuals
who are deemed to be Material Risks Takers (MRTs) based on local
regulatory requirements, including the respective EU Commission
Delegated Regulation, the fifth iteration of the EU Capital
Requirements Directive (CRD V) and equivalent UK requirements,
as applicable. This group consists of senior management, risk
takers, selected staff in control or support functions and certain
highly-compensated employees. For 2021, UBS identified 683
MRTs in relation to its relevant EU or UK entities.
Variable compensation awarded to MRTs is subject to
additional deferral and other requirements. These include a
maximum variable to fixed compensation ratio of 200% based on
approval through relevant shareholder votes, a minimum deferral
rate of 40% or 60% (depending on role / variable compensation
level) on performance awards and delivery of at least 50% of any
upfront performance award in UBS shares that are vested but
blocked for 12 months after grant.
Deferred awards granted to MRTs under UBS’s deferred
compensation plans for their performance in 2021 are subject to
6- or 12-month blocking periods post vesting and do not pay out
dividends or interest during the deferral period.
For up to 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.
LTIP awards granted to UK MRTs and SMFs are subject to an
additional non-financial conduct-related metric as required by UK
regulation.
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.
Subject to de minimis and other compensation-related
considerations, variable compensation awards made to SMFs
must comply with specific 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, except those who have
total compensation below GBP 500,000 and variable incentive
accounting for less than 33% of total compensation, for whom a
five-year deferral period (instead of a seven-year period) applies.
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 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
individual
approved by
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
258
258
Advisory vote
Corporate governance and compensation | Compensation
Material Risk Takers
UK Senior Managers and Certification Regime
2021 Group personnel expenses
For relevant EU- or UK-regulated entities, we identify individuals
The Senior Managers and Certification Regime (the SMCR) of the
who are deemed to be Material Risks Takers (MRTs) based on local
UK Prudential Regulation Authority and Financial Conduct
regulatory requirements, including the respective EU Commission
Authority requires that individuals with specified responsibilities,
Delegated Regulation, the fifth iteration of the EU Capital
performing certain significant functions and / or those in certain
Requirements Directive (CRD V) and equivalent UK requirements,
other identified categories be designated as SMFs.
as applicable. This group consists of senior management, risk
Subject to de minimis and other compensation-related
takers, selected staff in control or support functions and certain
considerations, variable compensation awards made to SMFs
highly-compensated employees. For 2021, UBS identified 683
must comply with specific requirements, including longer deferral,
MRTs in relation to its relevant EU or UK entities.
blocking and clawback periods. The deferral period for SMFs is
Variable compensation awarded to MRTs is subject to
seven years, with the deferred performance awards vesting no
additional deferral and other requirements. These include a
faster than pro rata from years 3 to 7, except those who have
maximum variable to fixed compensation ratio of 200% based on
total compensation below GBP 500,000 and variable incentive
approval through relevant shareholder votes, a minimum deferral
accounting for less than 33% of total compensation, for whom a
rate of 40% or 60% (depending on role / variable compensation
five-year deferral period (instead of a seven-year period) applies.
level) on performance awards and delivery of at least 50% of any
Such awards are also subject to a 12-month blocking period post
upfront performance award in UBS shares that are vested but
vesting. The clawback policy for SMFs permits clawback for up to
blocked for 12 months after grant.
10 years from the date of performance award grants (applicable
Deferred awards granted to MRTs under UBS’s deferred
if an individual is subject to an investigation at the end of the
compensation plans for their performance in 2021 are subject to
initial seven-year clawback period). All SMFs are also MRTs and,
6- or 12-month blocking periods post vesting and do not pay out
as such, subject to the same prohibitions on dividend and interest
dividends or interest during the deferral period.
payments.
For up to seven years after grant, performance awards granted
to MRTs are subject to clawback provisions, which allow the firm
Control functions and Group Internal Audit
to claim repayment of both the upfront and the vested deferred
element of any performance award if an individual is found to
Our control functions must be independent in order to monitor
have contributed substantially to significant financial losses for the
risk effectively. Therefore, their compensation is determined
Group or corporate structure in scope, a material downward
separately from the revenue areas that they oversee, supervise or
restatement of disclosed results, or engaged in misconduct and /
monitor. Their performance award pool is based not on the
or failed to take expected actions that contributed to significant
performance of these businesses, but on the performance of the
reputational harm.
Group as a whole. We also consider other factors, such as how
LTIP awards granted to UK MRTs and SMFs are subject to an
effectively the function has performed and our market position.
additional non-financial conduct-related metric as required by UK
Decisions on individual compensation for the senior managers of
regulation.
the control functions are made by the function heads and
approved by
the Group CEO. Decisions on
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 number of personnel employed as of 31 December 2021 was
broadly stable, at 71,385 (full-time equivalents), a net decrease of
166 compared with 31 December 2020.
The table below shows our total personnel expenses for 2021,
including salaries, pension expenses, social security contributions,
variable compensation and other personnel costs. Variable
compensation includes cash performance awards paid in 2022 for
the 2021 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.
The performance award pool reflects the value of performance
awards granted relating to the 2021 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
future periods
(amortization of unvested awards granted in 2022 for the
2021 performance year) and accounting adjustments; and
– addition for 2021 amortization of unvested deferred awards
for expenses deferred
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 2021
and 2022.
› Refer to “Note 6 Personnel expenses” and “Note 28 Employee
benefits: variable compensation” in the “Consolidated financial
statements” section of our Annual Report 2021 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
VVaarriiaabbllee ccoommppeennssaattiioonn –– ppeerrffoorrmmaannccee aawwaarrddss22
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
Expenses recognized in the IFRS income statement
RReellaatteedd ttoo tthhee
ppeerrffoorrmmaannccee yyeeaarr 22002211
77,,333399
RReellaatteedd ttoo pprriioorr
ppeerrffoorrmmaannccee yyeeaarrss
00
TToottaall eexxppeennsseess
rreeccooggnniizzeedd iinn
22002211
77,,333399
Total expenses
recognized in
2020
7,023
Total expenses
recognized in
2019
6,518
22,,338833
440055
118833
114400
5544
2299
22,,778888
119911
22,,997799
338811
992266
883333
44,,117755
556600
1177,,119933
((1100))
441122
118800
115588
1199
5566
440022
3388
444400
00
5533
00
668855
1166
11,,119944
22,,337733
881177
336633
229977
7733
8844
33,,119900
222299
33,,441199
338811
997788
883333
44,,886600
557766
1188,,338877
2,141
1,068
463
463
54
88
3,209
220
3,429
375
899
845
4,091
561
17,224
1,868
887
422
375
39
51
2,755
246
3,001
381
799
787
4,043
555
16,084
11 Includes role-based allowances. 22 Refer to “Note 28 Employee benefits: variable compensation” in the “Consolidated financial statements” section of our Annual Report 2021 for more information. 33 Consists
of replacement payments, forfeiture credits, severance payments, retention plan payments and interest expense related to the Deferred Contingent Capital Plan. 44 Refer to “Note 27 Pension and other post-
employment benefit plans” in the “Consolidated financial statements” section of our Annual Report 2021 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.
258
259
259
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 2022.
Equity Ownership Plan (EOP) 2016 / 2017, EOP 2017 / 2018, EOP 2018 / 2019 and EOP 2019 / 2020
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
2016 / 2017, the third and final installment for the Group Executive Board (the
GEB) members vests in full. For EOP 2017 / 2018, the second installment for the
GEB members vests in full. For EOP 2018 / 2019, the first installment for the GEB
members and the second installment for all other employees covered under the
plan vest in full. For EOP 2019 / 2020, the first installment for all other employees
covered under the plan vests in full.
% of installment vesting
100%
Deferred Contingent Capital Plan (DCCP) 2016 / 2017
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 2016 / 2017 vests in full.
100%
11 Performance may be adjusted for disclosed items generally not representative of underlying business performance.
.
260
260
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 2022.
Equity Ownership Plan (EOP) 2016 / 2017, EOP 2017 / 2018, EOP 2018 / 2019 and EOP 2019 / 2020
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
2016 / 2017, the third and final installment for the Group Executive Board (the
attributed equity
GEB) members vests in full. For EOP 2017 / 2018, the second installment for the
GEB members vests in full. For EOP 2018 / 2019, the first installment for the GEB
members and the second installment for all other employees covered under the
plan vest in full. For EOP 2019 / 2020, the first installment for all other employees
covered under the plan vests in full.
Deferred Contingent Capital Plan (DCCP) 2016 / 2017
Performance conditions
Performance achieved1
% of installment vesting
Common equity tier 1 (CET1) capital
The performance conditions have been satisfied. DCCP 2016 / 2017 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
262
262
263
263
264
264
264
260
261
261
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
Christian Bluhm, Group Chief Risk Officer
Mike Dargan, Group Chief Digital and Information Officer
Markus U. Diethelm, former Group General Counsel
Kirt Gardner, Group Chief Financial Officer
Suni Harford, President Asset Management
Robert Karofsky, President Investment Bank
Sabine Keller-Busse, President Personal & Corporate Banking and President UBS Switzerland
Iqbal Khan, Co-President Global Wealth Management and President EMEA
Edmund Koh, President Asia Pacific
Axel P. Lehmann, former President Personal & Corporate Banking and President UBS Switzerland
Barbara Levi, Group General Counsel
Tom Naratil, Co-President Global Wealth Management and President UBS Americas
Piero Novelli, former Co-President Investment Bank
Markus Ronner, Group Chief Compliance and Governance Officer
TToottaall
oonn
3311 DDeecceemmbbeerr
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
Number of
unvested
shares / at
risk2
122,453
14,841
654,579
582,787
240,343
-
-
706,845
780,640
696,500
636,122
352,329
851,520
627,748
798,457
639,087
898,111
742,546
501,322
421,930
-
690,537
430,732
-
1,374,044
1,383,854
-
660,240
418,452
302,584
Number of
vested shares
2,673
TToottaall nnuummbbeerr
ooff sshhaarreess
112255,,112266
Potentially
conferred
voting
rights in %
0.008
0
226
218
82,743
-
-
617,858
236,421
165,223
22,199
0
357,064
357,621
421,491
349,834
113,715
68,253
493,977
337,062
-
331,677
0
-
950,682
770,780
-
408,897
57,856
130,097
1144,,884411
665544,,880055
558833,,000055
332233,,008866
--
--
11,,332244,,770033
11,,001177,,006611
886611,,772233
665588,,332211
335522,,332299
11,,220088,,558844
998855,,336699
11,,221199,,994488
998888,,992211
11,,001111,,882266
881100,,779999
999955,,229999
775588,,999922
--
11,,002222,,221144
443300,,773322
--
22,,332244,,772266
22,,115544,,663344
--
11,,006699,,113377
447766,,330088
443322,,668811
0.001
0.041
0.035
0.020
-
-
0.079
0.063
0.051
0.041
0.021
0.075
0.059
0.076
0.059
0.063
0.048
0.062
0.045
-
0.061
0.027
-
0.145
0.128
-
0.064
0.030
0.026
0.650
7,706,776
2,739,047
1100,,444455,,882233
0.675
11 Includes all vested and unvested shares of GEB members, including those held by related parties. No options were held in 2021 and 2020 by any GEB member or any of its related parties. Refer to “Note 28 Employee
benefits: variable compensation” in the “Consolidated financial statements” section of our Annual Report 2021 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.
1111,,335599,,334488
7,821,828
3,537,520
22002200
Audited |
Total of all vested and unvested shares of GEB members1,2
SShhaarreess oonn 3311 DDeecceemmbbeerr 22002211
1100,,444455,,882233
2,739,047
1,463,440
1,688,568
2,112,516
1,488,544
877,856
TToottaall of which: vested
of which: vesting
2022
2023
2024
2025
2026
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
2021
2022
2023
2024
2025
2027
75,852
2026
41,931
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.
262
262
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
Christian Bluhm, Group Chief Risk Officer
Mike Dargan, Group Chief Digital and Information Officer
Markus U. Diethelm, former Group General Counsel
Kirt Gardner, Group Chief Financial Officer
Suni Harford, President Asset Management
Robert Karofsky, President Investment Bank
Sabine Keller-Busse, President Personal & Corporate Banking and President UBS Switzerland
Iqbal Khan, Co-President Global Wealth Management and President EMEA
Edmund Koh, President Asia Pacific
Barbara Levi, Group General Counsel
Axel P. Lehmann, former President Personal & Corporate Banking and President UBS Switzerland
Tom Naratil, Co-President Global Wealth Management and President UBS Americas
Piero Novelli, former Co-President Investment Bank
Markus Ronner, Group Chief Compliance and Governance Officer
Number of
unvested
shares / at
122,453
14,841
654,579
582,787
240,343
706,845
780,640
696,500
636,122
352,329
851,520
627,748
798,457
639,087
898,111
742,546
501,322
421,930
690,537
430,732
-
-
-
-
-
2,673
0
226
218
82,743
-
-
617,858
236,421
165,223
22,199
0
357,064
357,621
421,491
349,834
113,715
68,253
493,977
337,062
-
0
-
-
ooff sshhaarreess
112255,,112266
1144,,884411
665544,,880055
558833,,000055
332233,,008866
11,,332244,,770033
11,,001177,,006611
886611,,772233
665588,,332211
335522,,332299
11,,220088,,558844
998855,,336699
11,,221199,,994488
998888,,992211
11,,001111,,882266
881100,,779999
999955,,229999
775588,,999922
--
--
--
--
--
331,677
11,,002222,,221144
443300,,773322
1,374,044
1,383,854
950,682
770,780
22,,332244,,772266
22,,115544,,663344
660,240
418,452
302,584
408,897
57,856
130,097
11,,006699,,113377
447766,,330088
443322,,668811
7,706,776
2,739,047
1100,,444455,,882233
7,821,828
3,537,520
1111,,335599,,334488
oonn
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
0.008
0.001
0.041
0.035
0.020
-
-
0.079
0.063
0.051
0.041
0.021
0.075
0.059
0.076
0.059
0.063
0.048
0.062
0.045
0.061
0.027
0.145
0.128
0.064
0.030
0.026
0.650
0.675
-
-
-
2027
75,852
2026
41,931
11 Includes all vested and unvested shares of GEB members, including those held by related parties. No options were held in 2021 and 2020 by any GEB member or any of its related parties. Refer to “Note 28 Employee
benefits: variable compensation” in the “Consolidated financial statements” section of our Annual Report 2021 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.
Total of all vested and unvested shares of GEB members1,2
SShhaarreess oonn 3311 DDeecceemmbbeerr 22002211
1100,,444455,,882233
2,739,047
1,463,440
1,688,568
2,112,516
1,488,544
877,856
TToottaall of which: vested
of which: vesting
2022
2023
2024
2025
2026
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
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.
2021
2022
2023
2024
2025
TToottaall
Audited |
262
3311 DDeecceemmbbeerr
risk2
vested shares
Number of
TToottaall nnuummbbeerr
Potentially
conferred
voting
rights in %
Audited |
Number of shares of BoD members1
Name, function
Axel A. Weber, Chairman
Jeremy Anderson, Vice Chairman and Senior Independent Director
Claudia Böckstiegel, member2
William C. Dudley, member
Patrick Firmenich, member2
Reto Francioni, member
Fred Hu, member
Mark Hughes, member
Nathalie Rachou, member
Julie G. Richardson, member
Beatrice Weder di Mauro, former member2
Dieter Wemmer, member
Jeanette Wong, member
oonn 3311 DDeecceemmbbeerr
22002211
NNuummbbeerr ooff sshhaarreess hheelldd
11,,114488,,336699
Voting rights in %
0.071
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
11,,004466,,999944
9977,,551188
6666,,774444
00
--
4499,,771144
2266,,118811
00
--
113399,,660099
115544,,008866
7744,,448811
4422,,442288
3300,,226633
44,,992200
1188,,110022
00
111177,,336655
8888,,440011
--
119988,,557788
111144,,008866
8888,,774433
6688,,445522
3333,,772222
11,,885577,,995599
0.062
0.006
0.004
0.000
-
0.003
0.002
0.000
-
0.009
0.009
0.005
0.003
0.002
0.000
0.001
0.000
0.007
0.005
-
0.012
0.007
0.005
0.004
0.002
0.116
Total
0.104
11 Includes blocked and unblocked shares held by BoD members, including those held by related parties. No options were granted in 2021 and 2020. 22 At the 2021 AGM, Claudia Böckstiegel and Patrick Firmenich
were newly elected and Beatrice Weder di Mauro did not stand for re-election.
11,,775500,,779977
22002200
Audited |
Total of all blocked and unblocked shares of BoD members1
TToottaall
of which:
unblocked
of which: blocked until
2022
2023
2024
2025
SShhaarreess oonn 3311 DDeecceemmbbeerr 22002211
11,,885577,,995599
701,594
178,603
305,947
329,875
341,940
SShhaarreess oonn 3311 DDeecceemmbbeerr 22002200
11 Includes shares held by related parties.
11,,775500,,779977
658,642
205,961
197,395
332,743
356,056
2021
2022
2023
2024
263
263
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
Christian Bluhm, Group Chief Risk Officer (highest loan in 2021)
Markus U. Diethelm, Group General Counsel (highest loan in 2020)
Aggregate of all GEB members4
oonn 3311 DDeecceemmbbeerr
22002211
22002200
22002211
22002200
USD
(for reference)
Loans3
7,742,947
LLooaannss33
77,,005599,,000000
66,,113311,,550000
2299,,663355,,559900
32,506,982
3311,,883300,,339944
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 2021 and 2020.
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
22002211
22002200
LLooaannss33,,44
11,,550000,,000000
22,,110000,,000000
USD
(for reference)
Loans3,4
1,645,335
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 1,500,00 for Reto Francioni in 2021 and CHF 600,000 for Reto Francioni and CHF 1,500,000 for Beatrice Weder di Mauro in
2020.
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
22002211
22002200
22002211
22002200
22002211
22002200
0
0
0
0
187,876
206,048
187,876
206,048
USD
(for reference)
Total
205,264
205,264
TToottaall
00
00
118877,,887766
220066,,004488
118877,,887766
220066,,004488
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 2021 and 2020 to two former GEB members.
264
264
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
and collateral, and neither involve more than the normal risk of
AG, GEB members may be granted loans. Such loans are made in
collectability nor contain any other unfavorable features for the
the ordinary course of business on substantially the same terms as
firm. The total amount of such loans must not exceed CHF 20
those granted to other employees, including interest rates
million per GEB member.
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 2021 and 2020.
USD
(for reference)
Loans3
7,742,947
oonn 3311 DDeecceemmbbeerr
LLooaannss33
77,,005599,,000000
66,,113311,,550000
3311,,883300,,339944
22002211
22002200
22002211
22002200
2299,,663355,,559900
32,506,982
CHF, except where indicated2
Name, function
Christian Bluhm, Group Chief Risk Officer (highest loan in 2021)
Markus U. Diethelm, Group General Counsel (highest loan in 2020)
Aggregate of all GEB members4
Audited |
Loans granted to BoD members1
In line with article 33 of the Articles of Association of UBS Group
those granted to employees, including interest rates and
AG, loans to independent BoD members are made in the ordinary
collateral, and neither involve more than the normal risk of
course of business at general market conditions. The Chairman,
collectability nor contain any other unfavorable features for the
as a non-independent member, may be granted loans in the
firm. The total amount of such loans must not exceed CHF 20
ordinary course of business on substantially the same terms as
million per BoD member.
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 1,500,00 for Reto Francioni in 2021 and CHF 600,000 for Reto Francioni and CHF 1,500,000 for Beatrice Weder di Mauro in
oonn 3311 DDeecceemmbbeerr
LLooaannss33,,44
11,,550000,,000000
22,,110000,,000000
22002211
22002200
USD
(for reference)
Loans3,4
1,645,335
CHF, except where indicated2
Aggregate of all BoD members
2020.
Audited |
CHF, except where indicated2
Former BoD members
Aggregate of all former GEB members3
Aggregate of all former BoD and GEB members
Compensation paid to former BoD and GEB members1
FFoorr tthhee yyeeaarr
Compensation
Benefits
22002211
22002200
22002211
22002200
22002211
22002200
0
0
0
0
187,876
206,048
187,876
206,048
(for reference)
USD
Total
205,264
205,264
TToottaall
00
00
118877,,887766
220066,,004488
118877,,887766
220066,,004488
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 2021 and 2020 to two former GEB members.
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
achievement. 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
264
265
265
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 2022
Report of the statutory auditor on the compensation report
We have audited the compensation report dated 4 March 2022 of UBS Group AG for the year ended 31
December 2021. 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: Approved fixed compensation, 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 2021 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)
Jan Marxfeld
Licensed audit expert
266
266
Financial
statements
5
Consolidated financial
statements
Table of contents
269 Management’s report on internal control over financial
270
271
276
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
283 UBS Group AG consolidated financial statements
283
283
284
285
286
288
289
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
291 Notes to the UBS Group AG consolidated financial
statements
1
Summary of material accounting policies
Segment reporting
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
2
4
5
6
7
8
291
308
311
311
312
312
313
313
314
268
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
10
11
12
13
14
15
16
17
18
19
337 Additional information
337
20
26
27
21
22
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
Interest rate benchmark reform
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
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
33
29
32
31
28
30
317
317
322
324
324
325
327
327
328
329
330
336
348
364
366
369
370
373
377
387
391
396
397
399
400
400
401
Consolidated financial
statements
283 UBS Group AG consolidated financial statements
Other assets
269 Management’s report on internal control over financial
Balance sheet notes
Table of contents
reporting
270
Report of the independent registered public accounting
firm on internal control over financial reporting
271
Report of the independent registered public accounting
firm on the consolidated financial statements
276
Statutory auditor’s report on the audit of the
consolidated financial statements
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
291 Notes to the UBS Group AG consolidated financial
statements
Segment reporting
Income statement notes
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
283
283
284
285
286
288
289
291
308
311
311
312
312
313
313
314
268
1
2
3
4
5
6
7
8
337 Additional information
317
317
322
324
324
325
327
327
328
329
330
336
337
348
364
366
369
370
373
377
387
391
396
397
399
400
400
401
10
11
12
13
14
15
16
17
18
19
20
21
22
23
25
26
27
28
29
30
31
32
33
34
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
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
Expected credit loss measurement
Fair value measurement
Offsetting financial assets and financial liabilities
Restricted and transferred financial assets
Interest rate benchmark reform
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
Related parties
Invested assets and net new money
Currency translation rates
Events after the reporting period
35 Main differences between IFRS and Swiss GAAP
Summary of material accounting policies
24 Maturity analysis of financial liabilities
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 (IFRS), as issued by the International
Accounting Standards Board (IASB).
UBS’s internal control over financial reporting includes those
policies and procedures that:
– pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect transactions 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.
Management’s assessment of internal control over financial
reporting as of 31 December 2021
UBS management has assessed the effectiveness of UBS’s internal
control over financial reporting as of 31 December 2021 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 2021,
UBS’s internal control over financial reporting was effective.
The effectiveness of UBS’s internal control over financial
reporting as of 31 December 2021 has been audited by Ernst &
Young Ltd, UBS’s independent registered public accounting firm, as
stated in their report appearing on page 270, which expresses an
unqualified opinion on the effectiveness of UBS’s internal control
over financial reporting as of 31 December 2021.
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 271 to 275) and internal control over financial reporting
(refer to page 270) of UBS Group AG are included in our filing on
7 March 2022 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 276 to 282)
of UBS Group AG, in addition to the aforementioned reports, is
included in our Annual Report 2021 available on our website and
filed on 7 March 2022 with all other relevant non-US exchanges.
269
269
Financial statements Ernst & Young Ltd
Aeschengraben 27
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 2021,
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 2021, 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 2021 and 2020, 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 2021, and the related notes
and our report dated 4 March 2022 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 2022
270
Ernst & Young Ltd
Aeschengraben 27
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 2021 and 2020, 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 2021, 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 2021 and 2020, and the results of its
operations and its cash flows for each of the three years in the period ended 31 December 2021, 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 2021, 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 2022 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.
271
Financial statements 2
Valuation of complex or illiquid instruments at fair value
Description of
the Matter
At 31 December 2021, 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 345,010 million
and USD 300,916 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 at fair value not
held for trading, debt issued designated at fair value, and other financial liabilities 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,
key modelling assumptions and significant unobservable inputs. Auditing the valuation of
complex or illiquid instruments at fair value included consideration of any incremental risks
arising from the impact of the current economic environment on valuation techniques and
inputs. The valuation techniques that required especially complex judgement were comprised
of discounted cash flow and earnings-based valuation techniques. Highly 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. We also
independently challenged key judgments in relation to a sample of fair value adjustments.
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 2021, the Group’s deferred tax assets (“DTA”) were USD 8,876 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 future taxable income that
is not based on the reversal of taxable temporary differences. Management’s estimate of
272
3
future taxable profits is based on its strategic plan that is sensitive to the assumptions made
in estimating future taxable income.
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 rate
expectations.
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 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 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.
We also assessed management’s disclosure regarding recognized and unrecognized
deferred tax assets (within Note 8 to the consolidated financial statements).
How We
Addressed the
Matter in Our
Audit
Legal provisions & contingent liabilities
Description of
the Matter
At 31 December 2021, the Group’s provisions for litigation, regulatory and similar matters
(legal provisions) were USD 2,798 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.
Auditing management’s assessment of legal provisions and contingent liabilities was complex
and judgmental due to the significant subjectivity involved in management’s estimate of the
amount and probability that an outflow of resources will be required for existing legal matters,
including a material matter related to the cross-border wealth management business (Note
18b.1). In particular, these legal provisions are based on management’s estimation of the
amount and likelihood of the occurrence of certain scenarios.
273
Financial statements 4
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
amount and likelihood of the occurrence of certain scenarios.
Where appropriate, 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 internal and external 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 2021, the Group’s allowances and provisions for expected credit losses
(“ECL”) were USD 1,165 million. As explained in Notes 1, 9 and 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 that form the basis of
the ECL calculation, their probability weightings, and the credit risk models used to estimate
stage 1 and stage 2 ECL. The COVID-19 pandemic also contributed to the complexity with its
continuing impact on the economic environment in 2021. As a result, 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 post-model adjustments; and,
(ii) credit risk models, since the output from historic data based models may not be indicative
of current or future conditions.
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
assumptions. These assumptions take into account expected future cash flows from collateral
and other credit enhancements or expected payouts from bankruptcy proceedings for
274
How We
Addressed the
Matter in Our
Audit
5
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 forward-
looking economic scenarios used to measure ECL and the probability weighting assigned to
such scenarios. We evaluated management’s methodologies and governance controls for
developing and monitoring the economic scenarios used and the probability weightings
assigned to them, and related post-model adjustment. 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, and
evaluated the modelled correlation and translation of those macroeconomic factors to the ECL
estimate. We further assessed the appropriateness of the post-model adjustments by
considering management’s governance process, assumptions used and sensitivity analysis.
We also 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, and output data
used in the overall ECL calculation. With the support of specialists, on a sample basis, 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
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, on a sample basis.
We also assessed management’s disclosures regarding financial assets at amortized cost and
other positions in scope of expected credit loss measurement (within Notes 1, 9 and 20 to the
consolidated financial statements).
Ernst & Young Ltd
We have served as the Group’s auditor since 1998.
Basel, Switzerland
4 March 2022
275
Financial statements 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 2022
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 2021 and 31 December 2020, 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 2021, 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 2021 and 31 December 2020, and the
consolidated financial performance and its consolidated cash flows for each of the three years in the period
ended 31 December 2021 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.
276
2
Valuation of complex or illiquid instruments at fair value
Area of focus At 31 December 2021, 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
345,010 million and USD 300,916 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 at fair value not held for trading, debt issued designated at fair value, and other
financial liabilities 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, key modelling assumptions and significant unobservable inputs. Auditing the
valuation of complex or illiquid instruments at fair value included consideration of any
incremental risks arising from the impact of the current economic environment on valuation
techniques and inputs. The valuation techniques that required especially complex
judgement were comprised of discounted cash flow and earnings-based valuation
techniques. Highly 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
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. We also independently challenged key judgments in relation to a sample
of fair value adjustments.
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 2021, the Group’s deferred tax assets (“DTA”) were USD 8,876 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 future taxable
income that is not based on the reversal of taxable temporary differences. Management’s
277
Financial statements 3
estimate of future taxable profits is based on its strategic plan that is sensitive to the
assumptions made in estimating future taxable income.
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 rate
expectations.
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 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 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.
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 2021, the Group’s provisions for litigation, regulatory and similar matters
(legal provisions) were USD 2,798 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.
Auditing management’s assessment of legal provisions and contingent liabilities was
complex and judgmental due to the significant subjectivity involved in management’s
estimate of the amount and probability that an outflow of resources will be required for
existing legal matters, including a material matter related to the cross-border wealth
management business (Note 18b.1). In particular, these legal provisions are based on
management’s estimation of the amount and likelihood of the occurrence of certain
scenarios.
278
4
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 amount and likelihood of the occurrence of certain scenarios.
Where appropriate, 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 internal and external 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 2021, the Group’s allowances and provisions for expected credit losses
(“ECL”) were USD 1,165 million. As explained in Notes 1, 9 and 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 that form the
basis of the ECL calculation, their probability weightings, and the credit risk models used
to estimate stage 1 and stage 2 ECL. The COVID-19 pandemic also contributed to the
complexity with its continuing impact on the economic environment in 2021. As a result,
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 post-model adjustments; and, (ii) credit risk models, since the output from historic data
based models may not be indicative of current or future conditions.
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 assumptions. These assumptions take into account expected future cash flows from
collateral and other credit enhancements or expected payouts from bankruptcy
279
Financial statements Our audit
response
5
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 forward-looking economic scenarios used to measure ECL and the probability
weighting assigned to such scenarios. We evaluated management’s methodologies and
governance controls for developing and monitoring the economic scenarios used and the
probability weightings assigned to them, and related post-model adjustment. 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, and evaluated the modelled correlation and translation of those
macroeconomic factors to the ECL estimate. We further assessed the appropriateness of
the post-model adjustments by considering management’s governance process,
assumptions used and sensitivity analysis.
We also 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, and
output data used in the overall ECL calculation. With the support of specialists, on a sample
basis, 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
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, on a sample basis.
We also assessed management’s disclosures regarding financial assets at amortized cost
and other positions in scope of expected credit loss measurement (within Notes 1, 9 and
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. The Group continues to invest in
its IT systems and is dependent on such technologies 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 with a significant number of IT
infrastructure and applications relevant to financial reporting.
280
6
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 262-
263), 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.
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
281
Financial statements 7
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.)
282
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, amortization and impairment of non-financial 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..2211
31.12.20
31.12.19
For the year ended
3
3
3
3
3
20
4
4
4
5
6
7
12, 13
8
88,,553333
((33,,225599))
11,,443311
66,,770055
55,,885500
114488
2244,,337722
((11,,998855))
2222,,338877
445522
3355,,554422
1188,,338877
55,,555533
22,,111188
2266,,005588
99,,448844
11,,999988
77,,448866
2299
77,,445577
8,810
(4,247)
1,299
5,862
6,960
(694)
20,961
(1,775)
19,186
1,076
32,390
17,224
4,885
2,126
24,235
8,155
1,583
6,572
15
6,557
10,684
(7,194)
1,011
4,501
6,842
(78)
19,110
(1,696)
17,413
212
28,889
16,084
5,288
1,940
23,312
5,577
1,267
4,310
6
4,304
22..1144
22..0066
1.83
1.77
1.17
1.14
283
283
Financial statements Consolidated financial statements
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
Subtotal foreign currency translation, net of tax
FFiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt ffaaiirr vvaalluuee tthhrroouugghh ootthheerr ccoommpprreehheennssiivvee iinnccoommee
Net unrealized gains / (losses), before tax
Net realized gains / (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
Cost of hedging, before tax
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
Comprehensive income attributable to non-controlling interests
NNeett pprrooffiitt // ((lloossss))
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
Note
3311..1122..2211
31.12.20
31.12.19
For the year ended
77,,445577
6,557
4,304
11
26
26
27
21
((11,,007766))
449988
((22))
1100
3355
((553355))
((220033))
((99))
5555
((115577))
((999922))
((11,,007733))
339900
((11,,667755))11
((3322))
66
((2266))
((22,,339933))
22
((77))
((55))
4466
00
4466
4422
2,103
(936)
(7)
2
(67)
1,095
223
(40)
(48)
136
2,012
(770)
(231)
1,011
(13)
0
(13)
2,230
(327)
109
(218)
(293)
0
(293)
(511)
200
(134)
52
(14)
0
104
189
(31)
(41)
117
1,571
(175)
(253)
1,143
1,363
(146)
(41)
(186)
(400)
8
(392)
(578)
((22,,335511))
55,,110066
1,719
8,276
785
5,089
2299
((1166))
1133
15
21
36
6
(4)
2
77,,448866
((22,,336677))
((22,,339933))
2266
55,,111199
6,572
1,740
2,230
(490)
8,312
4,310
781
1,363
(582)
5,091
TToottaall ccoommpprreehheennssiivvee iinnccoommee
11 Mainly reflects the reclassification of net gains on hedging instruments from OCI to the income statement as the hedged forecast cash flows affected profit or loss and a decrease in net unrealized gains on US dollar
hedging derivatives resulting from increases in the relevant long-term US dollar interest rates.
284
284
Foreign currency translation movements related to net assets of foreign operations, before tax
((11,,007766))
2,103
Consolidated financial statements
Statement of comprehensive income
USD million
NNeett pprrooffiitt // ((lloossss))
Comprehensive income attributable to shareholders
OOtthheerr ccoommpprreehheennssiivvee iinnccoommee tthhaatt mmaayy bbee rreeccllaassssiiffiieedd ttoo tthhee iinnccoommee ssttaatteemmeenntt
FFoorreeiiggnn ccuurrrreennccyy ttrraannssllaattiioonn
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
Subtotal foreign currency translation, net of tax
FFiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt ffaaiirr vvaalluuee tthhrroouugghh ootthheerr ccoommpprreehheennssiivvee iinnccoommee
Net unrealized gains / (losses), before tax
Net realized gains / (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
Cost of hedging, before tax
Income tax relating to cost of hedging
Subtotal cost of hedging, net of tax
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
Comprehensive income attributable to non-controlling interests
NNeett pprrooffiitt // ((lloossss))
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
Note
3311..1122..2211
31.12.20
31.12.19
For the year ended
77,,445577
6,557
4,304
11
26
26
27
21
((553355))
1,095
((999922))
((11,,007733))
339900
2,012
(770)
(231)
((11,,667755))11
1,011
(936)
(7)
2
(67)
223
(40)
(48)
136
(13)
0
(13)
(327)
109
(218)
(293)
0
(293)
(511)
200
(134)
52
(14)
0
104
189
(31)
(41)
117
1,571
(175)
(253)
1,143
(146)
(41)
(186)
(400)
8
(392)
(578)
449988
((22))
1100
3355
((220033))
((99))
5555
((115577))
((3322))
66
((2266))
22
((77))
((55))
4466
00
4466
4422
2299
((1166))
1133
((22,,335511))
55,,110066
1,719
8,276
785
5,089
15
21
36
6
(4)
2
77,,448866
((22,,336677))
((22,,339933))
2266
55,,111199
6,572
1,740
2,230
(490)
8,312
4,310
781
1,363
(582)
5,091
TToottaall ootthheerr ccoommpprreehheennssiivvee iinnccoommee tthhaatt mmaayy bbee rreeccllaassssiiffiieedd ttoo tthhee iinnccoommee ssttaatteemmeenntt,, nneett ooff ttaaxx
((22,,339933))
2,230
1,363
11 Mainly reflects the reclassification of net gains on hedging instruments from OCI to the income statement as the hedged forecast cash flows affected profit or loss and a decrease in net unrealized gains on US dollar
hedging derivatives resulting from increases in the relevant long-term US dollar interest rates.
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..2211
31.12.20
9
9, 22
9, 22
9
9, 14a
21
10, 21, 22
21
21
11, 21
29b
12
13
8
14b
15
22
22
15
17
19a
21
10, 21, 22
21
16, 21
19b, 21
18a
19c
119922,,881177
1155,,448800
7755,,001122
3300,,551144
339977,,776611
2266,,220099
773377,,779944
113300,,882211
4433,,339977
111188,,114422
2211,,883399
6600,,008800
333300,,888822
88,,884444
11,,224433
1122,,888888
66,,337788
88,,887766
1100,,227777
11,,111177,,118822
1133,,110011
55,,553333
3311,,779988
554422,,000077
113399,,115555
99,,000011
774400,,559955
3311,,668888
112211,,330099
4444,,004455
7733,,779999
3300,,007744
330000,,991166
33,,551188
1111,,115511
11,,005566,,118800
332222
1155,,992288
((44,,667755))
4433,,885511
55,,223366
6600,,666622
334400
6611,,000022
11,,111177,,118822
158,231
15,444
74,210
32,737
379,528
27,194
687,345
125,397
47,098
159,617
24,659
80,364
390,037
8,258
1,557
13,109
6,480
9,212
9,768
1,125,765
11,050
6,321
37,312
524,605
139,232
9,729
728,250
33,595
161,102
38,742
61,243
30,387
325,069
2,828
9,854
1,066,000
338
16,753
(4,068)
38,776
7,647
59,445
319
59,765
1,125,765
284
285
285
Financial statements Consolidated financial statements
Statement of changes in equity
USD million
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22001188
Effect of adoption of IFRIC 23
Share
capital
333388
Share
premium Treasury shares
((22,,663311))
2200,,884433
BBaallaannccee aass ooff 11 JJaannuuaarryy 22001199 aafftteerr tthhee aaddooppttiioonn ooff IIFFRRIICC 2233
333388
2200,,884433
(886)
(2)
29
619
11
(2,544)3
(6)
333388
1188,,006644
(628)
(11)
691
18
(1,304)3
(76)
333388
1166,,775533
Retained
earnings
3300,,441166
(11)
3300,,440055
(9)
3,726
4,304
(578)
3344,,112222
(1,304)3
(49)
(40)
6,046
6,557
(511)
3388,,777766
((22,,663311))
(1,771)2
983
942
((33,,332266))
(1,584)2
719
1232
((44,,006688))
((33,,552211))22
778899
881122
((667755))
77
((223366))
664433
((8888))
((665511))33
((77))
118822
22,,004444
((11,,779922))
((665511))33
1188
11
77,,449999
77,,445577
4422
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: OCI, net of tax
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22001199
Acquisition of treasury shares
Delivery of treasury shares under share-based compensation plans
Other disposal of treasury shares
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)4
Total comprehensive income for the year
of which: net profit / (loss)
of which: OCI, net of tax
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22002200
Acquisition of treasury shares
Delivery of treasury shares under share-based compensation plans
Other disposal of treasury shares
Share-based compensation expensed in the income statement
Tax (expense) / benefit
Dividends
Equity classified as obligation to purchase own shares
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: OCI, net of tax
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22002211
Cancellation of treasury shares related to the 2018–2021 share repurchase program5
((1166))
332222
1155,,992288
((44,,667755))
4433,,885511
11 Excludes other comprehensive income related to defined benefit plans and own credit, which is recorded directly in Retained earnings. 22 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. 33 Reflects the payment of an ordinary cash dividend of USD 0.37 (2020: USD 0.73, 2019: CHF 0.70) 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. 44 Mainly relates to the establishment of a banking partnership with Banco do Brasil. In 2020, UBS issued a 49.99% stake in UBS Brasil Serviços in exchange for exclusive access to Banco do Brasil’s
corporate clients. Upon completion of the transaction in 2020, equity attributable to non-controlling interests increased by USD 115 million, with no material effect on equity attributable to shareholders. 55 Reflects
the cancellation of 156,632,400 shares purchased under UBS’s 2018–2021 share repurchase program as approved by shareholders at the 2021 Annual General Meeting. For shares repurchased from 2020 onward,
Swiss tax law effective 1 January 2020 requires Switzerland-domiciled companies with shares listed on a Swiss stock exchange to reduce capital contribution reserves by at least 50% of the total capital reduction
amount exceeding the nominal value upon cancellation of the shares. 66 Includes the effects related to the launch of UBS’s new operational partnership entity with Sumitomo Mitsui Trust Holdings, Inc. Refer to
Note 30 for more information.
286
286
BBaallaannccee aass ooff 11 JJaannuuaarryy 22001199 aafftteerr tthhee aaddooppttiioonn ooff IIFFRRIICC 2233
333388
2200,,884433
33,,993300
33,,992244
((110033))
110099
Share
capital
333388
Share
premium Treasury shares
2200,,884433
((22,,663311))
Other comprehensive
income recognized
directly in equity,
net of tax1
33,,993300
of which:
foreign currency
translation
33,,992244
of which:
financial assets at
fair value through OCI
((110033))
of which:
cash flow
hedges
110099
of which:
cost of hedging
9
1,363
1,363
55,,330033
49
65
2,230
2,230
77,,664477
104
104
44,,002288
65
1,095
1,095
55,,118888
0
117
117
1144
9
1,143
1,143
11,,226600
0
49
136
136
115511
1,011
1,011
22,,332211
(13)
(13)
((1133))
((1188))
00
((1188))
00
((22,,339933))
((553355))
((115577))
((11,,667755))
((22,,339933))
55,,223366
((553355))
44,,665533
((115577))
((77))
((11,,667755))
662288
((2266))
((2266))
((3399))
Consolidated financial statements
Statement of changes in equity
USD million
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22001188
Effect of adoption of IFRIC 23
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: OCI, net of tax
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22001199
Acquisition of treasury shares
Delivery of treasury shares under share-based compensation plans
Other disposal of treasury shares
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)4
Total comprehensive income for the year
of which: net profit / (loss)
of which: OCI, net of tax
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22002200
Acquisition of treasury shares
Delivery of treasury shares under share-based compensation plans
Other disposal of treasury shares
Share-based compensation expensed in the income statement
Tax (expense) / benefit
Dividends
Equity classified as obligation to purchase own shares
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: OCI, net of tax
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22002211
((22,,663311))
(1,771)2
983
942
((33,,332266))
(1,584)2
719
1232
((44,,006688))
((33,,552211))22
778899
881122
333388
1188,,006644
333388
1166,,775533
(886)
(2)
29
619
11
(6)
(2,544)3
(628)
(11)
691
18
(1,304)3
(76)
((667755))
77
((223366))
664433
((8888))
((665511))33
((77))
118822
Retained
earnings
3300,,441166
(11)
3300,,440055
(9)
3,726
4,304
(578)
3344,,112222
(1,304)3
(49)
(40)
6,046
6,557
(511)
3388,,777766
((665511))33
1188
11
77,,449999
77,,445577
4422
Cancellation of treasury shares related to the 2018–2021 share repurchase program5
((1166))
22,,004444
((11,,779922))
11 Excludes other comprehensive income related to defined benefit plans and own credit, which is recorded directly in Retained earnings. 22 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. 33 Reflects the payment of an ordinary cash dividend of USD 0.37 (2020: USD 0.73, 2019: CHF 0.70) 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. 44 Mainly relates to the establishment of a banking partnership with Banco do Brasil. In 2020, UBS issued a 49.99% stake in UBS Brasil Serviços in exchange for exclusive access to Banco do Brasil’s
corporate clients. Upon completion of the transaction in 2020, equity attributable to non-controlling interests increased by USD 115 million, with no material effect on equity attributable to shareholders. 55 Reflects
the cancellation of 156,632,400 shares purchased under UBS’s 2018–2021 share repurchase program as approved by shareholders at the 2021 Annual General Meeting. For shares repurchased from 2020 onward,
Swiss tax law effective 1 January 2020 requires Switzerland-domiciled companies with shares listed on a Swiss stock exchange to reduce capital contribution reserves by at least 50% of the total capital reduction
amount exceeding the nominal value upon cancellation of the shares. 66 Includes the effects related to the launch of UBS’s new operational partnership entity with Sumitomo Mitsui Trust Holdings, Inc. Refer to
Note 30 for more information.
332222
1155,,992288
((44,,667755))
4433,,885511
Total equity
attributable to
shareholders
5522,,889966
(11)
5522,,888855
(1,771)
Non-controlling
interests
117766
117766
97
92
29
619
11
(2,544)
0
(6)
5,089
4,304
785
5544,,550011
(1,584)
90
112
691
18
(8)
5
2
6
(4)
117744
Total equity
5533,,007711
(11)
5533,,006600
(1,771)
97
92
29
619
11
(2,552)
0
(1)
5,091
4,310
781
5544,,667755
(1,584)
90
112
691
18
(2,607)
(6)
(2,613)
0
(40)
(12)
8,276
6,557
1,719
5599,,444455
((33,,552211))
111144
8888
00
664433
((8888))
115
36
15
21
331199
0
(40)
103
8,312
6,572
1,740
5599,,776655
((33,,552211))
111144
8888
00
664433
((8888))
((11,,330011))
((44))
((11,,330055))
((77))
00
11
118822
55,,110066
77,,445577
((22,,335511))
6600,,666622
((77))
00
11
119933
55,,111199
77,,448866
((22,,336677))
6611,,000022
1122
1133
2299
((1166))
334400
286
287
287
Financial statements Consolidated financial statements
Share information and earnings per share
Ordinary share capital
As of 31 December 2021, UBS Group AG had 3,702,422,995
issued shares with a nominal value of CHF 0.10 each, leading to
a share capital of CHF 370,242,299.50. Shares issued decreased
by 157 million and share capital decreased by USD 16 million in
2021, as the 156,632,400 shares acquired under the 2018–2021
share repurchase program were canceled by means of a capital
reduction, as approved by shareholders at the 2021 Annual
General Meeting.
Conditional share capital
As of 31 December 2021, 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 (the EGM) held on
26 November 2014, having originally been approved at the
Annual General Meeting (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.
Authorized share capital
UBS Group AG had no authorized capital available to issue on
31 December 2021.
Share repurchase programs
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 8 million shares for a total acquisition cost of
USD 112 million in 2021 (2020: 31 million shares for a total
acquisition cost of USD 364 million).
The 2018–2021 program was completed on 2 February 2021
and the 156,632,400 shares acquired under the 2018–2021 share
repurchase program were canceled by means of a capital
reduction, as approved by shareholders at the 2021 Annual
General Meeting.
In February 2021, UBS commenced a new three-year share
repurchase program of up to CHF 4 billion. Under this program,
UBS repurchased 153 million shares in 2021 for a total acquisition
cost of USD 2,500 million (CHF 2,294 million).
Shares outstanding
SShhaarreess iissssuueedd
Balance at the beginning of the year
Shares issued
Shares canceled
Balance at the end of the year
TTrreeaassuurryy sshhaarreess
Balance at the beginning of the year
Acquisitions
Disposals
Cancellation of second trading line treasury shares
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 EPS2
Effect of dilutive potential shares resulting from notional employee shares, in-the-money options and warrants
outstanding3
Weighted average shares outstanding for diluted EPS
Earnings per share (USD)
Basic
Diluted
As of or for the year ended
3311..1122..2211
31.12.20
31.12.19
33,,885599,,005555,,339955
3,859,055,395
3,855,634,749
3,420,646
((115566,,663322,,440000))11
33,,770022,,442222,,999955
330077,,447777,,000022
221144,,227700,,117755
((6622,,229999,,444499))
((115566,,663322,,440000))11
330022,,881155,,332288
33,,339999,,660077,,666677
3,859,055,395
3,859,055,395
243,021,296
128,372,257
(63,916,551)
166,467,802
146,876,692
(70,323,198)
307,477,002
3,551,578,393
243,021,296
3,616,034,099
77,,445577
00
77,,445577
6,557
(1)
6,556
4,304
0
4,304
33,,448822,,996633,,668822
3,583,176,189
3,663,278,238
114444,,227777,,669933
33,,662277,,224411,,337755
123,852,137
3,707,028,326
103,881,600
3,767,159,838
22..1144
22..0066
1.83
1.77
1.17
1.14
Potentially dilutive instruments4
Employee share-based compensation awards
Other equity derivative contracts
TToottaall
11 Reflects the cancellation of shares purchased under UBS’s 2018–2021 share repurchase program as approved by shareholders at the 2021 Annual General Meeting. 22 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. 33 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. 44 Reflects potential shares that could dilute basic earnings per share in the future, but were not dilutive for the periods
presented.
2,536,789
11,414,728
13,951,517
55,,888866,,994455
66,,555533,,005511
1122,,443399,,999966
21,632,879
21,632,879
288
288
Consolidated financial statements
Share information and earnings per share
Statement of cash flows
Ordinary share capital
– A maximum of CHF 12,170,583 represented by 121,705,830
USD million
Cash flow from / (used in) operating activities
Net profit / (loss)
NNoonn--ccaasshh iitteemmss iinncclluuddeedd iinn nneett pprrooffiitt aanndd ootthheerr aaddjjuussttmmeennttss::
Depreciation, amortization and impairment of non-financial assets
Credit loss expense / (release)
Share of net profits of associates and joint ventures and impairment related to 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 and 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 and other financial assets and liabilities
Provisions and 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.
As of 31 December 2021, UBS Group AG had 3,702,422,995
issued shares with a nominal value of CHF 0.10 each, leading to
a share capital of CHF 370,242,299.50. Shares issued decreased
by 157 million and share capital decreased by USD 16 million in
2021, as the 156,632,400 shares acquired under the 2018–2021
share repurchase program were canceled by means of a capital
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.
reduction, as approved by shareholders at the 2021 Annual
Authorized share capital
General Meeting.
Conditional share capital
UBS Group AG had no authorized capital available to issue on
31 December 2021.
As of 31 December 2021, the following conditional share capital
Share repurchase programs
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 (the EGM) held on
26 November 2014, having originally been approved at the
Annual General Meeting (AGM) of UBS AG on 14 April 2010.
The BoD has not made use of such allowance.
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 8 million shares for a total acquisition cost of
USD 112 million in 2021 (2020: 31 million shares for a total
acquisition cost of USD 364 million).
The 2018–2021 program was completed on 2 February 2021
and the 156,632,400 shares acquired under the 2018–2021 share
repurchase program were canceled by means of a capital
reduction, as approved by shareholders at the 2021 Annual
General Meeting.
In February 2021, UBS commenced a new three-year share
repurchase program of up to CHF 4 billion. Under this program,
UBS repurchased 153 million shares in 2021 for a total acquisition
cost of USD 2,500 million (CHF 2,294 million).
Shares outstanding
SShhaarreess iissssuueedd
Balance at the beginning of the year
Shares issued
Shares canceled
Balance at the end of the year
TTrreeaassuurryy sshhaarreess
Balance at the beginning of the year
Acquisitions
Disposals
Cancellation of second trading line treasury shares
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 EPS2
outstanding3
Weighted average shares outstanding for diluted EPS
Earnings per share (USD)
Potentially dilutive instruments4
Employee share-based compensation awards
Other equity derivative contracts
Basic
Diluted
TToottaall
presented.
288
Effect of dilutive potential shares resulting from notional employee shares, in-the-money options and warrants
As of or for the year ended
3311..1122..2211
31.12.20
31.12.19
33,,885599,,005555,,339955
3,859,055,395
3,855,634,749
3,420,646
33,,770022,,442222,,999955
3,859,055,395
3,859,055,395
243,021,296
128,372,257
(63,916,551)
166,467,802
146,876,692
(70,323,198)
((115566,,663322,,440000))11
330077,,447777,,000022
221144,,227700,,117755
((6622,,229999,,444499))
((115566,,663322,,440000))11
330022,,881155,,332288
33,,339999,,660077,,666677
307,477,002
3,551,578,393
243,021,296
3,616,034,099
77,,445577
00
77,,445577
6,557
(1)
6,556
4,304
0
4,304
33,,448822,,996633,,668822
3,583,176,189
3,663,278,238
114444,,227777,,669933
33,,662277,,224411,,337755
123,852,137
3,707,028,326
103,881,600
3,767,159,838
22..1144
22..0066
1.83
1.77
1.17
1.14
55,,888866,,994455
66,,555533,,005511
1122,,443399,,999966
2,536,789
11,414,728
13,951,517
21,632,879
21,632,879
11 Reflects the cancellation of shares purchased under UBS’s 2018–2021 share repurchase program as approved by shareholders at the 2021 Annual General Meeting. 22 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. 33 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. 44 Reflects potential shares that could dilute basic earnings per share in the future, but were not dilutive for the periods
For the year ended
31.12.20
3311..1122..2211
31.12.19
77,,448866
6,572
4,310
22,,111188
2,126
1,940
((114488))
((110055))
443344
((223300))
110000
33,,880022
22,,114488
((22,,331166))
((33,,331122))
((2277,,446600))
2299,,882255
((1100,,551166))
88,,111155
1199,,660099
33,,001100
((11,,113344))
3311,,442255
((11))
559933
((11,,884411))
229955
((55,,880022))
55,,005522
((441155))
((22,,111199))
694
(84)
352
(698)
3,246
(8,076)
3,586
9,588
(3,487)
(33,656)
51,805
11,259
(5,199)
320
(387)
(1,002)
36,958
(46)
674
(1,854)
366
(6,290)
4,530
(4,166)
(6,785)
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)
289
289
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
Issuance of debt designated at fair value and long-term debt measured at amortized cost
Repayment of debt designated at fair value and long-term debt measured at amortized cost
Net cash flows from other financing activities
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
31.12.20
3311..1122..2211
31.12.19
((33,,009933))
((33,,334411))
((11,,330011))
9988,,227722
((7799,,990099))
((228822))
1100,,334455
117733,,553311
3399,,665511
((55,,330077))
220077,,887755
119922,,770066
1133,,994422
11,,222277
23,845
(1,387)
(2,607)
80,255
(87,098)
(575)
12,432
119,873
42,605
11,052
173,531
158,088
14,028
1,415
(17,149)
(1,559)
(2,544)
65,047
(68,883)
(526)
(25,614)
126,079
(7,467)
1,261
119,873
106,957
11,386
1,530
1111,,116633
11,915
15,315
Interest paid in cash
Dividends on equity investments, investment funds and associates received in cash5
11 Includes cash proceeds from the sale of UBS’s investment in Clearstream Fund Centre AG (previously Fondcenter AG). UBS’s majority stake was sold in 2020 and the remaining minority investment was sold in the
second quarter of 2021. Refer to Note 30 for more information. Also includes dividends received from associates. 22 USD 3,408 million, USD 3,828 million and USD 3,192 million of cash and cash equivalents (mainly
reflected in Loans and advances to banks) were restricted as of 31 December 2021, 31 December 2020 and 31 December 2019, 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, Financial assets measured at fair value through other
comprehensive income, Financial assets at fair value not held for trading and Other financial assets measured at amortized cost. 55 Includes dividends received from associates reported within Net cash flow from /
(used in) investing activities.
10,769
6,320
3,145
1,901
44,,770077
22,,553311
Changes in liabilities arising from financing activities
USD million
BBaallaannccee aass ooff 11 JJaannuuaarryy 22002200
Cash flows
Non-cash changes
of which: foreign currency translation
of which: fair value changes
of which: hedge accounting and other effects
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22002200
Cash flows
Non-cash changes
of which: foreign currency translation
of which: fair value changes
of which: hedge accounting and other effects
Debt issued
measured at
amortized cost
110,497
22,428
6,308
4,980
of which:
short-term 1
21,837
23,845
984
984
of which:
long-term 2
88,660
(1,417)
5,324
3,995
Debt issued
designated at fair
value
66,809
(5,420)
(146)
1,764
(1,909)
Over-the-
counter debt
instruments3
2,022
(6)
44
81
(37)
1,328
139,232
5,070
(5,148)
(3,175)
(1,972)
46,666
(3,093)
(475)
(475)
1,328
92,566
8,163
(4,673)
(2,700)
61,243
10,076
2,480
(1,617)
4,097
2,060
124
(56)
(65)
9
(1,972)
9966,,005577
Total
179,327
17,002
6,207
6,824
(1,946)
1,328
202,535
15,270
(2,724)
(4,857)
4,106
(1,972)
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22002211
11 Debt with an original contractual maturity of less than one year. 22 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. 33 Included in balance sheet line Other financial liabilities designated at fair value.
221155,,008822
113399,,115555
4433,,009988
7733,,779999
22,,112288
290
290
Notes to the UBS Group AG consolidated financial statements
Note 1 Summary of material accounting policies
The following table provides an overview of information included in this Note.
292
292
292
293
293
293
297
297
297
297
298
301
301
302
a) Material 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
302
303
304
304
305
305
305
306
306
Income taxes
3) Fee and commission income and expenses
4) Share-based and other deferred compensation plans
5) Post-employment benefit plans
6)
7) Property, equipment and software
8) Goodwill
9) Provisions and contingent liabilities
10) Foreign currency translation
11) Equity, treasury shares and contracts
on UBS Group AG shares
307
b) Changes in accounting policies, comparability
and other adjustments
307
c)
International Financial Reporting Standards and
Interpretations to be adopted in 2022 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
Issuance of debt designated at fair value and long-term debt measured at amortized cost
Repayment of debt designated at fair value and long-term debt measured at amortized cost
Net cash flows from other financing activities
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..2211
31.12.20
31.12.19
((33,,009933))
((33,,334411))
((11,,330011))
9988,,227722
((7799,,990099))
((228822))
1100,,334455
117733,,553311
3399,,665511
((55,,330077))
220077,,887755
119922,,770066
1133,,994422
11,,222277
23,845
(1,387)
(2,607)
80,255
(87,098)
(575)
12,432
119,873
42,605
11,052
173,531
158,088
14,028
1,415
(17,149)
(1,559)
(2,544)
65,047
(68,883)
(526)
(25,614)
126,079
(7,467)
1,261
119,873
106,957
11,386
1,530
1111,,116633
44,,770077
22,,553311
11,915
6,320
1,901
15,315
10,769
3,145
Dividends on equity investments, investment funds and associates received in cash5
11 Includes cash proceeds from the sale of UBS’s investment in Clearstream Fund Centre AG (previously Fondcenter AG). UBS’s majority stake was sold in 2020 and the remaining minority investment was sold in the
second quarter of 2021. Refer to Note 30 for more information. Also includes dividends received from associates. 22 USD 3,408 million, USD 3,828 million and USD 3,192 million of cash and cash equivalents (mainly
reflected in Loans and advances to banks) were restricted as of 31 December 2021, 31 December 2020 and 31 December 2019, 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, Financial assets measured at fair value through other
comprehensive income, Financial assets at fair value not held for trading and Other financial assets measured at amortized cost. 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 22002200
Cash flows
Non-cash changes
of which: foreign currency translation
of which: fair value changes
of which: hedge accounting and other effects
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22002200
Cash flows
Non-cash changes
of which: foreign currency translation
of which: fair value changes
of which: hedge accounting and other effects
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22002211
Debt issued
measured at
amortized cost
short-term 1
long-term 2
of which:
of which:
designated at fair
Debt issued
Over-the-
counter debt
instruments3
2,022
110,497
22,428
6,308
4,980
1,328
139,232
5,070
(5,148)
(3,175)
(1,972)
113399,,115555
21,837
23,845
984
984
46,666
(3,093)
(475)
(475)
88,660
(1,417)
5,324
3,995
1,328
92,566
8,163
(4,673)
(2,700)
(1,972)
9966,,005577
value
66,809
(5,420)
(146)
1,764
(1,909)
61,243
10,076
2,480
(1,617)
4,097
Total
179,327
17,002
6,207
6,824
(1,946)
1,328
(2,724)
(4,857)
4,106
(1,972)
(6)
44
81
(37)
(56)
(65)
9
2,060
124
202,535
15,270
11 Debt with an original contractual maturity of less than one year. 22 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. 33 Included in balance sheet line Other financial liabilities designated at fair value.
4433,,009988
7733,,779999
22,,112288
221155,,008822
290
291
291
Financial statements
Consolidated financial statements | UBS Group AG consolidated financial statements
1) Consolidation
The Financial Statements comprise the financial statements of the
parent company (UBS Group AG) and its subsidiaries, 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 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.
Business combinations are accounted for using the acquisition
method. The amount of any non-controlling interest is measured
at the non-controlling interest’s proportionate share of the
acquiree’s identifiable net assets.
› Refer to Note 29 for more information
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 29 for more information
Note 1 Summary of material accounting policies (continued)
a) Material accounting policies
This Note describes the material 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 24 February 2022, 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.
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 6 in this Note and to Note 8);
–
–
– provisions and contingent liabilities (refer to item 9 in this Note and to
Note 18);
– post-employment benefit plans (refer to item 5 in this Note and to Note
27);
– goodwill (refer to item 8 in this Note and to Note 13); and
–
consolidation of structured entities (refer to item 1 in this Note and to
Note 29).
300
292
Consolidated financial statements | UBS Group AG consolidated financial statements
Note 1 Summary of material accounting policies (continued)
Note 1 Summary of material accounting policies (continued)
a) Material accounting policies
2) Financial instruments
This Note describes the material accounting policies applied in the
1) Consolidation
preparation of the consolidated financial statements (the Financial
Statements) of UBS Group AG and its subsidiaries (UBS or the
The Financial Statements comprise the financial statements of the
Group). On 24 February 2022, the Financial Statements were
parent company (UBS Group AG) and its subsidiaries, presented
authorized for issue by the Board of Directors.
Basis of accounting
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 relevant activities of the entity;
The Financial Statements have been prepared in accordance with
(ii) exposure to an entity‘s variable returns; and (iii) the ability to
International Financial Reporting Standards (IFRS), as issued by the
use its power to affect its own returns.
International Accounting Standards Board (the IASB), and are
Consideration is given to all facts and circumstances to
presented in US dollars (USD).
determine whether the Group has power over another entity, i.e.,
Disclosures marked as audited in the “Risk, capital, liquidity
the current ability to direct the relevant activities of an entity when
and funding, and balance sheet” section of this report form an
decisions about those activities need to be made.
integral part of the Financial Statements. These disclosures relate
Subsidiaries, including SEs, are consolidated from the date
to requirements under IFRS 7, Financial Instruments: Disclosures,
when control is gained and deconsolidated from the date when
and IAS 1, Presentation of Financial Statements, and are not
control ceases. Control, or the lack thereof, is reassessed if facts
repeated in this section.
and circumstances indicate that there is a change to one or more
The accounting policies described in this Note have been
elements required to establish that control is present.
applied consistently in all years presented unless otherwise stated
Business combinations are accounted for using the acquisition
in Note 1b.
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
the 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,
they 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
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
instruments
through profit or
subsequently measured at amortized cost or FVOCI, the initial fair
value is adjusted for directly attributable transaction costs.
(FVTPL). For financial
loss
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 of holding 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).
method. The amount of any non-controlling interest is measured
at the non-controlling interest’s proportionate share of the
acquiree’s identifiable net assets.
› Refer to Note 29 for more information
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 29 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
Financial Statements:
expected credit loss measurement (refer to item 2g in this Note and to
–
–
–
Note 20);
Note 18);
27);
Note 29).
fair value measurement (refer to item 2f in this Note and to Note 21);
income taxes (refer to item 6 in this Note and to Note 8);
– provisions and contingent liabilities (refer to item 9 in this Note and to
– post-employment benefit plans (refer to item 5 in this Note and to Note
– goodwill (refer to item 8 in this Note and to Note 13); and
–
consolidation of structured entities (refer to item 1 in this Note and to
Business model assessment and contractual cash flow
characteristics
UBS determines the nature of a business model by considering the
way financial assets are managed to achieve a particular business
objective.
In assessing whether 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.
If a 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.
300
301
293
Financial statements Consolidated financial statements | UBS Group AG consolidated financial statements
Note 1 Summary of material 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;
– receivables from securities financing transactions;
– cash collateral receivables on derivative instruments;
– residential and commercial mortgages;
– corporate loans;
– secured loans, including Lombard loans, and
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.
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
– foreign exchange (FX) translation gains and losses.
When a 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
– FX translation gains and losses.
302
294
Consolidated financial statements | UBS Group AG consolidated financial statements
Note 1 Summary of material accounting policies (continued)
Note 1 Summary of material 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;
– receivables from securities financing transactions;
– cash collateral receivables on derivative instruments;
– residential and commercial mortgages;
– corporate loans;
– secured loans, including Lombard loans, and
unsecured loans;
– loans to financial advisors; and
– debt securities held as high-quality liquid assets
(HQLA).
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
– foreign exchange (FX) translation gains and losses.
When a 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
– FX 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, and
receivables from securities financing transactions 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 (ETD) and over-the-counter (OTC)-
cleared derivatives that are legally 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,
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 FX 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).
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Financial statements Consolidated financial statements | UBS Group AG consolidated financial statements
Note 1 Summary of material 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:
– demand and time deposits;
– retail savings / deposits;
– payables from securities financing transactions;
– 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 from securities financing transactions;
– amounts due under unit-linked investment contracts
the cash flows of which 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.
Measured at amortized cost using the effective interest
method.
When a 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 a 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 legally settled on a daily basis or in
substance net settled on a daily basis, which are
presented within Cash collateral payables on derivative
instruments.
304
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Consolidated financial statements | UBS Group AG consolidated financial statements
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
– demand and time deposits;
– retail savings / deposits;
– payables from securities financing transactions;
– non-structured fixed-rate bonds;
– subordinated debt;
– certificates of deposit and covered bonds; and
– cash collateral payables on derivative instruments.
method.
statement.
When a financial liability at amortized cost is
derecognized, the gain or loss is recognized in the income
Measured at
Held for trading
Financial liabilities held for trading include:
fair value
through
profit or loss
– 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
UBS designates at FVTPL the following financial
FVTPL
liabilities:
– 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 from securities financing transactions;
– amounts due under unit-linked investment contracts
the cash flows of which 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 a 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 legally 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 material accounting policies (continued)
Note 1 Summary of material accounting policies (continued)
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.
d. Interest income and expense
Interest income and expense are recognized in the income
statement based on the effective interest method. When
calculating the effective interest rate (the EIR) for financial
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 transferred financial asset, or a portion of a
financial asset, 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 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 Note 22 and Note 23 for more information
Financial liabilities
UBS derecognizes a financial liability 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
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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
measured at 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.
Note 1 Summary of material 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.
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 in Note 21g.
› Refer to Note 21 for more information
g. Allowances and provisions for 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 committed unconditionally revocable credit lines,
which include UBS’s credit card limits and master credit facilities,
as 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 (an 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.
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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.
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 in Note 21g.
› Refer to Note 21 for more information
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
measured at 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
g. Allowances and provisions for expected credit losses
ECL are recognized for financial assets measured at amortized
cost, financial assets measured at FVOCI, fee and lease
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
receivables, financial guarantees, and loan commitments not
qualitative criteria.
measured at fair value. ECL are also recognized on the undrawn
portion of committed unconditionally revocable credit lines,
which include UBS’s credit card limits and master credit facilities,
as UBS is exposed to credit risk because the borrower has the
› Refer to “Credit policies for distressed assets” in the “Risk
management and control” section of this report for more
information
mitigation actions.
Recognition of expected credit losses
ECL are recognized on the following basis:
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
– Stage 1 instruments: Maximum 12-month ECL are recognized
exposure at default (EAD). Parameters are generally determined
from initial recognition, reflecting the portion of lifetime cash
on an individual financial asset level. Based on the materiality of
shortfalls that would result if a default occurs in the 12 months
the portfolio, for credit card exposures and personal account
after the reporting date, weighted by the risk of a default
overdrafts in Switzerland, a portfolio approach is applied that
occurring.
derives an average PD and LGD for the entire portfolio. PDs and
– Stage 2
instruments: Lifetime ECL are recognized
if a
LGDs used in the ECL calculation are point-in-time (PIT)-based for
significant increase in credit risk (an SICR) is observed
key portfolios and consider both current conditions and expected
subsequent to the instrument’s initial recognition, reflecting
cyclical changes. For material portfolios, PDs and LGDs are
lifetime cash shortfalls that would result from all possible
determined for different scenarios, whereas EAD projections are
default events over the expected life of a financial instrument,
treated as scenario independent.
weighted by the risk of a default occurring. When an SICR is
For the purpose of determining the ECL-relevant parameters,
no longer observed, the instrument will move back to stage 1.
UBS leverages its Pillar 1 internal ratings-based (IRB) models that
– Stage 3 instruments: Lifetime ECL are always recognized for
are also used in determining expected loss (EL) and risk-weighted
credit-impaired financial instruments, as determined by the
assets under the Basel III framework and Pillar 2 stress loss
occurrence of one or more loss events, by estimating expected
models. Adjustments have been made to these models and IFRS
cash flows based on a chosen recovery strategy. Credit-
9-related models have been developed that consider the
impaired exposures may include positions for which no
complexity, structure and risk profile of relevant portfolios and
allowance has been recognized, for example because they are
take account of the fact that PDs and LGDs used in the ECL
expected to be fully recoverable through collateral held.
calculation are PIT-based, as opposed to the corresponding
– Changes in lifetime ECL since initial recognition are also
Basel III through-the-cycle (TTC) parameters. All models that are
recognized for assets that are purchased or originated credit-
relevant for measuring expected credit losses are subject to UBS’s
impaired (POCI). POCI financial instruments include those that
model validation and oversight processes.
are purchased at a deep discount or newly originated with a
defaulted counterparty; they remain a separate category until
derecognition.
Note 1 Summary of material accounting policies (continued)
Note 1 Summary of material accounting policies (continued)
Probability of default: PD represents the probability of a default
over a specified time period. A 12-month PD represents the
probability 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,
interest payments and
considering expected
accruals, discounted at the EIR. Future drawdowns on facilities are
considered through a credit conversion factor (a CCF) that is
reflective of historical drawdown and default patterns and the
characteristics of the respective portfolios.
repayments,
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. LGD is commonly expressed as a percentage
of EAD.
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 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’
ability to draw down funds before UBS can take credit risk
Measurement of expected credit losses
Estimation of expected credit losses
abilities to service debt;
Number of scenarios and estimation of scenario weights
Determination of 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. The estimation of the appropriate weights for these
scenarios is predominantly judgement-based. The assessment is
based on a holistic review of the prevailing economic or political
conditions, which may exhibit different levels of uncertainty. It
takes into account the impact of changes in the nature and
severity of the underlying scenario narratives and the projected
economic variables.
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
– 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 IFRS 9
Scenario Sounding Sessions and ECL Management Forum, 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 Committee, as the highest
authority under UBS’s model governance framework, ratifies the
decisions taken by the ECL Management Forum.
› 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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Note 1 Summary of material accounting policies (continued)
Additionally, some financial instruments include both an on-
demand loan and a revocable undrawn commitment, where the
contractual cancellation 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
instrument is transferred to stage 2 with lifetime ECL recognized.
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.
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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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 those
contractual cancellation right does not limit UBS’s exposure to
instruments with a low PD at inception. The SICR assessment
credit risk to the contractual notice period, as the client has the
based on PD changes is made at an individual financial asset level.
ability to draw down funds before UBS can take risk-mitigating
A high-level overview of the SICR trigger, which is a multiple of
actions. In such cases UBS is required to estimate the period over
the annualized remaining lifetime PIT PD expressed in rating
which it is exposed to credit risk. This applies to UBS’s credit card
downgrades, is provided in the “SICR thresholds” table below.
limits, which do not have a defined contractual maturity date, are
The actual SICR thresholds applied are defined on a more granular
callable on demand and where the drawn and undrawn
level by interpolating between the values shown in the table.
components are managed as one exposure. The exposure arising
from UBS’s credit card limits is not significant and is managed at
SICR thresholds
a portfolio level, with credit actions triggered when balances are
Internal rating at origination
Rating downgrades /
past due. An ECL measurement period of seven years is applied
of the instrument
SICR trigger
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
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 more
are not subject to RbM, but are reviewed at least annually through
than 30 days past due. For certain less material portfolios,
a formal credit review. UBS has assessed these credit risk
specifically the Swiss credit card portfolio, the 30-day past due
management practices and considers both the RbM approach and
criterion is used as the primary indicator of an SICR. Where
formal credit reviews as substantive credit reviews resulting in a
instruments are transferred to stage 2 due to the 30-day past due
re-origination of the given facility. Following this, a 12-month
criterion, a minimum period of six months is applied before a
measurement period from the reporting date is used for both
transfer back to stage 1 can be triggered. For instruments in
types of facilities as an appropriate proxy of the period over which
Personal & Corporate Banking and Global Wealth Management
UBS is exposed to credit risk, with 12 months also used as a look-
Region Switzerland that are between 90 and 180 days past due
back period for assessing SICR, always from the respective
but have not been reclassified to stage 3, a one-year period is
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 SICR.
maximum 12-month ECL continues to be appropriate, an
Exception management is further applied, allowing for individual
assessment is made as to whether an SICR has occurred since
and collective adjustments on exposures sharing the same credit
initial recognition of the financial instrument, applying both
risk characteristics to take account of specific situations that are
quantitative and qualitative factors.
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 risk
instrument determined at two different dates:
– at the reporting date; and
– at inception of the instrument.
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 material accounting policies (continued)
Note 1 Summary of material 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 ECL
Management Forum 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 that include relevant macroeconomic
variables and management’s assumptions around future economic
conditions. IFRS 9 Scenario Sounding Sessions, in addition to the IFRS 9 ECL
Management Forum, are in place to derive, review and challenge the
scenario selection and weights, and 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 Committee (the
GMGC). The post-model adjustments are approved by the ECL
Management Forum and endorsed by the GMGC.
A sensitivity analysis covering key macroeconomic variables, scenario
weights and SICR trigger points on ECL measurement is provided in 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. The 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 presents financial assets and liabilities on its balance sheet
net if (i) it has a legally enforceable right to set off the recognized
amounts and (ii) it intends either to settle on a net basis or to
realize the asset and settle the liability simultaneously. Netted
positions include, for example, certain derivatives and repurchase
and reverse repurchase transactions with various counterparties,
exchanges and clearing houses.
In assessing whether UBS intends to either settle on a net basis,
or to realize the asset and settle the 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 they may be subject to
enforceable netting arrangements. Repurchase arrangements and
securities financing transactions are presented net 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.
› Refer to Note 22 for more information
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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 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 fees, and brokerage fees
(e.g., securities and derivatives execution and clearing). UBS
recognizes fees earned from point-in-time services 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 various
performance obligations.
the consideration
received across
Note 1 Summary of material accounting policies (continued)
j. Hedge accounting
The Group applies hedge accounting requirements of IFRS 9, unless
stated otherwise below, where the criteria for 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.
Fair value hedges of interest rate risk related to debt instruments
and loan assets
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
Prior to discontinuation in December 2021, 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 FX risk related to debt instruments
The fair value change of the hedged item attributable to the
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 comprehensive
income within Equity. These amounts are 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.
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Note 1 Summary of material accounting policies (continued)
Note 1 Summary of material 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 over-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. However, they are
generally billed on a monthly or quarterly basis once the
customer’s portfolio size is known or known with near certainty
and therefore 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. 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 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
generally 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. For derivatives execution and clearing
services (where UBS acts as an agent), 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.
› Refer to Note 4 for more information, including the
disaggregation of revenues
4) 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
restructuring programs or mutually agreed termination provisions,
recognition of such 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, fair value is not remeasured unless
the terms of the award are modified such that there is an
incremental increase in value. 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 28 for more information
Consolidated financial statements | UBS Group AG consolidated financial statements
j. Hedge accounting
Hedges of net investments in foreign operations
The Group applies hedge accounting requirements of IFRS 9, unless
Gains or losses on the hedging instrument relating to the effective
stated otherwise below, where the criteria for documentation and
portion of a hedge are recognized directly in Other comprehensive
hedge effectiveness are met. If a hedge relationship no longer
income within Equity, while any gains or losses relating to the
meets the criteria for hedge accounting, hedge accounting is
ineffective and / or undesignated portion (for example, the interest
discontinued. Voluntary discontinuation of hedge accounting is
element of a forward contract) are recognized in the income
permitted under IAS 39 but not under IFRS 9.
statement. Upon disposal or partial disposal of the foreign operation,
the cumulative value of any such gains or losses recognized in Equity
Fair value hedges of interest rate risk related to debt instruments
associated with the entity is reclassified to Other income.
and loan assets
The fair value change of the hedged item attributable to a hedged
Interest Rate Benchmark Reform
risk is reflected as an adjustment to the carrying amount of the
UBS can continue hedge accounting during the period of
hedged item, and recognized in the income statement along with
uncertainty before existing interest rate benchmarks are replaced
the change in the fair value of the hedging instrument.
with alternative risk-free interest rates. During this period, UBS
can assume that the current benchmark rates will continue to
Fair value hedges of portfolio interest rate risk related to loans
exist, such that forecast transactions are considered highly
designated under IAS 39
probable and hedge relationships remain, with little or no
Prior to discontinuation in December 2021, the fair value change
consequential
impact on the financial statements. Upon
of the hedged item attributable to a hedged risk is reflected within
replacement of existing interest rate benchmarks by alternative
Other financial assets measured at amortized cost or Other
risk-free interest rates expected in 2021 and beyond, UBS will
financial liabilities measured at amortized cost and recognized in
apply the requirements of Amendments to IFRS 9, IAS 39, IFRS 7,
the income statement along with the change in the fair value of
IFRS 4 and IFRS 16 (Interest Rate Benchmark Reform – Phase 2).
the hedging instrument.
› Refer to Note 1b for more information
Fair value hedges of FX risk related to debt instruments
3) Fee and commission income and expenses
The fair value change of the hedged item attributable to the
hedged risk is reflected in the measurement of the hedged item
UBS earns fee income from the diverse range of services it
and recognized in the income statement along with the change
provides to its clients. Fee income can be divided into two broad
in the fair value of the hedging instrument. The foreign currency
categories: fees earned from services that are provided over a
basis spread of cross-currency swaps designated as hedging
certain period of time, such as management of clients’ assets,
derivatives is excluded from the designation and accounted for as
custody services and certain advisory services; and fees earned
a cost of hedging with amounts deferred in Other comprehensive
from point-in-time services, such as underwriting fees, deal-
income within Equity. These amounts are released to the income
contingent merger and acquisitions fees, and brokerage fees
statement over the term of the hedged item.
Discontinuation of fair value hedges
(e.g., securities and derivatives execution and clearing). UBS
recognizes fees earned from point-in-time services when it has
fully provided the service to the customer. Where the contract
Discontinuations for reasons other than derecognition of the hedged
requires services to be provided over time, income is recognized
item result in an adjustment to the carrying amount, which is
on a systematic basis over the life of the agreement.
amortized to the income statement over the remaining life of the
Consideration
received
is allocated
to
the separately
hedged item using the effective interest method. If the hedged item
identifiable performance obligations in a contract. Owing to the
is derecognized, the unamortized fair value adjustment or deferred
nature of UBS’s business, contracts that include multiple
cost of hedging amount is recognized immediately in the income
performance obligations are typically those that are considered to
statement as part of any derecognition gain or loss.
Cash flow hedges of forecast transactions
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
Fair value gains or losses associated with the effective portion of
consequence, UBS is not required to apply significant judgment in
derivatives designated as cash flow hedges for cash flow repricing
allocating
the consideration
received across
the various
risk are recognized initially in Other comprehensive income within
performance obligations.
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.
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Note 1 Summary of material accounting policies (continued)
5) Post-employment benefit plans
6) 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.
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.
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 in future years; and (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.
Deferred tax liabilities are recognized for 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.
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
in Other
comprehensive income within Equity.
(vi) above are recognized
(iii) through
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, measured using
the projected unit credit method, 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. Calculation of the
net defined benefit obligation or asset takes into account the
specific features of each plan, including risk sharing between
employee and employer, and is 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, 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 in Note 27.
› Refer to Note 27 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.
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5) Post-employment benefit plans
6) Income taxes
Defined benefit plans
UBS is subject to the income tax laws of Switzerland and those of
Defined benefit plans specify an amount of benefit that an
the non-Swiss jurisdictions in which UBS has business operations.
employee will receive, which usually depends on one or more
The Group’s provision for income taxes is composed of current
factors, such as age, years of service and compensation. The
and deferred taxes. Current income taxes represent taxes to be
defined benefit liability recognized in the balance sheet is the
paid or refunded for the current period or previous periods.
present value of the defined benefit obligation, measured using
Deferred taxes are recognized for temporary differences
the projected unit credit method, less the fair value of the plan’s
between the carrying amounts and tax bases of assets and
assets at the balance sheet date, with changes resulting from
liabilities that will result in taxable or deductible amounts in future
remeasurements recorded immediately in Other comprehensive
periods and are measured using the applicable tax rates and laws
income. If the fair value of the plan’s assets is higher than the
that have been enacted or substantively enacted by the end of the
present value of the defined benefit obligation, the recognition of
reporting period and that will be in effect when such differences
the resulting net asset is limited to the present value of economic
are expected to reverse.
benefits available in the form of refunds from the plan or
Deferred tax assets arise from a variety of sources, the most
reductions in future contributions to the plan. Calculation of the
significant being: (i) tax losses that can be carried forward to be
net defined benefit obligation or asset takes into account the
used against profits in future years; and (ii) temporary differences
specific features of each plan, including risk sharing between
that will result in deductions against profits in future years.
employee and employer, and is calculated periodically by
Deferred tax assets are recognized only to the extent it is probable
independent qualified actuaries.
Critical accounting estimates and judgments
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
The net defined benefit liability or asset at the balance sheet date and the
is convincing other evidence that sufficient taxable profit will be
related personnel expense depend on the expected future benefits to be
available against which the unused tax losses can be utilized.
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, discount rate, expected salary increases, pension increases
and interest credits on retirement savings account balances. Sensitivity
Deferred tax liabilities are recognized for 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.
Deferred and current tax assets and liabilities are offset when:
analysis for reasonable possible movements in each significant assumption
(i) they arise in the same tax reporting group; (ii) they relate to the
for UBS‘s post-employment obligations is provided in Note 27.
› Refer to Note 27 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.
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) above 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.
Note 1 Summary of material accounting policies (continued)
Note 1 Summary of material accounting policies (continued)
Critical accounting estimates and judgments
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 when 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.
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 Board of
Directors. The discount rates and growth rates are determined using
external information, and also 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
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,
7) Property, equipment and software
Property, equipment and software is measured at cost less
accumulated depreciation and impairment losses. 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 and is calculated on a
straight line basis over an asset’s estimated useful life.
Property, equipment and software are generally tested for
impairment at the appropriate cash-generating unit level,
alongside goodwill and intangible assets as described in item 8 in
this Note. An impairment charge is recognized for such assets if
the recoverable amount is below its carrying amount. The
recoverable amounts 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
8) Goodwill
Goodwill represents the excess of the consideration over the fair
value of identifiable assets, liabilities and contingent liabilities
acquired that arises in a business combination. 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.
An impairment charge is recognized in the income statement if
the carrying amount exceeds the recoverable amount.
9) Provisions and contingent liabilities
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 structures. Provisions for
employee benefits relate mainly to service anniversaries and
sabbatical
in accordance with
measurement principles set out in item 4 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.
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Note 1 Summary of material accounting policies (continued)
Critical accounting estimates and judgments
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
10) Foreign currency translation
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 Other comprehensive
income 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
11) 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.
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.
314
306
Consolidated financial statements | UBS Group AG consolidated financial statements
Critical accounting estimates and judgments
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
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 Other comprehensive
income 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
11) Equity, treasury shares and contracts on UBS Group AG
10) Foreign currency translation
shares
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
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.
at the exchange rate on the date of the transaction.
Net cash settlement contracts
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
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
expense items and other comprehensive income are translated at
as derivatives held for trading.
the average rate for the period. The resulting foreign currency
Note 1 Summary of material accounting policies (continued)
Note 1 Summary of material accounting policies (continued)
b) Changes in accounting policies, comparability and other adjustments
Amendments to IAS 1, Presentation of Financial Statements, and
IFRS Practice Statement 2, Making Materiality Judgements
Effective from 1 January 2021, UBS early adopted amendments
to IAS 1, Presentation of Financial Statements, and IFRS Practice
Statement 2, Making Materiality Judgements, issued by IASB in
February 2021. The disclosure of material accounting policies in
Note 1a has been refined through adopting these amendments.
Amendments to IAS 39, IFRS 9 and IFRS 7 (Interest Rate
Benchmark Reform – Phase 2)
On 1 January 2021, UBS adopted 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 interbank offered rates (IBORs) are reformed
or replaced. The amendments provide a practical expedient that
permits certain changes in the contractual cash flows of debt
instruments attributable to the replacement of IBORs with
for
alternative
prospectively by updating a given instrument’s effective interest
rate (EIR), provided (i) the change is necessary as a direct
consequence of IBOR reform and (ii) the new basis for
determining the contractual cash flows is economically equivalent
to the previous basis. UBS has adopted the amendments, which
had no material effect on the Group’s financial statements.
to be accounted
reference
(ARRs)
rates
The amendments also provide various hedge accounting
reliefs, with the following adopted by UBS:
– Designate an ARR as a non-contractually specified risk
component, even if it is not separately identifiable at the date
when it was designated, provided UBS can reasonably expect
that it will meet the requirements within 24 months of the first
designation and the risk component is reliably measurable. As
of 31 December 2021, the principal ARRs that UBS has
designated as the hedged risk in fair value hedges of interest
rate risk related to debt instruments, mortgages and cash flow
hedges of forecast transactions were the Secured Overnight
Financing Rate (SOFR), the Swiss Average Rate Overnight
(SARON) and the Sterling Overnight Index Average (SONIA).
– Amend hedge documentation for the fair value hedges of
interest rate risk related to debt instruments for which the
hedged risk changed due to IBOR reform, which allowed UBS
to continue the hedge relationship in accordance with the
requirements of the phase 2 amendment.
– The cash flow hedges of IBOR forecast transactions in Swiss
francs and pounds sterling were discontinued and replaced
with new ARR designations in December 2021. The amount
accumulated in the cash flow hedge reserve is deemed to be
based on the ARR on which the hedged future cash flows will
be based. Amounts will be released to the income statement
when the forecast ARR cash flows affect the income statement
or are no longer expected to occur.
› Refer to Note 26 for more information
The amendments also
introduced additional disclosure
requirements regarding the Group’s management of the
transition to alternative benchmark rates, its progress as at the
reporting date and the risks to which it is exposed arising from
financial instruments because of the transition.
› Refer to Note 25 for more information
c) International Financial Reporting Standards and Interpretations to be adopted in 2022 and later and other changes
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.
314
315
307
Financial statements
Consolidated financial statements | UBS Group AG 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 financial services,
advice and solutions to private clients, in particular in the ultra
high net worth and high net worth segments. Its offering
ranges from investment management to estate planning and
corporate finance advice, in addition to specific wealth
management products and services. The business division is
managed globally across the regions.
– Personal & Corporate Banking serves its private, corporate,
and institutional clients’ needs, from basic banking to
retirement, financing, investments and strategic transactions,
in Switzerland, through its branch network and digital
channels.
– 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 support to institutions, wholesale intermediaries
and wealth management clients globally.
– 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. Its offering includes advisory services,
facilitating clients raising debt and equity from the public and
private markets and capital markets, cash and derivatives
trading across equities and fixed income, and financing.
– Group Functions is made up of the following major areas:
Group Services (which consists of Technology, Corporate
Services, Human Resources, Finance, Legal, Risk Control,
Compliance, Regulatory & Governance, Communications &
Branding and Group Sustainability and Impact), 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.
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 segments are funded through and
invested with Group 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.
316
308
Note 2a Segment reporting
Note 2a Segment reporting (continued)
USD million
For the year ended 31 December 2021
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 assets
Additions to non-current assets
USD million
FFoorr tthhee yyeeaarr eennddeedd 3311 DDeecceemmbbeerr 22002200
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
– Group Functions is made up of the following major areas:
Non-current assets disclosed for segment reporting purposes
USD million
Consolidated financial statements | UBS Group AG consolidated financial statements
UBS’s businesses are organized globally into four business
Financial information about the four business divisions and
divisions: Global Wealth Management, Personal & Corporate
Group Functions is presented separately in internal management
Banking, Asset Management and the Investment Bank. All four
reports to the Group Executive Board (the GEB), which is
business divisions are supported by Group Functions and qualify
considered the “chief operating decision maker” pursuant to
as reportable segments for the purpose of segment reporting.
IFRS 8, Operating Segments.
Together with Group Functions, the four business divisions reflect
UBS’s internal accounting policies, which include management
the management structure of the Group.
accounting policies and service level agreements, determine the
revenues and expenses directly attributable to each reportable
– Global Wealth Management provides financial services,
segment. Transactions between the reportable segments are
advice and solutions to private clients, in particular in the ultra
carried out at internally agreed rates and are reflected in the
high net worth and high net worth segments. Its offering
operating results of the reportable segments. Revenue-sharing
ranges from investment management to estate planning and
agreements are used to allocate external client revenues to
corporate finance advice, in addition to specific wealth
reportable segments where several reportable segments are
management products and services. The business division is
involved in the value creation chain. Total intersegment revenues
managed globally across the regions.
for the Group are immaterial, as the majority of the revenues are
– Personal & Corporate Banking serves its private, corporate,
allocated across the segments by means of revenue-sharing
and institutional clients’ needs, from basic banking to
agreements. Interest income earned from managing UBS’s
retirement, financing, investments and strategic transactions,
consolidated equity is allocated to the reportable segments based
in Switzerland, through its branch network and digital
on average attributed equity and currency composition. Assets
channels.
and liabilities of the reportable segments are funded through and
– Asset Management is a large-scale and diversified global
invested with Group Functions, and the net interest margin is
asset manager. It offers investment capabilities and styles
reflected in the results of each reportable segment.
across all major traditional and alternative asset classes, as well
Segment assets are based on a third-party view and do not
as advisory support to institutions, wholesale intermediaries
include intercompany balances. This view is in line with internal
and wealth management clients globally.
reporting to the GEB. If one operating segment is involved in an
– The Investment Bank provides a range of services to
external transaction together with another operating segment or
institutional, corporate and wealth management clients
Group Functions, additional criteria are considered to determine
globally, to help them raise capital, grow their businesses,
the segment that will report the associated assets. This will include
invest and manage risks. Its offering includes advisory services,
a consideration of which segment’s business needs are being
facilitating clients raising debt and equity from the public and
addressed by the transaction and which segment is providing the
private markets and capital markets, cash and derivatives
funding and / or resources. Allocation of liabilities follows the
trading across equities and fixed income, and financing.
same principles.
Group Services (which consists of Technology, Corporate
represent assets that are expected to be recovered more than 12
Services, Human Resources, Finance, Legal, Risk Control,
months after the reporting date, excluding financial instruments,
Compliance, Regulatory & Governance, Communications &
deferred tax assets and post-employment benefits.
Branding and Group Sustainability and Impact), Group
Treasury and Non-core and Legacy Portfolio.
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group
Functions
UBS
4,244
15,175
19,419
29
19,449
14,665
44,,778833
2,120
2,143
4,263
86
4,349
2,618
11,,773311
(15)
2,632
2,617
(1)
2,616
1,586
11,,003300
481
8,972
9,454
34
9,488
6,858
22,,663300
(127)
(233)
(359)
0
(360)
330
((668899))
6,705
28,689
35,393
148
35,542
26,058
99,,448844
1,998
77,,448866
395,235
56
Global Wealth
Management
225,370
16
Personal &
Corporate
Banking
25,639
1
346,431
30
124,507
1,989
1,117,182
2,091
Asset
Management
Investment
Bank
Group
Functions
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))
UBS
5,862
27,222
33,084
(694)
32,390
24,235
88,,115555
1,583
66,,557722
367,714
5
231,657
12
28,589
385
369,683
150
128,122
2,294
1,125,765
2,847
Global Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group
Functions
UBS
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 assets
Additions to non-current assets
11 Includes a USD 631 million net gain on the sale of a majority stake in Fondcenter AG (now Clearstream Fund Centre AG), of which USD 571 million was recognized in Asset Management and USD 60 million was
recognized in Global Wealth Management.
4,501
24,467
28,967
(78)
28,889
23,312
55,,557777
1,267
44,,331100
3,947
12,426
16,373
(20)
16,353
12,955
33,,339977
(25)
1,962
1,938
0
1,938
1,406
553322
(669)
7,968
7,299
(30)
7,269
6,485
778844
1,992
1,744
3,736
(21)
3,715
2,274
11,,444411
(744)
367
(378)
(7)
(385)
192
((557777))
315,855
1
102,603
5,217
972,194
5,297
209,405
10
309,766
68
34,565
0
316
317
309
Financial statements Consolidated financial statements | UBS Group AG 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, and
may be refined to reflect changes in estimates or 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.
TToottaall ooppeerraattiinngg iinnccoommee
TToottaall nnoonn--ccuurrrreenntt aasssseettss
UUSSDD bbiilllliioonn
SShhaarree %%
UUSSDD bbiilllliioonn
SShhaarree %%
1144..55
1133..55
66..55
77..00
77..99
((00..33))
3355..55
4411
3388
1188
2200
2222
((11))
110000
99..00
88..55
11..55
22..99
77..11
00..00
2200..55
4444
4411
77
1144
3355
00
110000
Total operating income
Total non-current assets
USD billion
Share %
USD billion
Share %
13.0
11.7
6.0
6.5
6.9
0.1
3322..44
40
36
18
20
21
0
110000
9.0
8.4
1.5
3.0
7.6
0.0
2211..11
42
40
7
14
36
0
110000
Total operating income
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
For the year ended 31 December 2021
Americas
of which: USA
Asia Pacific
Europe, Middle East and Africa (excluding Switzerland)
Switzerland
Global
TToottaall
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
318
310
Consolidated financial statements | UBS Group AG consolidated financial statements
Note 2b Segment reporting by geographic location
Income statement notes
The operating regions shown in the table below correspond to
client and trading and portfolio management revenues are
the regional management structure of the Group. The allocation
attributed to the country where the risk is managed. This revenue
of operating income to these regions reflects, and is consistent
attribution is consistent with the mandate of the regional
with, the basis on which the business is managed and its
Presidents. Certain revenues, such as those related to Non-core
performance is evaluated. These allocations involve assumptions
and Legacy Portfolio in Group Functions, are managed at a Group
and judgments that management considers to be reasonable, and
level. These revenues are included in the Global line.
may be refined to reflect changes in estimates or management
The geographic analysis of non-current assets is based on the
structure. The main principles of the allocation methodology are
location of the entity in which the given assets are recorded.
that client revenues are attributed to the domicile of the given
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..2211
11,,443311
55,,885500
((66,,558822))
77,,228811
31.12.20
1,299
6,960
1,509
8,259
31.12.19
1,011
6,842
(8,748)
7,853
Net interest income
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
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. 2021 included net losses of USD 2,068 million (net losses of USD 72 million and
USD 1,830 million in 2020 and 2019, 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 net gains of
USD 2,068 million (net gains of USD 72 million and USD 1,830 million in 2020 and 2019, 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.
8,008
2,005
364
120
188
10,684
2,634
1,152
3,285
122
7,194
3,490
1,011
4,501
66,,448888
551133
228844
111155
11,,113333
88,,553333
552233
11,,110022
11,,553333
110022
33,,225599
55,,227744
11,,443311
66,,770055
6,690
862
335
101
822
8,810
1,031
870
2,237
110
4,247
4,563
1,299
5,862
For the year ended 31 December 2021
Europe, Middle East and Africa (excluding Switzerland)
For the year ended 31 December 2020
Europe, Middle East and Africa (excluding Switzerland)
For the year ended 31 December 2019
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 income
Total non-current assets
USD billion
Share %
USD billion
Share %
1144..55
1133..55
66..55
77..00
77..99
((00..33))
3355..55
13.0
11.7
6.0
6.5
6.9
0.1
3322..44
12.0
10.9
4.7
5.8
6.7
(0.3)
2288..99
4411
3388
1188
2200
2222
((11))
110000
40
36
18
20
21
0
110000
42
38
16
20
23
(1)
110000
99..00
88..55
11..55
22..99
77..11
00..00
2200..55
9.0
8.4
1.5
3.0
7.6
0.0
2211..11
8.9
8.5
1.4
3.0
7.1
0.0
2200..33
4444
4411
77
1144
3355
00
110000
42
40
7
14
36
0
110000
44
42
7
15
35
0
110000
Total operating income
Total non-current assets
USD billion
Share %
USD billion
Share %
318
319
311
Financial statements Consolidated financial statements | UBS Group AG consolidated financial statements
Note 4 Net fee and commission income
USD million
FFeeee aanndd ccoommmmiissssiioonn iinnccoommee
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..2211
31.12.20
31.12.19
11,,446633
11,,110022
44,,338822
55,,779900
99,,776622
11,,887744
2244,,337722
1155,,441100
88,,669922
226699
225599
661111
11,,111155
11,,998855
2222,,338877
44,,112233
1,085
736
4,132
5,289
8,009
1,710
20,961
13,009
7,491
461
274
589
912
1,775
19,186
3,858
741
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
11 For the year ended 31 December 2021, reflects third-party fee and commission income of USD 14,545 million for Global Wealth Management, USD 1,644 million for Personal & Corporate Banking, USD 3,337
million for Asset Management, USD 4,814 million for the Investment Bank and USD 33 million for Group Functions (for the year ended 31 December 2020: 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).
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 properties3
Net gains / (losses) from properties held for sale
Other
TToottaall ootthheerr iinnccoommee
For the year ended
3311..1122..2211
31.12.20
31.12.19
((1111))
4411
110055
00
113355
99
2233
11000044
11885566
445522
6352
0
84
0
719
40
26
765
2167
1,076
(36)
4
46
(1)
13
31
27
(19)
160
212
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 (now Clearstream Fund Centre AG). 33 Includes rent received from third parties. 44 Mainly relates to the sale of a property in Basel. 55 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. 66 Includes a gain of USD 100 million from the
sale of UBS's domestic wealth management business in Austria. Refer to Note 30 for more information. 77 Includes a USD 215 million gain on the sale of intellectual property rights associated with the Bloomberg
Commodity Index family.
320
312
Consolidated financial statements | UBS Group AG consolidated financial statements
Note 4 Net fee and commission income
Portfolio management and related services
USD million
FFeeee aanndd ccoommmmiissssiioonn iinnccoommee
Underwriting fees
M&A and corporate finance fees
Brokerage fees
Investment fund fees
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
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 properties3
Net gains / (losses) from properties held for sale
Other
TToottaall ootthheerr iinnccoommee
Commodity Index family.
For the year ended
3311..1122..2211
31.12.20
31.12.19
11,,446633
11,,110022
44,,338822
55,,779900
99,,776622
11,,887744
2244,,337722
1155,,441100
88,,669922
226699
225599
661111
11,,111155
11,,998855
2222,,338877
44,,112233
((1111))
4411
110055
00
113355
99
2233
11000044
11885566
445522
1,085
736
4,132
5,289
8,009
1,710
20,961
13,009
7,491
461
274
589
912
1,775
19,186
3,858
6352
0
84
0
719
40
26
765
2167
1,076
741
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
(36)
4
46
(1)
13
31
27
(19)
160
212
For the year ended
3311..1122..2211
31.12.20
31.12.19
11 For the year ended 31 December 2021, reflects third-party fee and commission income of USD 14,545 million for Global Wealth Management, USD 1,644 million for Personal & Corporate Banking, USD 3,337
million for Asset Management, USD 4,814 million for the Investment Bank and USD 33 million for Group Functions (for the year ended 31 December 2020: 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
Note 6 Personnel expenses
USD million
Salaries1
Variable compensation – performance awards2
Variable compensation – other2
Financial advisor compensation2,4
Contractors
Social security
Post-employment benefit plans5
of which: defined benefit plans
of which: defined contribution plans
Other personnel expenses
TToottaall ppeerrssoonnnneell eexxppeennsseess
For the year ended
3311..1122..2211
31.12.20
31.12.19
77,,333399
33,,119900
222299
44,,886600
338811
997788
88333366
447700
336633
557766
7,023
3,2093
220
4,091
375
8993
845
502
343
5613
6,518
2,755
246
4,043
381
799
787
461
326
555
1188,,338877
17,224
16,084
11 Includes role-based allowances. 22 Refer to Note 28 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. 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 27 for more information. 66 Includes curtailment gains of USD 80 million, which represent a reduction in the defined benefit obligation
related to the Swiss pension plan resulting from a decrease in headcount following restructuring activities.
Note 7 General and administrative expenses1
USD million
Outsourcing costs
IT expenses
Consulting, legal and audit fees
Real estate and logistics costs
Market data services
Marketing and communication
Travel and entertainment
Litigation, regulatory and similar matters2
Other
of which: UK and German bank levies3
TToottaall ggeenneerraall aanndd aaddmmiinniissttrraattiivvee eexxppeennsseess
For the year ended
3311..1122..2211
31.12.20
889933
11,,005555
554400
663344
441177
224422
7722
991111
778888
5588
55,,555533
951
949
646
671
413
217
84
197
757
31.12.19
1,072
860
850
662
414
270
298
165
696
55
4,885
41
5,288
Net gains / (losses) from disposals of financial assets measured at fair value through other comprehensive income
11 In 2021, UBS changed the presentation of the line items within general and administrative expenses. Prior-period information reflects the new presentation structure, with no effect on Total general and administrative
expenses. 22 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 1 million in 2021 (USD 3 million and USD 11 million in 2020 and 2019, respectively). 33 UK bank levy expenses of USD 22 million (USD 38 million for 2020 and USD 30 million for 2019) included a credit of
USD 16 million (USD 27 million for 2020 and USD 31 million for 2019) related to prior years.
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 (now Clearstream Fund Centre AG). 33 Includes rent received from third parties. 44 Mainly relates to the sale of a property in Basel. 55 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. 66 Includes a gain of USD 100 million from the
sale of UBS's domestic wealth management business in Austria. Refer to Note 30 for more information. 77 Includes a USD 215 million gain on the sale of intellectual property rights associated with the Bloomberg
320
321
313
Financial statements Consolidated financial statements | UBS Group AG 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
31.12.20
3311..1122..2211
31.12.19
668800
3344
771144
888844
440000
11,,228844
11,,999988
482
116
559988
749
236
998855
11,,558833
365
265
663300
426
211
663377
11,,226677
Income tax recognized in the income statement
Income tax expenses of USD 1,998 million were recognized for
the Group in 2021, representing an effective tax rate of 21.1%.
These included Swiss tax expenses of USD 714 million and non-
Swiss tax expenses of USD 1,284 million.
The Swiss tax expenses included current tax expenses of
USD 680 million related to taxable profits of UBS Switzerland AG
and other Swiss entities. They also included deferred tax expenses
of USD 34 million, which reflect movements in temporary
differences.
The non-Swiss tax expenses included current tax expenses of
USD 884 million related to taxable profits earned by non-Swiss
subsidiaries and branches, and net deferred tax expenses of
USD 400 million. Expenses of USD 734 million, which primarily
related to the amortization of deferred tax assets (DTAs)
previously recognized in relation to tax losses carried forward and
deductible temporary differences of UBS Americas Inc., were
partly offset by a benefit of USD 334 million in respect of the
included upward
remeasurement of DTAs. This benefit
revaluations of DTAs of USD 152 million for certain entities,
primarily in connection with our business planning process. It also
included USD 113 million in respect of additional DTA recognition
that primarily related to the contribution of real estate assets by
UBS AG to UBS Americas Inc. and UBS Financial Services Inc.,
which allowed the full recognition of DTAs in respect of the
associated historic real estate costs that were previously
capitalized for US tax purposes under elections that were made in
the fourth quarter of 2018. In addition, it included USD 69 million
in respect of an increase in the expected value of future tax
deductions for deferred compensation awards, due to an increase
in the Group’s share price during the year.
The pre-tax expense that was recognized in the year in respect
of the increase in litigation provisions for the French cross-border
matter did not result in any tax benefit.
USD million
Operating profit / (loss) before tax
of which: Swiss
of which: non-Swiss
Income taxes at Swiss tax rate of 18.5% for 2021, 19.5% for 2020 and 20.5% for 2019
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
31.12.20
8,155
3,403
4,752
1,590
3311..1122..2211
99,,448844
33,,333344
66,,115500
11,,775555
223344
112244
((117799))
((227788))
551100
((4400))
((1100))
((334422))
((55))
223311
11,,999988
110
144
(212)
(394)
385
(67)
12
(381)
234
161
1,583
31.12.19
5,577
2,571
3,006
1,143
82
131
(265)
(351)
732
(5)
(6)
(294)
(9)
107
1,267
322
314
For the year ended
3311..1122..2211
31.12.20
31.12.19
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.
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 taxes at Swiss tax rate of 18.5% for 2021, 19.5% for 2020 and 20.5% for 2019
Income tax recognized directly in equity
A net tax benefit of USD 479 million was recognized in Other comprehensive income (2020: net expense of USD 237 million) and a
net tax expense of USD 88 million was recognized in Share premium (2020: benefit of USD 18 million).
Consolidated financial statements | UBS Group AG consolidated financial statements
Note 8 Income taxes
Tax expense / (benefit)
USD million
SSwwiissss
Current
Deferred
TToottaall SSwwiissss
NNoonn--SSwwiissss
Current
Deferred
TToottaall nnoonn--SSwwiissss
668800
3344
771144
888844
440000
11,,228844
11,,999988
482
116
559988
749
236
998855
365
265
663300
426
211
663377
TToottaall iinnccoommee ttaaxx eexxppeennssee // ((bbeenneeffiitt)) rreeccooggnniizzeedd iinn tthhee iinnccoommee ssttaatteemmeenntt
11,,558833
11,,226677
Income tax recognized in the income statement
partly offset by a benefit of USD 334 million in respect of the
remeasurement of DTAs. This benefit
included upward
Income tax expenses of USD 1,998 million were recognized for
revaluations of DTAs of USD 152 million for certain entities,
the Group in 2021, representing an effective tax rate of 21.1%.
primarily in connection with our business planning process. It also
These included Swiss tax expenses of USD 714 million and non-
included USD 113 million in respect of additional DTA recognition
Swiss tax expenses of USD 1,284 million.
that primarily related to the contribution of real estate assets by
The Swiss tax expenses included current tax expenses of
UBS AG to UBS Americas Inc. and UBS Financial Services Inc.,
USD 680 million related to taxable profits of UBS Switzerland AG
which allowed the full recognition of DTAs in respect of the
and other Swiss entities. They also included deferred tax expenses
associated historic real estate costs that were previously
of USD 34 million, which reflect movements in temporary
capitalized for US tax purposes under elections that were made in
differences.
the fourth quarter of 2018. In addition, it included USD 69 million
The non-Swiss tax expenses included current tax expenses of
in respect of an increase in the expected value of future tax
USD 884 million related to taxable profits earned by non-Swiss
deductions for deferred compensation awards, due to an increase
subsidiaries and branches, and net deferred tax expenses of
in the Group’s share price during the year.
USD 400 million. Expenses of USD 734 million, which primarily
The pre-tax expense that was recognized in the year in respect
related to the amortization of deferred tax assets (DTAs)
of the increase in litigation provisions for the French cross-border
previously recognized in relation to tax losses carried forward and
matter did not result in any tax benefit.
deductible temporary differences of UBS Americas Inc., were
USD million
Operating profit / (loss) before tax
of which: Swiss
of which: non-Swiss
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
3311..1122..2211
31.12.20
31.12.19
99,,448844
33,,333344
66,,115500
11,,775555
223344
112244
((117799))
((227788))
551100
((4400))
((1100))
((334422))
((55))
223311
11,,999988
8,155
3,403
4,752
1,590
110
144
(212)
(394)
385
(67)
12
(381)
234
161
1,583
5,577
2,571
3,006
1,143
82
131
(265)
(351)
732
(5)
(6)
(294)
(9)
107
1,267
322
323
315
Financial statements Consolidated financial statements | UBS Group AG 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.
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.
Deferred tax liabilities are recognized in respect of 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 2021, this
exception was not considered to apply to any taxable temporary
differences.
USD million
Deferred tax assets1
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: other
TToottaall ddeeffeerrrreedd ttaaxx aasssseettss
of which: related to the US
of which: related to other locations
3311..1122..2211
31.12.20
GGrroossss
1133,,663366
55,,113333
22,,227722
11,,222222
11,,663399
1188,,776699
VVaalluuaattiioonn
aalllloowwaannccee
((99,,119933))
((770000))
00
((220099))
((449911))
((99,,889933))
RReeccooggnniizzeedd
44,,444433
44,,443333
22,,227722
11,,001133
11,,114488
88,,88776622
88,,552211
335555
Gross
14,108
4,384
2,268
1,128
989
18,492
Valuation
allowance
(8,715)
(565)
0
(173)
(392)
(9,280)
Recognized
5,393
3,819
2,268
955
564
9,2122
8,780
431
Deferred tax liabilities
Cash flow hedges
Other
TToottaall ddeeffeerrrreedd ttaaxx lliiaabbiilliittiieess
11 After offset of DTLs, as applicable. 22 As of 31 December 2021, the Group recognized DTAs of USD 77 million (31 December 2020: USD 138 million) in respect of entities that incurred losses in either the current
or preceding year.
425
139
564
111188
118833
330000
In general, US federal tax losses incurred prior to 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.
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
of which: related to the US 1
of which: related to the UK
of which: related to other locations
11 Related to UBS AG's US branch.
324
316
3311..1122..2211
114411
11,,002266
1133,,228833
22,,009933
1188,,114477
3344,,669900
1144,,887700
1144,,990099
44,,991111
31.12.20
146
638
13,257
3,858
17,227
35,127
16,256
13,848
5,023
Consolidated financial statements | UBS Group AG consolidated financial statements
Note 8 Income taxes (continued)
Deferred tax assets and liabilities
The recognition of DTAs is supported by forecasts of taxable
profits for the entities concerned. In addition, tax planning
The Group has gross DTAs, valuation allowances and recognized
opportunities are available that would result in additional future
DTAs related to tax loss carry-forwards and deductible temporary
taxable income and these would be utilized, if necessary.
differences, and also deferred tax liabilities in respect of taxable
Deferred tax liabilities are recognized in respect of investments
temporary differences, as shown in the table below. The valuation
in subsidiaries, branches and associates, and interests in joint
allowances reflect DTAs that were not recognized because, as of
arrangements, except to the extent that the Group can control
the last remeasurement period, management did not consider it
the timing of the reversal of the associated taxable temporary
probable that there would be sufficient future taxable profits
difference and it is probable that such will not reverse in the
available to utilize the related tax loss carry-forwards and
foreseeable future. However, as of 31 December 2021, this
deductible temporary differences.
exception was not considered to apply to any taxable temporary
of which: related to real estate costs capitalized for US tax
purposes
of which: related to compensation and benefits
USD million
Deferred tax assets1
Tax loss carry-forwards
Temporary differences
of which: other
TToottaall ddeeffeerrrreedd ttaaxx aasssseettss
of which: related to the US
of which: related to other locations
Deferred tax liabilities
Cash flow hedges
Other
TToottaall ddeeffeerrrreedd ttaaxx lliiaabbiilliittiieess
or preceding year.
differences.
GGrroossss
1133,,663366
55,,113333
22,,227722
11,,222222
11,,663399
1188,,776699
VVaalluuaattiioonn
aalllloowwaannccee
((99,,119933))
((770000))
00
((220099))
((449911))
((99,,889933))
3311..1122..2211
31.12.20
RReeccooggnniizzeedd
44,,444433
44,,443333
22,,227722
11,,001133
11,,114488
88,,88776622
88,,552211
335555
111188
118833
330000
Gross
14,108
4,384
2,268
1,128
989
18,492
Valuation
allowance
(8,715)
(565)
0
(173)
(392)
(9,280)
Recognized
5,393
3,819
2,268
955
564
9,2122
8,780
431
425
139
564
11 After offset of DTLs, as applicable. 22 As of 31 December 2021, the Group recognized DTAs of USD 77 million (31 December 2020: USD 138 million) in respect of entities that incurred losses in either the current
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 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 unemployment levels, 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
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
Lombard
Loans secured by pledges of marketable
securities, guarantees and other forms
of collateral
Sensitive to equity and debt markets (e.g.,
changes in collateral values)
– Global Wealth Management
In general, US federal tax losses incurred prior to 31 December
for the US and generally to 25% thereof for the UK. The amounts
2017 can be carried forward for 20 years. However, US federal
of US tax loss carry-forwards that are included in the table below
tax losses incurred after 31 December 2017 and UK tax losses can
are based on their amount for federal tax purposes rather than
be carried forward indefinitely, although the utilization of such
for state and local tax purposes.
losses is limited to 80% of the entity’s future year taxable profits
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
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
of which: related to the US 1
of which: related to the UK
of which: related to other locations
11 Related to UBS AG's US branch.
3311..1122..2211
31.12.20
114411
11,,002266
1133,,228833
22,,009933
1188,,114477
3344,,669900
1144,,887700
1144,,990099
44,,991111
146
638
13,257
3,858
17,227
35,127
16,256
13,848
5,023
Financial intermediaries
and hedge funds
Lending to financial institutions and
pension funds, including exposures to
broker-dealers and clearing houses
› Refer to Note 20f for more details regarding sensitivity
Sensitive to unemployment levels
– 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
Sensitive to GDP development, the
interest rate environment, price and
volatility risks in financial markets, and
regulatory and political risk
– Global Wealth Management
– Personal & Corporate Banking
– Personal & Corporate Banking
– Investment Bank
324
325
317
Financial statements Consolidated financial statements | UBS Group AG 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..2211
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
192,817
192,817
15,453
15,480
75,012
75,012
30,514
30,514
397,761
380,564
152,479 143,505
43,945 40,463
13,990 12,643
14,004 12,076
149,283 149,255
1,345
3,799
25,718
2,184
772200,,007799
88,,884444
772288,,992233
SSttaaggee 22
0
26
0
0
15,620
8,262
3,472
1,037
1,492
0
342
7
302
106
1155,,994488
00
1155,,994488
1,716
3,813
26,209
2,453
773377,,779944
88,,884444
774466,,663388
TToottaall eexxppoossuurree
SSttaaggee 11
TToottaall
19,695
20,972
2,567
3,464
1,143
1,353
9,491
9,575
2,454
2,454
3,137
3,137
39,478
37,097
23,922 21,811
1,444
38,207
7,046
4,599
4,736
8,670
9,000
117
5,527
110011,,997711
1,444
40,778
7,328
5,358
5,160
8,670
9,466
117
5,611
110088,,228844
SSttaaggee 22
1,127
793
164
84
0
0
2,335
2,102
0
2,508
281
736
389
0
462
0
36
66,,000066
SSttaaggee 33
0
1
0
0
1,577
711
9
310
436
27
29
7
189
163
11,,776677
00
11,,776677
SSttaaggee 33
150
104
46
0
0
0
46
9
0
63
0
23
35
0
4
0
48
330077
TToottaall
0
(8)
(2)
0
(850)
(132)
(60)
(170)
(259)
(33)
(36)
(114)
(109)
(86)
((996699))
00
((996699))
TToottaall
(41)
(6)
(8)
(17)
(1)
(1)
(114)
(100)
0
(38)
(5)
(7)
(15)
0
(6)
0
(3)
((119966))
((11,,116655))
EECCLL aalllloowwaanncceess
SSttaaggee 11
0
(7)
(2)
0
(126)
(28)
(19)
(22)
(19)
(6)
(10)
(6)
(27)
(19)
((116611))
00
((116611))
SSttaaggee 22
0
(1)
0
0
(152)
(71)
(40)
(16)
(15)
0
(9)
0
(7)
(3)
((116600))
00
((116600))
EECCLL pprroovviissiioonnss
SSttaaggee 11
(18)
(3)
(1)
(13)
0
(1)
(72)
(66)
0
(28)
(4)
(4)
(11)
0
(5)
0
(3)
((112211))
((228822))
SSttaaggee 22
(8)
(3)
(1)
(4)
0
0
(42)
(34)
0
(10)
(1)
(3)
(3)
0
(2)
0
0
((6600))
((222200))
SSttaaggee 33
0
0
0
0
(572)
(33)
0
(133)
(225)
(28)
(17)
(108)
(76)
(63)
((664477))
00
((664477))
SSttaaggee 33
(15)
0
(7)
0
(1)
0
0
0
0
0
0
0
0
0
0
0
0
((1155))
((666622))
Irrevocable committed prolongation of existing loans
TToottaall ooffff--bbaallaannccee sshheeeett ffiinnaanncciiaall iinnssttrruummeennttss aanndd 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.
326
318
Consolidated financial statements | UBS Group AG consolidated financial statements
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
TToottaall
SSttaaggee 11
SSttaaggee 22
SSttaaggee 33
CCaarrrryyiinngg aammoouunntt11
EECCLL aalllloowwaanncceess
3311..1122..2211
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
397,761
380,564
15,620
1,577
(126)
(152)
192,817
192,817
15,480
75,012
30,514
15,453
75,012
30,514
152,479 143,505
43,945 40,463
13,990 12,643
14,004 12,076
149,283 149,255
1,716
3,813
1,345
3,799
26,209
25,718
2,453
2,184
3,464
1,353
9,575
2,454
3,137
2,567
1,143
9,491
2,454
3,137
39,478
37,097
23,922 21,811
1,444
1,444
7,328
5,358
5,160
8,670
9,466
117
5,611
7,046
4,599
4,736
8,670
9,000
117
5,527
0
26
0
0
8,262
3,472
1,037
1,492
0
342
7
302
106
793
164
84
0
0
2,335
2,102
0
281
736
389
0
462
0
36
0
1
0
0
711
9
310
436
27
29
7
189
163
SSttaaggee 33
150
104
46
0
0
0
46
9
0
63
0
23
35
0
4
0
48
330077
0
(8)
(2)
0
(850)
(132)
(60)
(170)
(259)
(33)
(36)
(114)
(109)
(86)
((996699))
00
((996699))
TToottaall
(41)
(6)
(8)
(17)
(1)
(1)
(114)
(100)
0
(38)
(5)
(7)
(15)
0
(6)
0
(3)
0
(7)
(2)
0
(28)
(19)
(22)
(19)
(6)
(10)
(6)
(27)
(19)
((116611))
00
((116611))
(18)
(3)
(1)
(13)
0
(1)
(72)
(66)
0
(28)
(4)
(4)
(11)
0
(5)
0
(3)
0
(1)
0
0
(71)
(40)
(16)
(15)
0
(9)
0
(7)
(3)
((116600))
00
((116600))
(8)
(3)
(1)
(4)
0
0
(42)
(34)
0
(10)
(1)
(3)
(3)
0
(2)
0
0
0
0
0
0
(572)
(33)
0
(133)
(225)
(28)
(17)
(108)
(76)
(63)
((664477))
00
((664477))
(15)
0
(7)
0
(1)
0
0
0
0
0
0
0
0
0
0
0
0
TToottaall eexxppoossuurree
TToottaall
SSttaaggee 11
20,972
19,695
SSttaaggee 22
1,127
EECCLL pprroovviissiioonnss
SSttaaggee 11
SSttaaggee 22
SSttaaggee 33
Forward starting reverse repurchase and securities borrowing agreements
Committed unconditionally revocable credit lines
40,778
38,207
2,508
TToottaall ooffff--bbaallaannccee sshheeeett ffiinnaanncciiaall iinnssttrruummeennttss aanndd ccrreeddiitt lliinneess
110088,,228844
110011,,997711
66,,000066
((119966))
((11,,116655))
((112211))
((228822))
((6600))
((222200))
((1155))
((666622))
11 The carrying amount of financial assets measured at amortized cost represents the total gross exposure net of the respective ECL allowances.
FFiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt ffaaiirr vvaalluuee tthhrroouugghh ootthheerr ccoommpprreehheennssiivvee iinnccoommee
88,,884444
88,,884444
00
00
TToottaall oonn--bbaallaannccee sshheeeett ffiinnaanncciiaall aasssseettss iinn ssccooppee ooff EECCLL rreeqquuiirreemmeennttss
774466,,663388
772288,,992233
1155,,994488
11,,776677
773377,,779944
772200,,007799
1155,,994488
11,,776677
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
31.12.20
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
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
Stage 2
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
Total exposure
Stage 1
Total
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
Stage 2
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
Stage 3
0
0
0
0
2,240
959
23
474
628
55
30
12
469
450
22,,770099
00
22,,770099
Stage 3
170
113
48
0
8
0
104
64
0
108
0
27
63
0
11
0
0
338822
Total
0
(16)
(2)
0
(1,060)
(166)
(63)
(279)
(310)
(36)
(38)
(106)
(133)
(108)
((11,,221111))
00
((11,,221111))
Total
(63)
(20)
(13)
(17)
(2)
(2)
(142)
(121)
0
(50)
(12)
(9)
(16)
0
(8)
0
(2)
((225577))
((11,,446688))
ECL allowances
Stage 1
0
(9)
(2)
0
(142)
(35)
(15)
(27)
(19)
(5)
(11)
(5)
(34)
(27)
((118877))
00
((118877))
Stage 2
0
(5)
0
0
(215)
(93)
(44)
(40)
(23)
0
(11)
0
(9)
(5)
((222299))
00
((222299))
ECL provisions
Stage 1
(14)
(4)
(1)
(7)
0
(1)
(74)
(63)
0
(29)
(5)
(2)
(12)
(1)
(6)
0
(2)
((111199))
((330066))
Stage 2
(15)
(5)
(1)
(9)
0
0
(68)
(58)
0
(21)
(7)
(7)
(4)
0
(2)
0
0
((110044))
((333333))
Stage 3
0
(1)
0
0
(703)
(39)
(4)
(212)
(268)
(31)
(16)
(101)
(90)
(76)
((779955))
00
((779955))
Stage 3
(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 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.
326
327
319
Financial statements Consolidated financial statements | UBS Group AG 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.
These ratios are influenced by the following key factors:
– 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;
– the amount of unsecured retail lending (including credit cards)
is insignificant;
– lending in Switzerland includes government-backed COVID-19
loans;
– contractual maturities in the loan portfolio, which are a factor
in the calculation of ECLs, are generally short, with Lombard
lending typically having average contractual maturities of 12
months or less, real estate lending generally between 2 years
and 3 years in Switzerland with longer dated maturities in the
US and corporate lending between 1 to 2 years with related
loan commitments up to 4 years; 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..2211
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
GGrroossss ccaarrrryyiinngg aammoouunntt ((UUSSDD mmiilllliioonn))
TToottaall
152,610
44,004
14,161
14,263
149,316
1,752
3,927
18,578
2,539
440011,,115500
SSttaaggee 11
143,533
40,483
12,665
12,095
149,261
1,355
3,805
17,493
2,203
338822,,889933
SSttaaggee 22
8,333
3,512
1,053
1,507
0
351
7
1,010
109
1155,,888822
SSttaaggee 33
744
10
443
661
55
46
115
75
226
22,,337744
GGrroossss eexxppoossuurree ((UUSSDD mmiilllliioonn))
EECCLL ccoovveerraaggee ((bbppss))
SSttaaggee 11
2
5
18
16
0
72
15
9
88
44
SSttaaggee 22
85
114
148
103
0
255
3
15
303
9988
TToottaall
9
14
120
182
2
204
290
25
338
2233
SSttaaggee 33
446
231
2,997
3,402
5,026
3,735
9,388
3,730
2,791
22,,667733
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
TToottaall
9,123
8,766
32,748
8,077
14,438
9,466
3,262
12,153
8,806
TToottaall22
110066,,884400
11 Includes Loans and advances to customers of USD 398,611 million and Loans to financial advisors of USD 2,539 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.
SSttaaggee 11
8,798
8,481
28,981
7,276
14,438
9,000
3,262
11,784
8,507
110000,,552277
SSttaaggee 22
276
285
3,630
688
0
462
0
369
296
66,,000066
SSttaaggee 33
15
0
1
585
0
0
0
0
0
448866
SSttaaggee 22
9
88
110
151
0
34
0
120
30
110000
SSttaaggee 33
49
0
136
114
0
4
0
0
4
330077
TToottaall
3
9
34
38
1
7
4
15
15
1188
EECCLL ccoovveerraaggee ((bbppss))
SSttaaggee 11
3
7
25
19
0
5
4
12
6
1122
328
320
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
– lending in Switzerland includes government-backed COVID-19
Coverage ratios for core loan portfolio
31.12.20
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
Gross carrying amount (USD million)
Total
148,341
43,492
15,440
15,183
133,886
1,596
3,375
19,274
2,677
338833,,226666
Stage 1
138,803
37,583
12,684
12,010
133,800
1,209
3,219
17,781
2,009
335599,,009999
Stage 2
8,540
5,883
2,069
2,277
0
342
43
1,402
142
2200,,669977
Stage 3
998
27
686
896
86
46
113
91
526
33,,447700
Gross exposure (USD million)
ECL coverage (bps)
Stage 1
2
4
21
16
0
91
16
14
135
55
Stage 2
108
75
192
101
0
333
2
25
351
110066
Total
11
15
181
204
3
240
315
31
404
3300
Stage 3
390
1,414
3,089
2,991
3,592
3,488
8,939
3,563
1,446
22,,224477
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
Total
6,285
7,056
32,828
9,121
14,178
8,661
1,683
7,690
14,366
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.
Stage 1
6,083
6,576
25,026
7,239
14,170
8,220
1,658
7,242
13,876
9900,,009900
Stage 2
198
481
7,598
1,734
0
430
25
448
482
1111,,339966
Stage 3
197
0
565
779
1,941
0
8,279
166
12,414
889944
Stage 3
3
0
205
148
8
11
0
0
8
338822
Stage 2
16
185
92
63
0
44
15
248
11
9911
Total
7
21
46
40
2
9
10
26
13
2255
ECL coverage (bps)
Stage 1
6
9
27
19
1
8
8
13
7
1133
Consolidated financial statements | UBS Group AG consolidated financial statements
taking ECL allowances and provisions divided by the gross
loans;
carrying amount of the exposures. Core loan exposure is defined
– contractual maturities in the loan portfolio, which are a factor
as the sum of Loans and advances to customers and Loans to
in the calculation of ECLs, are generally short, with Lombard
financial advisors.
lending typically having average contractual maturities of 12
These ratios are influenced by the following key factors:
months or less, real estate lending generally between 2 years
– Lombard
loans are generally secured with marketable
and 3 years in Switzerland with longer dated maturities in the
securities in portfolios that are, as a rule, highly diversified, with
US and corporate lending between 1 to 2 years with related
strict lending policies that are intended to ensure that credit
loan commitments up to 4 years; and
risk is minimal under most circumstances;
– write-offs of ECL allowances against the gross loan balances
– mortgage loans to private clients and real estate financing are
when all or part of a financial asset is deemed uncollectible or
controlled by conservative eligibility criteria, including low
forgiven, reduces the coverage ratios.
loan-to-value ratios and strong debt service capabilities;
– the amount of unsecured retail lending (including credit cards)
is insignificant;
Coverage ratios for core loan portfolio
3311..1122..2211
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
440011,,115500
338822,,889933
1155,,888822
22,,337744
152,610
143,533
44,004
14,161
14,263
40,483
12,665
12,095
149,316
149,261
1,752
3,927
1,355
3,805
18,578
17,493
2,539
2,203
TToottaall
9,123
8,766
8,798
8,481
32,748
28,981
8,077
7,276
14,438
14,438
9,466
3,262
9,000
3,262
12,153
11,784
8,806
8,507
8,333
3,512
1,053
1,507
351
0
7
1,010
109
276
285
3,630
688
462
0
0
369
296
744
10
443
661
55
46
115
75
226
49
0
136
114
0
4
0
0
4
9
14
120
182
2
204
290
25
338
2233
3
9
34
38
1
7
4
15
15
1188
2
5
18
16
0
72
15
9
88
44
3
7
25
19
0
5
4
12
6
1122
85
114
148
103
0
255
3
15
303
9988
9
88
110
151
0
34
0
120
30
110000
446
231
2,997
3,402
5,026
3,735
9,388
3,730
2,791
22,,667733
585
15
0
1
0
0
0
0
0
448866
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 398,611 million and Loans to financial advisors of USD 2,539 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.
110066,,884400
110000,,552277
66,,000066
330077
328
329
321
Financial statements
Consolidated financial statements | UBS Group AG 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
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
and the contracts have industry-standard settlement mechanisms
prescribed by ISDA. Other OTC derivatives are cleared through
clearing houses, in particular interest rate swaps with LCH, where
a settled-to-market method has been generally adopted, under
which cash collateral exchanged on a daily basis is considered to
legally settle the market value of the derivatives. Regulators in
various jurisdictions have begun a phased introduction of rules
requiring the payment and collection of initial and variation
margins on certain OTC derivative contracts, which may have a
bearing on 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
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 aim 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 26 for more information about derivatives
designated in hedge accounting relationships
330
322
Consolidated financial statements | UBS Group AG consolidated financial statements
Note 10 Derivative instruments
Note 10 Derivative instruments (continued)
Overview
Risks of derivative instruments
Derivative instruments
Over-the-counter (OTC) derivative contracts are usually traded
The derivative financial assets shown on the balance sheet can be
under a standardized International Swaps and Derivatives
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 mechanisms
credit exposure in its derivatives business with that counterparty.
prescribed by ISDA. Other OTC derivatives are cleared through
This is generally the case because, on the one hand, replacement
clearing houses, in particular interest rate swaps with LCH, where
values can increase over time (potential future exposure), while,
a settled-to-market method has been generally adopted, under
on the other hand, exposure may be mitigated by entering into
which cash collateral exchanged on a daily basis is considered to
master netting agreements and bilateral collateral arrangements.
legally settle the market value of the derivatives. Regulators in
Both the exposure measures used internally by the Group to
various jurisdictions have begun a phased introduction of rules
control credit risk and the capital requirements imposed by
requiring the payment and collection of initial and variation
regulators reflect these additional factors.
margins on certain OTC derivative contracts, which may have a
bearing on 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
completion of the final phase-in of margin requirements for non-
› 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
centrally cleared derivatives, to 1 September 2022.
derivative instruments
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 aim 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 26 for more information about derivatives
designated in hedge accounting relationships
NNoottiioonnaall
aammoouunnttss
rreellaatteedd ttoo
ddeerriivvaattiivvee
ffiinnaanncciiaall
aasssseettss22,,33
999911..22
2299..44
339944..33
554455..22
2222..44
4444..77
3399..44
11..33
33,,003300..88
DDeerriivvaattiivvee
ffiinnaanncciiaall
aasssseettss
3333..22
00..11
2266..44
66..66
00..00
11..44
11..33
00..11
5533..33
3311..1122..2211
DDeerriivvaattiivvee
ffiinnaanncciiaall
lliiaabbiilliittiieess
2288..77
NNoottiioonnaall
aammoouunnttss
rreellaatteedd ttoo
ddeerriivvaattiivvee
ffiinnaanncciiaall
lliiaabbiilliittiieess22,,33
994433..11
OOtthheerr
nnoottiioonnaall
aammoouunnttss22,,44
88,,667755..11
Derivative
financial
assets
50.9
2288..66
444433..66
334444..11 77,,554499..44
555533..66
00..22
1199..22
99..22
00..00
11..88
11..66
00..22
5544..11
1166..88
4466..33
4444..11
11..77
22,,993388..88
0.0
40.8
10.1
0.0
2.4
2.2
0.1
68.7
Notional
amounts
related to
derivative
financial
assets2,3
928.0
19.8
407.0
447.5
53.6
57.6
53.6
1.9
2,951.1
552255..00
115577..11
11..22
8800..11
7711..22
88..88
1144..77
1133..99
27.3
779.1
34.3 1,727.3
440.9
7.1
449.6
34.8
6.4
7.0
10.7
10.7
2.2
0.5
1.0
0.0
0.5
89.4
87.1
273.1
57.8
17.7
23.5
8.0
2233..88 11,,000088..99
2244..33 11,,660066..33
441122..66
55..22
445566..99
2288..22
2233..88 11,,004433..22
2244..99 11,,448800..33
440088..66
55..33
660033..99
3344..99
44..77
44..66
1100..22
88..66
11..66
00..55
00..44
00..00
00..66
110055..77
6611..44
228899..66
5577..88
1199..99
1144..00
1188..11
115544..88
110022..33
334466..33
5566..44
2255..44
1100..44
1155..22
99..33
66..55
99..88
99..44
11..66
00..88
00..22
00..00
00..44
31.12.20
Derivative
financial
liabilities
43.9
0.4
30.9
12.5
0.0
2.9
2.6
0.3
70.5
29.0
34.4
7.1
41.2
9.8
10.9
11.3
9.1
2.0
0.8
0.7
0.0
0.3
Notional
amounts
related to
derivative
financial
liabilities2,3
880.4
21.9
364.8
460.5
33.1
64.8
62.3
2.5
2,820.4
853.3
1,567.3
394.7
581.3
108.4
146.2
326.8
49.7
18.0
17.8
6.3
Other
notional
amounts2,4
11,291.5
2,602.5
8,105.2
480.6
103.3
1.4
91.3
67.9
23.5
10.1
9.3
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: client-cleared transactions (ETD)
CCoommmmooddiittyy ccoonnttrraaccttss
of which: swaps (OTC)
of which: options (OTC)
of which: futures (ETD)
of which: forward contracts (ETD)
of which: client-cleared transactions (ETD)
88..22
00..11
00..00
00..88
00..00
1133..33
LLooaann ccoommmmiittmmeennttss
mmeeaassuurreedd aatt FFVVTTPPLL ((OOTTCC))
UUnnsseettttlleedd ppuurrcchhaasseess ooff nnoonn--ddeerriivvaattiivvee
ffiinnaanncciiaall iinnssttrruummeennttss55
UUnnsseettttlleedd ssaalleess ooff nnoonn--ddeerriivvaattiivvee ffiinnaanncciiaall
iinnssttrruummeennttss55
TToottaall ddeerriivvaattiivvee iinnssttrruummeennttss,,
bbaasseedd oonn IIFFRRSS nneettttiinngg66
11,394.4
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. 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 Notional
amounts of client-cleared ETD and OTC transactions through central clearing counterparties are not disclosed, as they have significantly different risk profile. 44 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. 55 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. 66 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.
4,479.5
44,,661166..66
4,429.7
88,,777711..11
44,,661133..88
159.6
111188..11
161.1
112211..33
17.2
10.0
12.9
1100..66
10.2
18.3
1188..22
00..22
00..22
00..11
99..44
0.0
0.3
0.3
0.2
0.2
On a notional amount basis, approximately 40% of OTC interest
rate contracts held as of 31 December 2021 (31 December 2020:
50%) mature within one year, 36% (31 December 2020: 30%)
within one to five years and 25% (31 December 2020: 20%) 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. Other notional amounts related
to interest rate contracts decreased by USD 2.6 trillion compared
with 31 December 2020, mainly reflecting trade compressions,
which included activity as part of the ongoing transition to
alternative reference rates, and maturities.
330
331
323
Financial statements
Consolidated financial statements | UBS Group AG 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
Governments and government agencies
of which: USA
Banks
TToottaall ffiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt ffaaiirr vvaalluuee tthhrroouugghh ootthheerr ccoommpprreehheennssiivvee iinnccoommee
UUnnrreeaalliizzeedd ggaaiinnss // ((lloosssseess)) rreeccooggnniizzeedd iinn OOtthheerr ccoommpprreehheennssiivvee iinnccoommee
Unrealized gains, before tax
Unrealized (losses), before tax
NNeett uunnrreeaalliizzeedd ggaaiinnss // ((lloosssseess)),, bbeeffoorree ttaaxx
3311..1122..2211
31.12.20
88,,552222
77,,550077
332222
88,,884444
6677
((8800))
((1133))
8,155
7,727
103
8,258
204
(4)
200
151
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.
((77))
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 and
equipment1
Leased
properties and
equipment2
Software
Projects in
progress
22002211
2020
13,185
273
(430)
323
(303)
13,048
8,060
635
9
(424)
(12)
(196)
8,072
4,249
213
(223)
0
(66)
4,174
1,082
498
1
(215)
0
(20)
1,346
7,768
228
(98)
808
(64)
8,642
3,987
945
0
(98)
0
(28)
4,807
1,036
1,376
0
(1,149)
(12)
1,250
0
0
0
0
0
0
0
2266,,223388
22,,009900
((775511))
((1188))
((444455))
2277,,111133
1133,,112299
22,,007788
1100
((773377))
((1122))
((224433))
1144,,222255
24,431
2,312
(990)
(590)
1,074
26,238
11,628
1,997
72
(855)
(328)
616
13,129
NNeett bbooookk vvaalluuee
Net book value at the beginning of the year
NNeett bbooookk vvaalluuee aatt tthhee eenndd ooff tthhee yyeeaarr
11 Includes leasehold improvements and IT hardware. 22 Represents right-of-use assets recognized by UBS as lessee. UBS predominantly enters into lease contracts, or contracts that include lease components, in
relation to real estate, including offices, retail branches and sales offices. The total cash outflow for leases during 2021 was USD 657 million (2020: USD 679 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.
There were no material gains or losses arising from sale-and-leaseback transactions in 2021 (2020: USD 140 million). 33 Includes write-offs of fully depreciated assets. 44 The total reclassification amount for the
respective periods represents net reclassifications to Properties and other non-current assets held for sale. 55 Impairment charges recorded in 2021 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. 66 Consists of USD 1,087 million related to software and USD 163 million related to Owned properties and equipment.
1,036
11,,22550066
12,804
13,109
1133,,110099
1122,,888888
3,780
33,,883355
3,167
22,,882288
5,126
44,,997766
332
324
Consolidated financial statements | UBS Group AG consolidated financial statements
88,,552222
77,,550077
332222
88,,884444
6677
((8800))
((1133))
((77))
8,155
7,727
103
8,258
204
(4)
200
151
USD million
DDeebbtt iinnssttrruummeennttss
of which: USA
Banks
Governments and government agencies
Unrealized gains, before tax
Unrealized (losses), before tax
NNeett uunnrreeaalliizzeedd ggaaiinnss // ((lloosssseess)),, bbeeffoorree ttaaxx
NNeett uunnrreeaalliizzeedd ggaaiinnss // ((lloosssseess)),, aafftteerr ttaaxx
TToottaall ffiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt ffaaiirr vvaalluuee tthhrroouugghh ootthheerr ccoommpprreehheennssiivvee iinnccoommee
UUnnrreeaalliizzeedd ggaaiinnss // ((lloosssseess)) rreeccooggnniizzeedd iinn OOtthheerr ccoommpprreehheennssiivvee iinnccoommee
Note 12 Property, equipment and software
At historical cost less accumulated depreciation
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.
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
Net book value at the beginning of the year
NNeett bbooookk vvaalluuee aatt tthhee eenndd ooff tthhee yyeeaarr
Owned
Leased
properties and
properties and
equipment1
equipment2
Software
Projects in
progress
22002211
2020
13,185
273
(430)
323
(303)
13,048
8,060
635
9
(424)
(12)
(196)
8,072
5,126
44,,997766
4,249
213
(223)
0
(66)
4,174
1,082
498
(215)
1
0
(20)
1,346
3,167
22,,882288
7,768
228
(98)
808
(64)
8,642
3,987
945
(98)
0
0
(28)
4,807
3,780
33,,883355
1,036
1,376
0
(1,149)
(12)
1,250
0
0
0
0
0
0
0
2266,,223388
22,,009900
((775511))
((1188))
((444455))
2277,,111133
1133,,112299
22,,007788
1100
((773377))
((1122))
((224433))
24,431
2,312
(990)
(590)
1,074
26,238
11,628
1,997
72
(855)
(328)
616
1144,,222255
13,129
1,036
11,,22550066
1133,,110099
1122,,888888
12,804
13,109
11 Includes leasehold improvements and IT hardware. 22 Represents right-of-use assets recognized by UBS as lessee. UBS predominantly enters into lease contracts, or contracts that include lease components, in
relation to real estate, including offices, retail branches and sales offices. The total cash outflow for leases during 2021 was USD 657 million (2020: USD 679 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.
There were no material gains or losses arising from sale-and-leaseback transactions in 2021 (2020: USD 140 million). 33 Includes write-offs of fully depreciated assets. 44 The total reclassification amount for the
respective periods represents net reclassifications to Properties and other non-current assets held for sale. 55 Impairment charges recorded in 2021 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. 66 Consists of USD 1,087 million related to software and USD 163 million related to Owned properties and equipment.
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..2211
31.12.20
Introduction
UBS performs an impairment test on its goodwill assets on an
annual basis or when indicators of impairment exist.
UBS considers Asset Management, as it is reported in Note 2a,
as a separate cash-generating unit (a CGU), as that is the level at
which the performance of investment (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 the formation of Global
Wealth Management in 2018. Therefore, 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 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 2021, total goodwill recognized on the
balance sheet was USD 6.1 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. Based on the impairment testing
methodology described below, UBS concluded that the goodwill
balances as of 31 December 2021 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 this
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 is equal to the capital a CGU requires to conduct
its business and
reasonable
approximation of the carrying amount of the CGUs. The
attributed equity methodology is also applied in the business
planning process, the inputs from which are used in calculating
the recoverable amounts of the respective CGU.
is currently considered a
› 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
information, where
model are
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. They also take into account
regional differences in risk-free rates at the level of the individual
CGUs. In line with discount rates, long-term growth rates are
determined at the regional level based on nominal or real GDP
growth rate forecasts.
332
333
325
Financial statements Consolidated financial statements | UBS Group AG 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
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
Impairment / (reversal of impairment)2
Disposals
Write-offs
Foreign currency translation
Balance at the end of the year
NNeett bbooookk vvaalluuee aatt tthhee eenndd ooff tthhee yyeeaarr
of which: Global Wealth Management Americas
of which: Global Wealth Management Switzerland and International
of which: Asset Management
of which: Investment Bank
of which: Group Functions
Discount rates
Growth rates
3311..1122..2211
99..55
88..55
88..55
Goodwill
6,182
(3)
(53)
6,126
6,126
3,720
1,204
1,202
31.12.20
9.5
8.5
8.5
Intangible
assets1
3311..1122..2211
44..00
33..11
22..99
31.12.20
5.1
3.7
3.5
22002211
2020
1,683
1
(41)
(30)
1,612
1,385
31
(1)
(41)
(13)
1,360
252
41
72
139
77,,886655
11
((33))
((4411))
((8833))
77,,773399
11,,338855
3311
((11))
00
((4411))
((1133))
11,,336600
66,,337788
33,,776600
11,,227766
11,,220022
113399
00
7,820
147
(158)
(35)
91
7,865
1,351
55
2
0
(35)
11
1,385
6,480
3,770
1,320
1,226
161
4
11 Intangible assets mainly include customer relationships, contractual rights and the fully amortized branch network intangible asset recognized in connection with the acquisition of PaineWebber Group, Inc.
22 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: USD 5 million for
2020).
The table below presents estimated aggregated amortization expenses for intangible assets.
USD million
EEssttiimmaatteedd aaggggrreeggaatteedd aammoorrttiizzaattiioonn eexxppeennsseess ffoorr::
2022
2023
2024
2025
2026
Thereafter
Not amortized due to indefinite useful life
TToottaall
334
326
Intangible assets
29
27
23
23
23
126
2
252
Consolidated financial statements | UBS Group AG consolidated financial statements
Note 13 Goodwill and intangible assets (continued)
Note 14 Other assets
Key assumptions used to determine the recoverable amounts
If the estimated earnings and other assumptions in future
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
Deposits and collateral provided in connection with litigation, regulatory and similar matters1
Prepaid expenses
VAT and other tax receivables
Properties and other non-current assets held for sale
Assets of disposal groups held for sale2
Other
TToottaall ootthheerr nnoonn--ffiinnaanncciiaall aasssseettss
11 Refer to Note 18 for more information. 22 Refer to Note 30 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 deposits1
TToottaall aammoouunnttss dduuee ttoo bbaannkkss aanndd ccuussttoommeerr ddeeppoossiittss
11 Includes customer deposits in UBS AG Jersey Branch placed by UBS Switzerland AG on behalf of its clients.
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 all
losses in the income statement. Recognition of any impairment of
scenarios, reasonably possible changes in key assumptions did
goodwill would reduce IFRS equity and net profit. It would not
not result in an impairment of goodwill or intangible assets
affect cash flows and, as goodwill is required to be deducted from
reported by Global Wealth Management Americas, Global
capital under the Basel III capital framework, no effect would be
Wealth Management Switzerland and International, and Asset
expected on the Group’s capital ratios.
Management.
Discount and growth rates
In %
Global Wealth Management Americas
Global Wealth Management Switzerland and International
Asset Management
Balance at the beginning of the year
USD million
HHiissttoorriiccaall ccoosstt
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
Impairment / (reversal of impairment)2
Amortization
Disposals
Write-offs
Foreign currency translation
Balance at the end of the year
NNeett bbooookk vvaalluuee aatt tthhee eenndd ooff tthhee yyeeaarr
of which: Global Wealth Management Americas
of which: Global Wealth Management Switzerland and International
of which: Asset Management
of which: Investment Bank
of which: Group Functions
2020).
USD million
2022
2023
2024
2025
2026
TToottaall
Thereafter
334
Not amortized due to indefinite useful life
Discount rates
Growth rates
3311..1122..2211
31.12.20
3311..1122..2211
31.12.20
99..55
88..55
88..55
Goodwill
6,182
(3)
(53)
6,126
6,126
3,720
1,204
1,202
9.5
8.5
8.5
Intangible
assets1
1,683
1
(41)
(30)
31
(1)
(41)
(13)
1,360
252
41
72
139
44..00
33..11
22..99
22002211
77,,886655
11
((33))
((4411))
((8833))
3311
((11))
00
((4411))
((1133))
11,,336600
66,,337788
33,,776600
11,,227766
11,,220022
113399
00
1,612
77,,773399
1,385
11,,338855
1,351
5.1
3.7
3.5
2020
7,820
147
(158)
(35)
91
7,865
55
2
0
(35)
11
1,385
6,480
3,770
1,320
1,226
161
4
29
27
23
23
23
126
2
252
11 Intangible assets mainly include customer relationships, contractual rights and the fully amortized branch network intangible asset recognized in connection with the acquisition of PaineWebber Group, Inc.
22 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: USD 5 million for
The table below presents estimated aggregated amortization expenses for intangible assets.
EEssttiimmaatteedd aaggggrreeggaatteedd aammoorrttiizzaattiioonn eexxppeennsseess ffoorr::
Intangible assets
3311..1122..2211
1188,,885588
31.12.20
18,801
99,,883333
22,,445533
11,,997722
11,,335566
445555
552200
559944
2266,,220099
9,789
2,569
2,014
1,447
614
591
1,158
27,194
3311..1122..2211
31.12.20
55,,225588
11,,552266
11,,110088
663388
3322
11,,009933
662211
1100,,227777
6,264
1,418
1,081
433
246
326
9,768
3311..1122..2211
1133,,110011
554422,,000077
224466,,441177
224477,,222244
4488,,336655
555555,,110088
31.12.20
11,050
524,605
236,447
220,898
67,260
535,655
335
327
Financial statements Consolidated financial statements | UBS Group AG consolidated financial statements
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..2211
31.12.20
4477,,005599
1166,,336699
11,,772233
22,,886688
22,,991111
22,,886688
22,,113366
7733,,779999
5577,,996677
41,069
11,038
1,933
3,604
1,497
2,101
1,190
61,243
46,427
of which: life-to-date own credit (gain) / loss
418
11 Includes investment fund unit-linked instruments issued. 22 Based on original contractual maturity without considering any early redemption features. As of 31 December 2021, 100% of the balance was unsecured
(31 December 2020: 100%).
334477
As of 31 December 2021 and 31 December 2020, 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
2022
2023
2024
2025
2026
2027–2031
Thereafter
TToottaall
3311..1122..2211
Total
31.12.20
0
0
0
0
0
0
2,340
22,,334400
1,375
4,296
19,338
23,635
1,658
15,621
17,279
716
5,067
5,783
495
5,816
6,311
226
3,840
4,066
6
150
156
0
47
47
0
145
145
0
0
0
0
0
0
273
8,364
8,637
423
0
423
1,732
3,238
4,971
99,,339977
6611,,228844
7700,,668822
9,409
49,528
58,937
0
7
7
442299
334499
777788
539
392
931
23,791
17,325
5,929
6,311
4,066
9,060
7,317
7733,,779999
61,243
11 Consists of instruments issued by the legal entity UBS Group AG. 22 Consists of instruments issued by the legal entity UBS AG. 33 Consists of instruments issued by subsidiaries of UBS AG.
336
328
Note 16 Debt issued designated at fair value
Note 17 Debt issued measured at amortized cost
3311..1122..2211
31.12.20
USD million
3311..1122..2211
31.12.20
4477,,005599
1166,,336699
11,,772233
22,,886688
22,,991111
22,,886688
22,,113366
7733,,779999
5577,,996677
334477
41,069
11,038
1,933
3,604
1,497
2,101
1,190
61,243
46,427
418
Certificates of deposit and 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
4400,,664400
22,,445588
4433,,009988
3388,,998844
2277,,559900
2233,,330077
11,,338899
1188,,664400
1111,,005522
22,,442255
22,,559966
554477
99,,445544
00
41,151
5,515
46,666
36,611
21,340
18,464
2,796
22,157
11,837
2,577
7,201
543
9,660
3
9966,,005577
92,566
TToottaall ddeebbtt iissssuueedd mmeeaassuurreedd aatt aammoorrttiizzeedd ccoosstt44
11 Debt with an original contractual maturity of less than one year. 22 Based on original contractual maturity without considering any early redemption features. As of 31 December 2021, 100% of the balance was
unsecured (31 December 2020: 100%). 33 Debt with an original contractual 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.
139,232
113399,,115555
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 26. As a result of applying hedge accounting, the life-
to-date adjustment to the carrying amount of debt issued was an
increase of USD 478 million as of 31 December 2021 and an
increase of USD 2,401 million as of 31 December 2020, reflecting
changes in fair value due to interest rate movements.
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
issuing entity. All of the subordinated debt
instruments
outstanding as of 31 December 2021 pay a fixed rate of interest.
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
Contractual maturity of carrying amount
Consolidated financial statements | UBS Group AG consolidated financial statements
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
of which: life-to-date own credit (gain) / loss
(31 December 2020: 100%).
11 Includes investment fund unit-linked instruments issued. 22 Based on original contractual maturity without considering any early redemption features. As of 31 December 2021, 100% of the balance was unsecured
As of 31 December 2021 and 31 December 2020, the contractual
to debt issued designated at fair value have not been included in
redemption amount at maturity of debt issued designated at fair
the table below, as the majority of the debt instruments issued
value through profit or loss was not materially different from the
are structured products and therefore the future interest
carrying amount.
payments are highly dependent upon the embedded derivative
The table below shows the residual contractual maturity of the
and prevailing market conditions at the point in time that each
carrying amount of debt issued designated at fair value, split
interest payment is made.
between fixed-rate and floating-rate instruments based on the
› Refer to Note 24 for maturity information on an undiscounted
contractual terms, and does not consider any early redemption
cash flow basis
features. Interest rate ranges for future interest payments related
Contractual maturity of carrying amount
2022
2023
2024
2025
2026
2027–2031
Thereafter
3311..1122..2211
31.12.20
TToottaall
Total
USD million
UUBBSS GGrroouupp AAGG11
Non-subordinated debt
Non-subordinated debt
Fixed-rate
UUBBSS AAGG22
Fixed-rate
Floating-rate
Subtotal
OOtthheerr ssuubbssiiddiiaarriieess33
Non-subordinated debt
Fixed-rate
Floating-rate
Subtotal
TToottaall
0
0
0
0
0
0
2,340
22,,334400
1,375
4,296
19,338
23,635
1,658
15,621
17,279
716
5,067
5,783
495
5,816
6,311
226
3,840
4,066
1,732
3,238
4,971
99,,339977
6611,,228844
7700,,668822
9,409
49,528
58,937
273
8,364
8,637
423
0
423
6
150
156
0
47
47
0
145
145
0
0
0
0
0
0
0
7
7
442299
334499
777788
539
392
931
23,791
17,325
5,929
6,311
4,066
9,060
7,317
7733,,779999
61,243
11 Consists of instruments issued by the legal entity UBS Group AG. 22 Consists of instruments issued by the legal entity UBS AG. 33 Consists of instruments issued by subsidiaries of UBS AG.
3,769
492
4,027
2,183
0
0
5,145
5,052
6,748
12,534
0
0
0
0
0
0
0
0
4,261
6,211
5,145
5,052
6,748
12,534
3,294
0
13,477
16,771
2022
2023
2024
2025
2026
2027–2031
Thereafter
TToottaall
3311..1122..2211
Total
31.12.20
USD million
UUBBSS GGrroouupp AAGG11
Non-subordinated debt
Fixed-rate
Floating-rate
Subordinated debt
Fixed-rate
Subtotal
UUBBSS AAGG22
Non-subordinated debt
Fixed-rate
Floating-rate
Subordinated debt
Fixed-rate
Subtotal
OOtthheerr ssuubbssiiddiiaarriieess33
Non-subordinated debt
Fixed-rate
Subtotal
TToottaall
4400,,556699
22,,667766
1133,,447777
5566,,772222
5522,,557711
1155,,223388
55,,116633
7722,,997722
33,578
5,890
14,413
53,881
52,618
15,299
7,744
75,661
3,439
508
210
4,158
1,381
1,213
0
0
0
0
1,381
1,213
38,647
9,807
2,020
50,474
5,578
2,093
0
7,671
1,964
1,922
2,596
6,482
907
907
1,007
1,007
1,072
1,072
55,642
14,889
12,698
349
907
337
1,594
1,173
1,173
7,818
1,045
1,045
11,951
3,674
3,674
17,590
582
582
99,,446600
99,,446600
9,690
9,690
18,566
113399,,115555
139,232
336
337
329
11 Consists of debt issued by the legal entity UBS Group AG. 22 Consists of debt issued by the legal entity UBS AG. 33 Consists of debt issued by subsidiaries of UBS AG.
Financial statements Consolidated financial statements | UBS Group AG 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..2211
33,,332222
119966
33,,551188
31.12.20
2,571
257
2,828
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
Foreign currency translation / unwind of discount
BBaallaannccee aatt tthhee eenndd ooff tthhee yyeeaarr
11 Consists of provisions for losses resulting from legal, liability and compliance risks. 22 Primarily consists of personnel-related restructuring provisions of USD 125 million as of 31 December 2021 (31 December 2020:
USD 18 million) and provisions for onerous contracts of USD 47 million as of 31 December 2021 (31 December 2020: USD 49 million). 33 Mainly includes provisions related to real estate, employee benefits and
operational risks.
Restructuring
72
297
(30)
(165)
0
(3)
11772222
TToottaall 22002211
22,,557711
11,,336611
((113366))
((443344))
3322
((7722))
33,,332222
Other3
363
78
(32)
(80)
32
(10)
335522
Litigation,
regulatory and
similar matters1
2,135
986
(74)
(189)
0
(59)
22,,779988
Restructuring provisions primarily relate to personnel-related
provisions and onerous contracts. Personnel-related restructuring
provisions are used within a short period of time 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. 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.
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 reputational 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 constructive obligation as a result of past
338
330
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
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.
for example,
such matter
(because,
for
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.
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.
to confidentiality obligations
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 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. 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 limit, suspend or
terminate licenses and regulatory 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.
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
Foreign currency translation / unwind of discount
BBaallaannccee aatt tthhee eenndd ooff tthhee yyeeaarr
Global
Wealth
Manage-
ment
861
754
(60)
(175)
(42)
11,,333388
Personal &
Corporate
Banking
115
84
Asset
Manage-
ment
0
9
Investment
Bank
227
107
Group
Functions
932
32
TToottaall 22002211
22,,113355
998866
(11)
(1)
(6)
118811
0
(1)
0
88
(4)
(10)
(11)
331100
0
(2)
0
((7744))
((118899))
((5599))
996622
22,,779988
11 Provisions, if any, for the matters described in items 3 and 4 of this Note are recorded in Global Wealth Management, and provisions, if any, for the matters described in item 2 are recorded in Group Functions.
Provisions, if any, for the matters described in items 1 and 6 of this Note are allocated between Global Wealth Management and Personal & Corporate Banking, and provisions, if any, for the matters described in item
5 are allocated between the Investment Bank and Group Functions.
Consolidated financial statements | UBS Group AG consolidated financial statements
The following table presents additional information for provisions other than provisions for expected credit losses.
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
Foreign currency translation / unwind of discount
BBaallaannccee aatt tthhee eenndd ooff tthhee yyeeaarr
operational risks.
3311..1122..2211
31.12.20
33,,332222
119966
33,,551188
2,571
257
2,828
Litigation,
regulatory and
similar matters1
2,135
986
(74)
(189)
0
(59)
22,,779988
Restructuring
Other3
TToottaall 22002211
72
297
(30)
(165)
0
(3)
11772222
363
78
(32)
(80)
32
(10)
335522
22,,557711
11,,336611
((113366))
((443344))
3322
((7722))
33,,332222
11 Consists of provisions for losses resulting from legal, liability and compliance risks. 22 Primarily consists of personnel-related restructuring provisions of USD 125 million as of 31 December 2021 (31 December 2020:
USD 18 million) and provisions for onerous contracts of USD 47 million as of 31 December 2021 (31 December 2020: USD 49 million). 33 Mainly includes provisions related to real estate, employee benefits and
Restructuring provisions primarily relate to personnel-related
components, such as utilities, service charges, taxes and
provisions and onerous contracts. Personnel-related restructuring
maintenance, when a property is vacated or not fully recovered
provisions are used within a short period of time but potential
from sub-tenants.
changes in amount may be triggered when natural staff attrition
Information about provisions and contingent liabilities in
reduces the number of people affected by a restructuring event
respect of litigation, regulatory and similar matters, as a class, is
and therefore the estimated costs. Onerous contracts for property
included in Note 18b. There are no material contingent liabilities
are recognized when UBS is committed to pay for non-lease
associated with the other classes of provisions.
b) Litigation, regulatory and similar matters
The Group operates in a legal and regulatory environment that
events, it is probable that an outflow of resources will be required,
exposes it to significant litigation and similar risks arising from
and the amount can be reliably estimated. Where these factors
disputes and regulatory proceedings. As a result, UBS (which for
are otherwise satisfied, a provision may be established for claims
purposes of this Note may refer to UBS Group AG and/or one or
that have not yet been asserted against the Group, but are
more of its subsidiaries, as applicable) is involved in various
nevertheless expected to be, based on the Group’s experience
disputes and legal proceedings, including litigation, arbitration,
with similar asserted claims. If any of those conditions is not met,
and regulatory and criminal investigations.
such matters result in contingent liabilities. If the amount of an
Such matters are subject to many uncertainties, and the
obligation cannot be reliably estimated, a liability exists that is not
outcome and the timing of resolution are often difficult to predict,
recognized even if an outflow of resources is probable.
particularly in the earlier stages of a case. There are also situations
Accordingly, no provision is established even if the potential
where the Group may enter into a settlement agreement. This
outflow of resources with respect to such matters could be
may occur in order to avoid the expense, management distraction
significant. Developments relating to a matter that occur after the
or reputational implications of continuing to contest liability, even
relevant reporting period, but prior to the issuance of financial
for those matters for which the Group believes it should be
statements, which affect management’s assessment of the
exonerated. The uncertainties inherent in all such matters affect
provision
for
such matter
(because,
for example,
the
the amount and timing of any potential outflows for both matters
developments provide evidence of conditions that existed at the
with respect to which provisions have been established and other
end of the reporting period), are adjusting events after the
contingent liabilities. The Group makes provisions for such
reporting period under IAS 10 and must be recognized in the
matters brought against it when, in the opinion of management
financial statements for the reporting period.
after seeking legal advice, it is more likely than not that the Group
has a present legal or constructive obligation as a result of past
338
339
331
Financial statements Consolidated financial statements | UBS Group AG 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
information based on requests for 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 has taken steps to
inform affected clients about the 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.
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.
On 20 February 2019, the court of first instance returned 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 of 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. A trial in the French Court of Appeal
took place in March 2021. On 13 December 2021, the Court of
Appeal found UBS AG guilty of unlawful solicitation and
aggravated laundering of the proceeds of tax fraud. The court
ordered a fine of EUR 3.75 million, the confiscation of
EUR 1 billion, and awarded civil damages to the French state of
EUR 800 million. The court also found UBS (France) SA guilty of
the aiding and abetting of unlawful solicitation and ordered it to
pay a fine of EUR 1.875 million. UBS AG has filed an appeal with
the French Supreme Court to preserve its rights. The appeal
enables UBS AG to thoroughly assess the verdict of the Court of
Appeal and to determine next steps in the best interest of its
stakeholders. The fine and confiscation imposed by the Court of
Appeal are suspended during the appeal. The civil damages award
has been paid to the French state (EUR 99 million of which was
deducted from the bail), subject to the result of UBS’s appeal.
Our balance sheet at 31 December 2021 reflected provisions
with respect to this matter in an amount of EUR 1.1 billion
(USD 1.252 billion at 31 December 2021). The wide range of
possible outcomes in this case contributes to a high degree of
estimation uncertainty and the provision reflects our best estimate
of possible financial implications, although actual penalties and
civil damages could exceed (or may be less than) the provision
amount.
In 2016, UBS was notified by the Belgian investigating judge
that it was under formal investigation (“inculpé”) regarding the
allegations of laundering of proceeds of tax fraud, banking and
financial solicitation by unauthorized persons, and serious tax
fraud. In November 2021, the Council Chamber approved a
settlement with the Brussels Prosecution Office for EUR 49 million
without recognition of guilt with regard to the allegations of
banking and financial solicitation by unauthorized persons and
serious tax fraud. The allegation of laundering of proceeds of tax
fraud was dismissed.
Our balance sheet at 31 December 2021 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.
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
(RMBS) and was a
residential mortgage-backed securities
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 2021 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.
340
332
Consolidated financial statements | UBS Group AG consolidated financial statements
1. Inquiries regarding cross-border wealth management
Our balance sheet at 31 December 2021 reflected provisions
businesses
with respect to this matter in an amount of EUR 1.1 billion
Tax and regulatory authorities in a number of countries have
(USD 1.252 billion at 31 December 2021). The wide range of
made inquiries, served requests for information or examined
possible outcomes in this case contributes to a high degree of
employees located in their respective jurisdictions relating to the
estimation uncertainty and the provision reflects our best estimate
cross-border wealth management services provided by UBS and
of possible financial implications, although actual penalties and
other financial institutions. It is possible that the implementation
civil damages could exceed (or may be less than) the provision
of automatic tax information exchange and other measures
amount.
relating to cross-border provision of financial services could give
In 2016, UBS was notified by the Belgian investigating judge
rise to further inquiries in the future. UBS has received disclosure
that it was under formal investigation (“inculpé”) regarding the
orders from the Swiss Federal Tax Administration (FTA) to transfer
allegations of laundering of proceeds of tax fraud, banking and
information based on requests for international administrative
financial solicitation by unauthorized persons, and serious tax
assistance in tax matters. The requests concern a number of UBS
fraud. In November 2021, the Council Chamber approved a
account numbers pertaining to current and former clients and are
settlement with the Brussels Prosecution Office for EUR 49 million
based on data from 2006 and 2008. UBS has taken steps to
without recognition of guilt with regard to the allegations of
inform affected clients about the administrative assistance
banking and financial solicitation by unauthorized persons and
proceedings and their procedural rights, including the right to
serious tax fraud. The allegation of laundering of proceeds of tax
appeal. The requests are based on data received from the German
fraud was dismissed.
authorities, who seized certain data related to UBS clients booked
Our balance sheet at 31 December 2021 reflected provisions
in Switzerland during their investigations and have apparently
with respect to matters described in this item 1 in an amount that
shared this data with other European countries. UBS expects
UBS believes to be appropriate under the applicable accounting
additional countries to file similar requests.
standard. As in the case of other matters for which we have
Since 2013, UBS (France) S.A., UBS AG and certain former
established provisions, the future outflow of resources in respect
employees have been under investigation in France for alleged
of such matters cannot be determined with certainty based on
complicity in unlawful solicitation of clients on French territory,
currently available information and accordingly may ultimately
regarding the laundering of proceeds of tax fraud, and banking
prove to be substantially greater (or may be less) than the
and financial solicitation by unauthorized persons. In connection
provision that we have recognized.
with this investigation, the investigating judges ordered UBS AG
to provide bail (“caution”) of EUR 1.1 billion and UBS (France) S.A.
2. Claims related to sales of residential mortgage-backed
to post bail of EUR 40 million, which was reduced on appeal to
securities and mortgages
EUR 10 million.
From 2002 through 2007, prior to the crisis in the US residential
On 20 February 2019, the court of first instance returned a
loan market, UBS was a substantial issuer and underwriter of US
verdict finding UBS AG guilty of unlawful solicitation of clients on
residential mortgage-backed securities
(RMBS) and was a
French territory and aggravated laundering of the proceeds of tax
purchaser and seller of US residential mortgages.
fraud, and UBS (France) S.A. guilty of aiding and abetting
In November 2018, the DOJ filed a civil complaint in the District
unlawful solicitation and of laundering the proceeds of tax fraud.
Court for the Eastern District of New York. The complaint seeks
The court imposed fines aggregating EUR 3.7 billion on UBS AG
unspecified civil monetary penalties under
the Financial
and UBS (France) S.A. and awarded EUR 800 million of civil
Institutions Reform, Recovery and Enforcement Act of 1989
damages to the French state. A trial in the French Court of Appeal
related to UBS’s issuance, underwriting and sale of 40 RMBS
took place in March 2021. On 13 December 2021, the Court of
transactions in 2006 and 2007. UBS moved to dismiss the civil
Appeal found UBS AG guilty of unlawful solicitation and
complaint on 6 February 2019. On 10 December 2019, the
aggravated laundering of the proceeds of tax fraud. The court
district court denied UBS’s motion to dismiss.
ordered a fine of EUR 3.75 million, the confiscation of
Our balance sheet at 31 December 2021 reflected a provision
EUR 1 billion, and awarded civil damages to the French state of
with respect to matters described in this item 2 in an amount that
EUR 800 million. The court also found UBS (France) SA guilty of
UBS believes to be appropriate under the applicable accounting
the aiding and abetting of unlawful solicitation and ordered it to
standard. As in the case of other matters for which we have
pay a fine of EUR 1.875 million. UBS AG has filed an appeal with
established provisions, the future outflow of resources in respect
the French Supreme Court to preserve its rights. The appeal
of this matter cannot be determined with certainty based on
enables UBS AG to thoroughly assess the verdict of the Court of
currently available information and accordingly may ultimately
Appeal and to determine next steps in the best interest of its
prove to be substantially greater (or may be less) than the
stakeholders. The fine and confiscation imposed by the Court of
provision that we have recognized.
Appeal are suspended during the appeal. The civil damages award
has been paid to the French state (EUR 99 million of which was
deducted from the bail), subject to the result of UBS’s appeal.
Note 18 Provisions and contingent liabilities (continued)
Note 18 Provisions and contingent liabilities (continued)
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
(FINMA) and the Luxembourg Commission de
Authority
Surveillance du Secteur Financier. Those inquiries concerned two
third-party funds established under Luxembourg law, 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
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.
in
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.
Since then, UBS 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 filed customer
complaints and arbitration demands seeking aggregate damages
of USD 3.4 billion, of which USD 3.1 billion have been resolved
through settlements, arbitration or withdrawal of claims.
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 2021, the parties reached an agreement to settle this
matter for USD 15 million, subject to court approval.
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. In 2017, the court denied
defendants’ motion to dismiss the complaint. In 2020, the court
denied plaintiffs’ motion for summary judgment.
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
into a bankruptcy-like proceeding under the
the bonds
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 in three separate cases. 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. Defendants’
motions to dismiss were granted in two of the cases; those
decisions are being appealed by the plaintiffs. In the third case,
defendants’ motion to dismiss was denied, but on appeal that
ruling was reversed and the motion to dismiss was granted.
340
341
333
Financial statements Consolidated financial statements | UBS Group AG consolidated financial statements
Note 18 Provisions and contingent liabilities (continued)
Our balance sheet at 31 December 2021 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 Swiss, US and United Kingdom regulators and
the European Commission. UBS was 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.
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.
LIBOR and other benchmark-related regulatory matters:
investigations
Numerous government agencies conducted
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 was 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.
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, including adjustable rate mortgages, preferred
and debt securities, bonds pledged as collateral, loans, depository
accounts, investments and other interest-bearing instruments.
The complaints allege 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.
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,
and again dismissed the antitrust claims in 2016 following an
appeal. In December 2021, the Second Circuit affirmed the district
court’s dismissal in part and reversed in part and remanded to the
district court for further proceedings. The Second Circuit, among
other things, held that there was personal jurisdiction over UBS
and other foreign defendants based on allegations that at least
one alleged co-conspirator undertook an overt act in the United
States. 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.
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 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,
in USD LIBOR
directly transacted with a defendant bank
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. Defendants moved to dismiss
the complaint in September 2021.
342
334
Consolidated financial statements | UBS Group AG consolidated financial statements
Our balance sheet at 31 December 2021 reflected provisions
competition law violations related to certain rates. However, UBS
with respect to matters described in this item 4 in amounts that
has not reached a final settlement with WEKO, as the Secretariat
UBS believes to be appropriate under the applicable accounting
of WEKO has asserted that UBS does not qualify for full immunity.
standard. As in the case of other matters for which we have
LIBOR and other benchmark-related civil litigation: A number
established provisions, the future outflow of resources in respect
of putative class actions and other actions are pending in the
of such matters cannot be determined with certainty based on
federal courts in New York against UBS and numerous other
currently available information and accordingly may ultimately
banks on behalf of parties who transacted in certain interest rate
prove to be substantially greater (or may be less) than the
benchmark-based derivatives. Also pending in the US and in other
provisions that we have recognized.
jurisdictions are a number of other actions asserting losses related
to various products whose interest rates were linked to LIBOR and
5. Foreign exchange, LIBOR and benchmark rates, and other
other benchmarks, including adjustable rate mortgages, preferred
trading practices
and debt securities, bonds pledged as collateral, loans, depository
Foreign exchange-related regulatory matters: Beginning in 2013,
accounts, investments and other interest-bearing instruments.
numerous authorities commenced investigations concerning
The complaints allege manipulation, through various means, of
possible manipulation of foreign exchange markets and precious
certain benchmark interest rates, including USD LIBOR, Euroyen
metals prices. As a result of these investigations, UBS entered into
TIBOR, Yen LIBOR, EURIBOR, CHF LIBOR, GBP LIBOR, SGD SIBOR
resolutions with Swiss, US and United Kingdom regulators and
and SOR and Australian BBSW, and seek unspecified
the European Commission. UBS was granted conditional
compensatory and other damages under varying legal theories.
immunity by the Antitrust Division of the DOJ and by authorities
USD LIBOR class and individual actions in the US: In 2013 and
in other jurisdictions in connection with potential competition law
2015, the district court in the USD LIBOR actions dismissed, in
violations relating to foreign exchange and precious metals
whole or in part, certain plaintiffs’ antitrust claims, federal
businesses.
racketeering claims, CEA claims, and state common law claims,
Foreign exchange-related civil litigation: Putative class actions
and again dismissed the antitrust claims in 2016 following an
have been filed since 2013 in US federal courts and in other
appeal. In December 2021, the Second Circuit affirmed the district
jurisdictions against UBS and other banks on behalf of putative
court’s dismissal in part and reversed in part and remanded to the
classes of persons who engaged in foreign currency transactions
district court for further proceedings. The Second Circuit, among
with any of the defendant banks. UBS has resolved US federal
other things, held that there was personal jurisdiction over UBS
court class actions relating to foreign currency transactions with
and other foreign defendants based on allegations that at least
the defendant banks and persons who transacted in foreign
one alleged co-conspirator undertook an overt act in the United
exchange futures contracts and options on such futures under a
States. Separately, in 2018, the Second Circuit reversed in part the
settlement agreement that provides for UBS to pay an aggregate
district court’s 2015 decision dismissing certain
individual
of USD 141 million and provide cooperation to the settlement
plaintiffs’ claims and certain of these actions are now proceeding.
classes. Certain class members have excluded themselves from
In 2018, the district court denied plaintiffs’ motions for class
that settlement and have filed individual actions in US and English
certification in the USD class actions for claims pending against
courts against UBS and other banks, alleging violations of US and
UBS, and plaintiffs sought permission to appeal that ruling to the
European competition laws and unjust enrichment.
Second Circuit. In July 2018, the Second Circuit denied the
In 2015, a putative class action was filed in federal court
petition to appeal of the class of USD lenders and in November
against UBS and numerous other banks on behalf of persons and
2018 denied the petition of the USD exchange class. In January
businesses in the US who directly purchased foreign currency from
2019, a putative class action was filed in the District Court for the
the defendants and alleged co-conspirators for their own end use.
Southern District of New York against UBS and numerous other
In March 2017, the court granted UBS’s (and the other banks’)
banks on behalf of US residents who, since 1 February 2014,
complaint in August 2017. In March 2018, the court denied the
instruments. The complaint asserts antitrust claims. The
defendants’ motions to dismiss the amended complaint.
defendants moved to dismiss the complaint in August 2019. On
LIBOR and other benchmark-related regulatory matters:
26 March 2020 the court granted defendants’ motion to dismiss
Numerous government agencies conducted
investigations
the complaint in its entirety. Plaintiffs have appealed the dismissal.
regarding potential improper attempts by UBS, among others, to
In August 2020, an individual action was filed in the Northern
manipulate LIBOR and other benchmark rates at certain times.
District of California against UBS and numerous other banks
UBS reached settlements or otherwise concluded investigations
alleging that the defendants conspired to fix the interest rate used
relating to benchmark interest rates with the investigating
as the basis for loans to consumers by jointly setting the
authorities. UBS was granted conditional leniency or conditional
USD LIBOR rate and monopolized the market for LIBOR-based
immunity from authorities in certain jurisdictions, including the
consumer loans and credit cards. Defendants moved to dismiss
Antitrust Division of the DOJ and the Swiss Competition
the complaint in September 2021.
Commission (WEKO), in connection with potential antitrust or
Note 18 Provisions and contingent liabilities (continued)
Note 18 Provisions and contingent liabilities (continued)
Other benchmark class actions in the US:
Yen LIBOR / Euroyen TIBOR – In 2014, 2015 and 2017, the court
in one of the Yen LIBOR / Euroyen TIBOR lawsuits dismissed
certain of the plaintiffs’ claims, including the 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 focused on Yen LIBOR. The court
granted in part and denied in part defendants’ motion to dismiss
the amended complaint in September 2021 and plaintiffs and the
remaining defendants have moved for reconsideration.
CHF LIBOR – In 2017, the court dismissed the CHF LIBOR action
on standing grounds and failure to state a claim. Plaintiffs filed an
amended complaint, and the court granted a renewed motion to
dismiss in September 2019. Plaintiffs appealed. In September
2021, the Second Circuit granted the parties’ joint motion to
vacate the dismissal and remand the case for further proceedings.
EURIBOR – 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.
SIBOR / SOR – In October 2018, the court in the SIBOR / SOR
action dismissed all but one of plaintiffs’ claims against UBS.
Plaintiffs filed an amended complaint, and the court granted a
renewed motion to dismiss in July 2019. Plaintiffs appealed. In
March 2021, the Second Circuit reversed the dismissal. Plaintiffs
filed an amended complaint in October 2021, which defendants
have moved to dismiss.
BBSW – In November 2018, the court dismissed the BBSW
lawsuit as to UBS and certain other foreign defendants for lack of
personal jurisdiction. Plaintiffs filed an amended complaint in April
2019, which UBS and other defendants moved to dismiss. In
February 2020, the court 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, which the court denied in May
2021.
GBP LIBOR – The court dismissed the GBP LIBOR action in
motions to dismiss the complaint. The plaintiffs filed an amended
directly transacted with a defendant bank
in USD LIBOR
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 was
granted in March 2021. Plaintiffs filed an amended complaint,
which defendants moved to dismiss in June 2021. Similar class
actions have been filed concerning European government bonds
and other government bonds.
In May 2021, the European Commission issued a decision
finding that UBS and six other banks breached European Union
antitrust rules in 2007–2011 relating to European government
bonds. The European Commission fined UBS EUR 172 million. UBS
is appealing the amount of the fine.
With respect to additional matters and jurisdictions not
encompassed by the settlements and orders referred to above,
our balance sheet at 31 December 2021 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.
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 continues 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 2021 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.
342
343
335
Financial statements
Consolidated financial statements | UBS Group AG consolidated financial statements
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 liabilities
of which: Deferred Contingent Capital Plan
of which: financial advisor compensation plans
of which: other compensation plans
of which: net defined benefit liability
of which: other compensation-related liabilities 1
Deferred tax liabilities
Current tax liabilities
VAT and other tax payables
Deferred income
Liabilities of disposal groups held for sale2
Other
TToottaall ootthheerr nnoonn--ffiinnaanncciiaall lliiaabbiilliittiieess
11 Includes liabilities for payroll taxes and untaken vacation. 22 Refer to Note 30 for more information.
3311..1122..2211
31.12.20
11,,887766
11,,009944
11,,330044
33,,555588
11,,116677
99,,000011
3311..1122..2211
2211,,446666
66,,337777
22,,112288
110033
3300,,007744
1,696
1,355
1,199
3,927
1,553
9,729
31.12.20
20,975
7,317
2,060
35
30,387
((3322))
(36)
3311..1122..2211
31.12.20
77,,225577
11,,662288
11,,551122
22,,884466
663333
663388
330000
11,,339988
559900
224400
11,,229988
6688
1111,,115511
7,468
1,858
1,500
2,740
722
648
564
1,009
523
228
61
9,854
344
336
Consolidated financial statements | UBS Group AG consolidated financial statements
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 liabilities
of which: Deferred Contingent Capital Plan
of which: financial advisor compensation plans
of which: other compensation plans
of which: net defined benefit liability
of which: other compensation-related liabilities 1
Deferred tax liabilities
Current tax liabilities
VAT and other tax payables
Deferred income
Liabilities of disposal groups held for sale2
Other
TToottaall ootthheerr nnoonn--ffiinnaanncciiaall lliiaabbiilliittiieess
11 Includes liabilities for payroll taxes and untaken vacation. 22 Refer to Note 30 for more information.
11,,887766
11,,009944
11,,330044
33,,555588
11,,116677
99,,000011
3311..1122..2211
2211,,446666
66,,337777
22,,112288
110033
3300,,007744
77,,225577
11,,662288
11,,551122
22,,884466
663333
663388
330000
11,,339988
559900
224400
11,,229988
6688
1111,,115511
1,696
1,355
1,199
3,927
1,553
9,729
31.12.20
20,975
7,317
2,060
35
30,387
7,468
1,858
1,500
2,740
722
648
564
1,009
523
228
61
9,854
((3322))
(36)
3311..1122..2211
31.12.20
344
Additional information
3311..1122..2211
31.12.20
Note 20 Expected credit loss measurement
a) Expected credit losses in the period
Total net credit loss releases were USD 148 million in 2021,
reflecting net credit loss releases of USD 123 million related to
stage 1 and 2 positions and USD 25 million net credit loss releases
related to credit-impaired (stage 3) positions.
Stage 3 net releases of USD 25 million were recognized across
a number of defaulted positions with a USD 24 million net release
in Personal & Corporate Banking.
to
the
continued positive
Stage 1 and 2 net credit loss releases of USD 123 million
included a USD 68 million partial net release of a post-model
adjustment, due
in
macroeconomic scenario input data during the year, a USD 45
million net release from a number of model and methodology
changes and a residual USD 10 million net release from
remeasurements within
loan book, derecognized
the
transactions, partially offset by expenses from new transactions.
› Refer to Note 20b for more information regarding changes to
ECL model, scenarios, scenario weights and the post-model
trend
adjustment and to Note 20c for more information regarding
the development of ECL allowances and provisions
Credit loss (expense) / release
USD million
FFoorr tthhee yyeeaarr eennddeedd 3311..1122..2211
Stages 1 and 2
Stage 3
TToottaall ccrreeddiitt lloossss ((eexxppeennssee)) // rreelleeaassee
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
Global
Wealth
Management
Personal &
Corporate
Banking
Asset
Management
Investment
Bank
Group
Functions
2288
11
2299
(48)
(40)
((8888))
3
(23)
((2200))
6622
2244
8866
(129)
(128)
((225577))
23
(44)
((2211))
00
((11))
((11))
0
(2)
((22))
0
0
00
3344
00
3344
(88)
(217)
((330055))
(4)
(26)
((3300))
00
00
00
0
(42)
((4422))
0
(7)
((77))
Total
112233
2255
114488
(266)
(429)
((669944))
22
(100)
((7788))
345
337
Financial statements Consolidated financial statements | UBS Group AG consolidated financial statements
Note 20 Expected credit loss measurement (continued)
b) Changes to ECL models, scenarios, scenario weights and key inputs
The narrative of the hypothetical severe downside scenario,
which is the Group’s binding stress scenario, has been adapted
and assumes that, while the immediate risks from COVID-19 have
decreased, the associated disruptions and the consequences of
the unprecedented monetary and fiscal stimulus measures will
remain critical. Concerns regarding the sustainability of public
debt, following the marked deterioration of fiscal positions, lead
to a
loss of confidence and market turbulence, while
protectionism results in a fall in global trade. Governments and
central banks have limited scope to support the economies. As a
consequence, the Eurozone and China suffer a hard landing,
under this scenario which severely affects the Swiss export-
oriented economy, and the US economy contracts as global
demand is significantly affected. Given the severity of the
macroeconomic impact, unemployment rates rise to historical
highs and real estate sectors contract sharply.
With effect from the second quarter, the hypothetical upside
and mild downside scenarios, which were viewed as less plausible
as of 31 December 2020 and had a probability weight of zero
attached, were redesigned and reintroduced
in the ECL
calculation. These two scenarios have become more relevant
following this update, as they better reflect a more positive
outlook with regard to COVID-19 and market expectations
regarding a potential change in central bank policies, respectively.
The upside scenario is based on positive developments
following COVID-19 and strong economic activity supported by
pent-up demand in certain sectors, as well as the expectation that
interest rates will remain relatively low in the near future. Asset
prices rise significantly, but a view that currently observed higher
inflation rates are temporary and spare economic capacity would
mean that consumer prices remain moderate in the first year of
the scenario.
The mild downside scenario focuses on the implications of
rising concerns regarding inflationary trends following a recovery
from COVID-19. Higher-than-expected inflation data triggers a
steepening of yield curves across the globe and leads to market
volatility. Higher interest rates lead to a sell-off in assets and a
period of deleveraging under this scenario. With inflation
remaining high, central banks start hiking their policy rates after
a few quarters, leading to further increases in interest rates and
impacting corporate and private debt
sustainability. A
recessionary period is the consequence.
The table on the following page details the key assumptions
for the four scenarios applied as of 31 December 2021.
Refer to Note 1a for information about the principles governing
expected credit loss (ECL) models, scenarios, scenario weights and
key inputs applied.
Governance
Comprehensive cross-functional and cross-divisional governance
processes are in place and are used to discuss and approve
scenario updates and weights, to assess whether significant
increases in credit risk resulted in stage transfers, to review model
regarding post-model
outputs and
adjustments.
reach conclusions
to
Model changes
During 2021, the model review and enhancement process led to
adjustments of the probability of default (PD), loss given default
(LGD) and credit conversion factor (CCF) models, resulting in a
USD 45 million decrease in ECL allowances. An amount of USD
25 million related to the Large corporate clients segment in the
Investment Bank. The remainder related to various segments in
Personal & Corporate Banking and Global Wealth Management.
Scenario and key input updates
During 2021, the scenarios and related macroeconomic factors
were updated from those that were applied at the end of 2020
by taking into account the prevailing economic and political
conditions and uncertainty. As the economic development was
more positive than anticipated following the COVID-19-related
downturn, the forward-looking scenarios benefited from an
improved forecast starting level.
The projections of the baseline scenario, which are aligned to
the economic and market assumptions used for UBS’s business
planning purposes, are broadly in line with external data, such as
from Bloomberg Consensus, Oxford Economics and
the
International Monetary Fund World Economic Outlook. The
economic performance during 2021
in relevant markets,
especially in the US and in Switzerland, highlighted an accelerated
improvement after the COVID-19-related shocks. The scenario
assumes continued growth in 2022 in all key markets, albeit at a
slower rate than seen in 2021, and unemployment rates are not
expected to fall noticeably below the current levels. Interest rates
are expected to remain low in line with the central bank policies
pursued in the Eurozone and Switzerland, and any potential rises
in the US would be limited in the foreseeable future. House prices
are expected to reflect the momentum and continue to rise,
especially in Switzerland and, to a lesser degree, in the US.
346
338
Consolidated financial statements | UBS Group AG consolidated financial statements
b) Changes to ECL models, scenarios, scenario weights and key inputs
Refer to Note 1a for information about the principles governing
The narrative of the hypothetical severe downside scenario,
expected credit loss (ECL) models, scenarios, scenario weights and
which is the Group’s binding stress scenario, has been adapted
and assumes that, while the immediate risks from COVID-19 have
decreased, the associated disruptions and the consequences of
the unprecedented monetary and fiscal stimulus measures will
key inputs applied.
Governance
adjustments.
Model changes
Comprehensive cross-functional and cross-divisional governance
remain critical. Concerns regarding the sustainability of public
processes are in place and are used to discuss and approve
debt, following the marked deterioration of fiscal positions, lead
scenario updates and weights, to assess whether significant
to a
loss of confidence and market turbulence, while
increases in credit risk resulted in stage transfers, to review model
protectionism results in a fall in global trade. Governments and
outputs and
to
reach conclusions
regarding post-model
central banks have limited scope to support the economies. As a
consequence, the Eurozone and China suffer a hard landing,
under this scenario which severely affects the Swiss export-
oriented economy, and the US economy contracts as global
During 2021, the model review and enhancement process led to
demand is significantly affected. Given the severity of the
adjustments of the probability of default (PD), loss given default
macroeconomic impact, unemployment rates rise to historical
(LGD) and credit conversion factor (CCF) models, resulting in a
highs and real estate sectors contract sharply.
USD 45 million decrease in ECL allowances. An amount of USD
With effect from the second quarter, the hypothetical upside
25 million related to the Large corporate clients segment in the
and mild downside scenarios, which were viewed as less plausible
Investment Bank. The remainder related to various segments in
as of 31 December 2020 and had a probability weight of zero
Personal & Corporate Banking and Global Wealth Management.
attached, were redesigned and reintroduced
in the ECL
Scenario and key input updates
calculation. These two scenarios have become more relevant
following this update, as they better reflect a more positive
During 2021, the scenarios and related macroeconomic factors
outlook with regard to COVID-19 and market expectations
were updated from those that were applied at the end of 2020
regarding a potential change in central bank policies, respectively.
by taking into account the prevailing economic and political
The upside scenario is based on positive developments
conditions and uncertainty. As the economic development was
following COVID-19 and strong economic activity supported by
more positive than anticipated following the COVID-19-related
pent-up demand in certain sectors, as well as the expectation that
downturn, the forward-looking scenarios benefited from an
interest rates will remain relatively low in the near future. Asset
improved forecast starting level.
prices rise significantly, but a view that currently observed higher
The projections of the baseline scenario, which are aligned to
inflation rates are temporary and spare economic capacity would
the economic and market assumptions used for UBS’s business
mean that consumer prices remain moderate in the first year of
planning purposes, are broadly in line with external data, such as
the scenario.
from Bloomberg Consensus, Oxford Economics and
the
The mild downside scenario focuses on the implications of
International Monetary Fund World Economic Outlook. The
rising concerns regarding inflationary trends following a recovery
economic performance during 2021
in relevant markets,
from COVID-19. Higher-than-expected inflation data triggers a
especially in the US and in Switzerland, highlighted an accelerated
steepening of yield curves across the globe and leads to market
improvement after the COVID-19-related shocks. The scenario
volatility. Higher interest rates lead to a sell-off in assets and a
assumes continued growth in 2022 in all key markets, albeit at a
period of deleveraging under this scenario. With inflation
slower rate than seen in 2021, and unemployment rates are not
remaining high, central banks start hiking their policy rates after
expected to fall noticeably below the current levels. Interest rates
a few quarters, leading to further increases in interest rates and
are expected to remain low in line with the central bank policies
impacting corporate and private debt
sustainability. A
pursued in the Eurozone and Switzerland, and any potential rises
recessionary period is the consequence.
in the US would be limited in the foreseeable future. House prices
The table on the following page details the key assumptions
are expected to reflect the momentum and continue to rise,
for the four scenarios applied as of 31 December 2021.
especially in Switzerland and, to a lesser degree, in the US.
Note 20 Expected credit loss measurement (continued)
Note 20 Expected credit loss measurement (continued)
Scenario weights and post-model adjustments
With the weighting of four scenarios above 0% and considering
the generally more positive outlook regarding an abating effect
on the world economy from the COVID-19 pandemic, the
distribution of weights shifted during 2021. As of 31 December
2021, 5 percentage points of the weight of the baseline scenario
and 10 percentage points of the severe downside scenario were
redistributed to the upside scenario (5%) and the mild downside
scenario (10%), as shown in the table below.
information
Although the scenarios and weight allocation were established
in line with the general market sentiment that COVID-19 has
passed its peak and a gradual return to normal is the most likely
path, significant uncertainties still remain. Models, which are
based on supportable statistical
from past
experiences regarding interdependencies of macroeconomic
factors and their implications for credit risk portfolios, cannot
comprehensively reflect extraordinary events, such as a pandemic
or a fundamental change in the world political order. Especially in
these uncertain times, it is in the realm of possibilities that the
generally accepted view that the effects of COVID-19 are abating
may prove to be disappointed by the emergence of new variants
of the virus, which may be more harmful and may undermine
current vaccination efforts. Political events involving tensions
introduce unforeseen
forces may
between major global
challenges, such as disruptions in the global supply chain and a
distortion of energy markets. Such events could affect economies
severely and change the baseline assumptions significantly. Rather
than creating multiple additional scenarios to gauge these risks
and applying model parameters that lack supportable information
and cannot be robustly validated, management continued to
apply significant post-model adjustments. These adjustments
were benchmarked against coverage ratio levels as of 30 June
2021, when a partial net release of USD 91 million was
recognized, corresponding to one third of the accumulated effect
of scenario improvements, following comprehensive expert
assessment and judgment, and were also deemed appropriate for
year-end 2021 reporting. The post-model adjustments relating to
COVID-19 amounted to USD 224 million as of 31 December 2021
(2020: USD 117 million in addition to overlays of USD 16 million
for other aspects, where model results were deemed to be
uncertain).
ECL scenario
Assigned weights in %
31.12.21
31.12.20
Upside
Baseline
Mild downside
Severe downside
5.0
55.0
10.0
30.0
0.0
60.0
0.0
40.0
Scenario assumptions
3311..1122..2211
RReeaall GGDDPP ggrroowwtthh ((%% cchhaannggee))
United States
Eurozone
Switzerland
CCoonnssuummeerr pprriiccee iinnddeexx ((%% cchhaannggee))
United States
Eurozone
Switzerland
UUnneemmppllooyymmeenntt rraattee ((eenndd--ooff--ppeerriioodd lleevveell,, %%))
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)
OOnnee yyeeaarr
TThhrreeee yyeeaarrss ccuummuullaattiivvee
UUppssiiddee
BBaasseelliinnee
MMiilldd
ddoowwnnssiiddee
SSeevveerree
ddoowwnnssiiddee
UUppssiiddee
BBaasseelliinnee
MMiilldd
ddoowwnnssiiddee
SSeevveerree
ddoowwnnssiiddee
9.1
9.4
5.5
3.1
2.3
1.8
3.0
6.2
2.3
50.0
40.0
50.0
12.0
16.0
14.0
5.1
10.0
8.4
4.4
3.9
2.4
2.2
1.4
0.3
3.9
7.4
2.5
16.5
11.1
12.1
14.1
12.3
12.1
4.4
3.5
5.1
(0.1)
(0.1)
(0.9)
5.7
4.2
3.5
6.1
8.7
3.4
259.2
283.8
245.5
(27.0)
(23.4)
(22.9)
(5.9)
(8.7)
(6.6)
(1.2)
(1.3)
(1.8)
10.9
12.9
5.2
(50.0)
(35.0)
(70.0)
(50.2)
(57.6)
(53.6)
(4.3)
(17.0)
(2.3)
(4.0)
(9.5)
(5.4)
17.8
17.3
13.1
9.5
8.0
6.1
3.0
6.0
1.6
170.0
140.0
150.0
35.5
41.6
37.9
15.5
21.7
17.8
10.1
7.5
5.8
6.3
4.8
1.7
3.5
7.2
2.3
41.2
34.9
34.4
24.7
20.7
19.1
7.4
7.1
9.6
1.8
0.9
(0.1)
13.0
10.4
9.0
7.2
9.1
4.2
329.2
349.3
307.3
(21.8)
(19.9)
(19.6)
(3.8)
(10.3)
(5.7)
0.4
(1.7)
(1.6)
10.8
15.1
5.9
(15.0)
(25.0)
(35.0)
(40.1)
(50.4)
(44.2)
(8.8)
(30.0)
(8.7)
(7.6)
(26.3)
(10.8)
346
347
339
Financial statements Consolidated financial statements | UBS Group AG consolidated financial statements
Note 20 Expected credit loss measurement (continued)
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,, %%))
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)
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
2.5
1.1
(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)
(15.3)
(22.9)
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
9.2
7.2
(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)
(28.7)
(35.4)
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;
– 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 PD increases to
100% (or vice versa);
– changes in models or updates to model parameters;
– write-off; and
– foreign exchange translations for assets denominated in
foreign currencies and other movements.
348
340
Consolidated financial statements | UBS Group AG consolidated financial statements
Scenario assumptions
3311..1122..2200
RReeaall GGDDPP ggrroowwtthh ((%% cchhaannggee))
CCoonnssuummeerr pprriiccee iinnddeexx ((%% cchhaannggee))
UUnneemmppllooyymmeenntt rraattee ((eenndd--ooff--ppeerriioodd lleevveell,, %%))
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)
FFiixxeedd iinnccoommee:: 1100--yyeeaarr ggoovveerrnnmmeenntt bboonnddss ((cchhaannggee iinn yyiieellddss,, bbaassiiss ppooiinnttss))
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
2.5
1.1
(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)
(15.3)
(22.9)
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
9.2
7.2
(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)
(28.7)
(35.4)
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 recognition
impacted by a variety of factors, such as:
of lifetime ECLs (and vice versa) following transfers between
– origination of new instruments during the period;
stages 1 and 2;
– effect of passage of time as the ECLs on an instrument for the
– movements from stages 1 and 2 to stage 3 (credit-impaired
remaining lifetime decrease (all other factors remaining the
status) when default has become certain and PD increases to
– discount unwind within ECLs as it is measured on a present
– changes in models or updates to model parameters;
same);
value basis;
100% (or vice versa);
– write-off; and
– derecognition of instruments in the period;
– foreign exchange translations for assets denominated in
– change in individual asset quality of instruments;
foreign currencies and other movements.
– 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
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.
Development of ECL allowances and provisions
USD million
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22002200
RReemmeeaassuurreemmeennttss wwiitthh ssttaaggee ttrraannssffeerrss22
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: Other
of which: Financial intermediaries and hedge funds
of which: Loans to financial advisors
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: Financial intermediaries and hedge funds
of which: Loans to financial advisors
RReemmeeaassuurreemmeennttss wwiitthhoouutt ssttaaggee ttrraannssffeerrss33
SSttaaggee 33
((882299))
00
0
0
0
0
0
0
0
((4499))
0
0
(8)
(36)
(4)
0
0
7744
(1)
3
17
53
2
0
(3)
00
MMoovveemmeennttss wwiitthh pprrooffiitt oorr lloossss iimmppaacctt55
2255
MMoovveemmeennttss wwiitthhoouutt pprrooffiitt oorr lloossss iimmppaacctt ((wwrriittee--ooffff,, FFXX aanndd ootthheerr))66
114411
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22002211
((666622))
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.
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: Financial intermediaries and hedge funds
of which: Loans to financial advisors
TToottaall
((11,,446688))
((5599))
(7)
(7)
(13)
(8)
(24)
(21)
0
((4400))
(9)
(3)
2
(27)
(3)
2
0
220033
33
30
44
53
44
27
6
4455
114488
115544
((11,,116655))
SSttaaggee 11
((330066))
((7722))
(10)
(11)
(21)
(8)
(23)
(18)
(1)
88
4
1
(2)
5
0
(1)
1
5555
8
13
5
(1)
29
15
8
2299
1199
55
((228822))
SSttaaggee 22
((333333))
1133
3
4
7
0
(2)
(4)
1
00
(13)
(4)
12
4
2
3
(1)
7744
26
13
21
1
14
12
1
1166
110044
99
((222200))
MMooddeell cchhaannggeess44
In 2021, ECL allowances and provisions decreased by USD 148
million from net credit loss releases impacting profit or loss:
– a USD 59 million net increase from new and derecognized
transactions that resulted from a USD 72 million stage 1
increase primarily in the corporate lending and real estate
lending portfolio, offset by a USD 13 million net release from
stage 2 positions, driven by positions that were terminated
before their contractual maturity;
– a USD 163 million net decrease from book quality movements
that resulted from a USD 203 million net decrease from
remeasurements without stage transfers, with approximately
half of that related to corporate lending – another significant
portion related to real estate-related lending, primarily due to
the partial release of a post-model adjustment, partially offset
by USD 40 million from transactions moving from stages 1 and
2 into stages 2 and 3, respectively, primarily related to SME
clients; and
– a USD 45 million net decrease that resulted from a number of
model changes. An amount of USD 25 million related to the
Large corporate clients segment in the Investment Bank. The
remainder related to various segments in Personal & Corporate
Banking and Global Wealth Management.
In addition to the movements impacting profit or loss,
allowances decreased by USD 154 million as a result of USD 137
million of write-offs and USD 18 million from foreign exchange
and other movements, both of which did not impact the income
statement.
348
349
341
Financial statements Consolidated financial statements | UBS Group AG consolidated financial statements
Note 20 Expected credit loss measurement (continued)
Development of ECL allowances and provisions
USD million
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22001199
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: Other
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: Securities financing transactions REIT
of which: Loans to financial advisors
of which: Lombard loans
of which Financial intermediaries
RReemmeeaassuurreemmeennttss wwiitthh ssttaaggee ttrraannssffeerrss22
Stage 3
((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)
00
MMoovveemmeennttss wwiitthh pprrooffiitt oorr lloossss iimmppaacctt55
((442299))
MMoovveemmeennttss wwiitthhoouutt pprrooffiitt oorr lloossss iimmppaacctt ((wwrriittee--ooffff,, FFXX aanndd ootthheerr))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.
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
Total
((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))
Stage 2
((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))
Stage 1
((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))
MMooddeell cchhaannggeess44
As explained in Note 1a, the assessment of a significant increase
in credit risk (SICR) considers a number of qualitative and
quantitative factors to determine whether a stage transfer
between stage 1 and stage 2 is required, although the primary
assessment considers changes in PD based on rating analyses and
economic outlook. Additionally, UBS takes into consideration
counterparties that have moved to a credit watch list and those
with payments that are at least 30 days past due.
ECL stage 2 (“significant deterioration in credit risk”) allowances / provisions as of 31 December 2021 – 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
350
342
SSttaaggee 22
(220)
(71)
(43)
(55)
(30)
(6)
(3)
(11)
(1)
of which:
PD layer
(158)
(54)
(38)
(40)
(19)
(6)
0
0
(1)
of which:
watch list
(22)
0
0
(15)
(7)
0
0
0
0
of which:
≥30 days
past due
(39)
(17)
(4)
0
(4)
0
(3)
(11)
0
Consolidated financial statements | UBS Group AG consolidated financial statements
Note 20 Expected credit loss measurement (continued)
Development of ECL allowances and provisions
USD million
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22001199
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: Other
of which: Securities financing transactions REIT
of which: Securities financing transactions REIT
of which: Loans to financial advisors
of which: Lombard loans
of which Financial intermediaries
RReemmeeaassuurreemmeennttss wwiitthh ssttaaggee ttrraannssffeerrss22
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 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
MMooddeell cchhaannggeess44
MMoovveemmeennttss wwiitthh pprrooffiitt oorr lloossss iimmppaacctt55
MMoovveemmeennttss wwiitthhoouutt pprrooffiitt oorr lloossss iimmppaacctt ((wwrriittee--ooffff,, FFXX aanndd ootthheerr))66
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22002200
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
Total
((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))
Stage 1
((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))
Stage 2
((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))
Stage 3
((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)
00
((442299))
228877
((882299))
SSttaaggee 22
(220)
of which:
PD layer
of which:
watch list
(158)
(22)
(71)
(43)
(55)
(30)
(6)
(3)
(11)
(1)
(54)
(38)
(40)
(19)
(6)
0
0
(1)
0
0
(15)
(7)
0
0
0
0
of which:
≥30 days
past due
(39)
(17)
(4)
0
(4)
0
(3)
(11)
0
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.
As explained in Note 1a, the assessment of a significant increase
assessment considers changes in PD based on rating analyses and
in credit risk (SICR) considers a number of qualitative and
economic outlook. Additionally, UBS takes into consideration
quantitative factors to determine whether a stage transfer
counterparties that have moved to a credit watch list and those
between stage 1 and stage 2 is required, although the primary
with payments that are at least 30 days past due.
ECL stage 2 (“significant deterioration in credit risk”) allowances / provisions as of 31 December 2021 – classification by trigger
Note 20 Expected credit loss measurement (continued)
d) Maximum exposure to credit risk
The tables below 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 banks4
Receivables from securities financing transactions
Cash collateral receivables on derivative instruments5,6
Loans and advances to customers7
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
Guarantees8
Loan commitments8
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,,22
CCrreeddiitt eennhhaanncceemmeennttss11
3311..1122..2211
MMaaxxiimmuumm
eexxppoossuurree ttoo
ccrreeddiitt rriisskk
CCaasshh
ccoollllaatteerraall
rreecceeiivveedd
CCoollllaatteerraalliizzeedd
bbyy sseeccuurriittiieess
SSeeccuurreedd bbyy
rreeaall eessttaattee
OOtthheerr
ccoollllaatteerraall33
NNeettttiinngg
CCrreeddiitt
ddeerriivvaattiivvee
ccoonnttrraaccttss GGuuaarraanntteeeess
EExxppoossuurree ttoo
ccrreeddiitt rriisskk
aafftteerr ccoollllaatteerraall
aanndd ccrreeddiitt
eennhhaanncceemmeennttss
119922..88
1155..55
7755..00
3300..55
339977..88
2266..22
773377..88
88..88
774466..66
2200..99
3399..44
11..44
4400..77
110022..55
00..00
3377..55
00..22
3377..77
3377..77
11..33
00..55
00..33
22..22
00..11
6688..00
112288..77
00..11
119966..99
119966..99
66..55
44..00
11..44
99..00
2200..99
119911..33
00..00
119911..33
119911..33
00..22
22..44
66..22
88..77
1188..44
1188..44
00..00
1188..44
00..00
00..33
66..99
2200..22
11..33
2288..44
2288..44
22..55
77..33
33..99
1133..77
00..00
00..33
31.12.20
Collateral1,2
Credit enhancements1
00..11
44..00
44..00
44..00
22..33
11..77
00..55
44..55
119922..88
1155..33
00..00
1122..11
1166..22
2244..66
226611..00
88..88
226699..88
88..11
2233..11
00..00
2200..99
5522..11
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
collateral3
Credit
derivative
contracts Guarantees
7.0
0.0
21.1
194.6
Netting
0.1
67.1
25.8
0.1
2266..00
118.2
0.2
118855..77
158.2
15.4
74.2
32.7
379.5
27.2
668877..33
USD billion
FFiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt
aammoorrttiizzeedd ccoosstt oonn tthhee bbaallaannccee sshheeeett
Cash and balances at central banks
Loans and advances to banks4
Receivables from securities financing transactions
Cash collateral receivables on derivative instruments5,6
Loans and advances to customers7
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
Guarantees8
Loan commitments8
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
5533..00
11 Of which: USD 1,443 million for 31 December 2021 (31 December 2020: USD 1,983 million) relates to total credit-impaired financial assets measured at amortized cost and USD 130 million for 31 December 2021
(31 December 2020: USD 154 million) to total off-balance sheet financial instruments and credit lines for credit-impaired positions. 22 Collateral arrangements generally incorporate a range of collateral, including
cash, securities, real estate and other collateral. UBS applies a risk-based approach that generally prioritizes collateral according to its liquidity profile. 33 Includes but is not limited to life insurance contracts, inventory,
mortgage loans, gold and other commodities. 44 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. 55 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. 66 The amount shown in the “Netting” column represents the netting potential not recognized on the balance sheet. Refer to Note 22 for more information. 77 In 2021,
the collateral allocation was updated to reflect additional cash collateral and custody accounts that are also available as security for certain on-balance sheet lending. This resulted in an increase in loans secured by
cash, with an offsetting reduction in loans secured by real estate and loans secured by securities. 88 The amount shown in the “Guarantees” column includes sub-participations.
158.2
15.3
0.0
11.6
14.8
25.5
222255..55
223333..77
7.0
25.3
119944..66
0.2
2.1
669955..66
17.0
41.2
118855..77
5.0
4.2
3300..11
1.7
6.8
2266..00
0.7
0.0
21.7
1.3
3300..11
44..44
2.5
2.4
0.0
20.7
3.2
10.3
3.2
40.1
119944..66
110011..66
2211..11
2211..11
1111..22
2222..77
88..33
44..44
88..55
00..88
00..00
44..99
88..33
4.4
00..00
6.2
00..00
0.4
0.1
2.7
0.0
00..44
350
351
343
Financial statements
Consolidated financial statements | UBS Group AG 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..2211
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
119911,,001155
11,,880022
191,015 1,802
1122,,662233
00
0
779955
795
0
0
1177,,444400
00
00
0
0
449900
440077
11,,117711
488
407 12,623 1,146
2
24
0
0
0
0
0
0
11,,443399
1100,,448833
1111,,226677
3344,,338866
34,386 11,267 10,483 17,440 1,439
4477
55,,887788
47
2211,,442233
77,,446666
33,,664477
7,466 13,476 5,878 3,647
6699,,889922
55,,229955
223322,,223333
6677,,662200
1133,,447766
00
119922,,881177
0 192,817
11
1155,,448888
0 15,460
27
0
1
1
7755,,001144
00
0 75,014
00
3300,,551144
0 30,514
339988,,661111
22,,114488
5,295
231,153
65,084 62,796 16,362
0 380,690
0 1,080 2,536 7,096 5,061
0
0
0
0
0
339944
332211
1122,,556644
66,,007722
66,,770022
317
307 5,863
12,564 6,693
77
209
13
10
0
0
0
0
2233,,779933
9977,,884466
8855,,447722
227788,,110033
0
0
225511,,113333
2,148
226644
0 15,773
2,148
2266,,331188
0 25,745
309
0
264
264
773388,,776622
22,,441144
33,,999966
225555,,113300
44,,777711
228822,,887744
00
8855,,447722
7777
9977,,992233
00
2233,,779933
00
22,,441144
88,,884444
774477,,660066
00
0
((88))
(7)
(1)
0
((22))
(2)
00
0
((885500))
(126)
(152)
(572)
((110099))
(27)
(7)
(76)
((996699))
00
((996699))
NNeett ccaarrrryyiinngg
aammoouunntt
((mmaaxxiimmuumm
eexxppoossuurree ttoo
ccrreeddiitt rriisskk))
119922,,881177
192,817
1155,,448800
15,453
26
1
7755,,001122
75,012
3300,,551144
30,514
339977,,776611
380,564
15,620
1,577
2266,,220099
25,718
302
189
773377,,779944
88,,884444
774466,,663388
Off-balance sheet positions subject to expected credit loss by rating category
USD million
3311..1122..2211
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))
77,,006644
44,,553355
27
0
1144,,118833
44,,445577
33,,775577
4,457 7,037 4,375 3,075
682
0
88,,229988
11,,000099
752
258
160
0
0
0
0
22,,779977
66,,550022
77,,665511
2,797 13,917 7,416 7,127 5,840
663
0
00
77,,551122
235 1,171
0
11,,338899
1133,,444444
266
0
00
2211,,224477
0
0
00
77,,225544
0
5555
1122,,224411
115500
0
0
150
4466
0
0
46
00
119966
99,,775522
1155,,559944
344
0
22,,443388
44,,110077
88,,662277
22,,663366
2,636 15,250 8,304 8,346 3,671
436
0
660022
568
34
0
44,,770099
323 1,406
0
0
0
1177
11,,008844
17 2,438 1,422 1,082
1
0
0
0
1100,,883366
22,,665533
0
0
1188,,003322
0
0
1100,,004499
0
11,,442222
6633
0
0
63
4488
0
0
48
111111
2200,,997722
19,695
1,127
150
3399,,447788
37,097
2,335
46
11,,444444
6611,,889944
4400,,777788
38,207
2,508
63
55,,661111
5,527
36
48
4466,,339900
((4411))
(18)
(8)
(15)
((111144))
(72)
(42)
0
00
((115555))
((3388))
(28)
(10)
0
((33))
(3)
0
0
((4411))
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
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
of which: stage 1
of which: stage 2
of which: stage 3
352
344
TToottaall 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 | UBS Group AG 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
default of individual counterparties, prior to substitutions. The
exposure to credit risk based on the Group’s internal credit rating
amounts presented are gross of impairment allowances.
system and year-end stage classification. Under IFRS 9, the credit
risk rating reflects the Group’s assessment of the probability of
› 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..2211
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
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
OOtthheerr ffiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt aammoorrttiizzeedd ccoosstt
00––11
22––33
44––55
66––88
99––1133
((ddeeffaauulltteedd))
aammoouunntt
aalllloowwaanncceess
CCrreeddiitt--
TToottaall ggrroossss
iimmppaaiirreedd
ccaarrrryyiinngg
00
11
0
1
00
119922,,881177
0 192,817
1155,,448888
0 15,460
27
1
7755,,001144
0 75,014
00
3300,,551144
0 30,514
119911,,001155
11,,880022
191,015 1,802
440077
1122,,662233
11,,117711
407 12,623 1,146
0
0
0
0
00
0
24
0
00
0
779955
795
0
0
00
0
449900
488
2
0
3344,,338866
1111,,226677
1100,,448833
1177,,444400
11,,443399
34,386 11,267 10,483 17,440 1,439
77,,446666
1133,,447766
55,,887788
33,,664477
7,466 13,476 5,878 3,647
4477
47
55,,229955
223322,,223333
6677,,662200
6699,,889922
2211,,442233
22,,114488
339988,,661111
5,295
231,153
65,084 62,796 16,362
0 380,690
0 1,080 2,536 7,096 5,061
1122,,556644
66,,770022
12,564 6,693
0
0
0
0
10
0
0
332211
0
66,,007722
307 5,863
13
0
209
0
0
339944
317
77
0
0 15,773
2,148
226644
2,148
2266,,331188
0 25,745
0
264
309
264
TToottaall ffiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt aammoorrttiizzeedd ccoosstt
225511,,113333
227788,,110033
8855,,447722
9977,,884466
2233,,779933
22,,441144
773388,,776622
OOnn--bbaallaannccee sshheeeett ffiinnaanncciiaall iinnssttrruummeennttss
FFiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt FFVVOOCCII –– ddeebbtt iinnssttrruummeennttss
33,,999966
44,,777711
00
7777
00
00
88,,884444
TToottaall oonn--bbaallaannccee sshheeeett ffiinnaanncciiaall iinnssttrruummeennttss
225555,,113300
228822,,887744
8855,,447722
9977,,992233
2233,,779933
22,,441144
774477,,660066
Off-balance sheet positions subject to expected credit loss by rating category
USD million
3311..1122..2211
00––11
22––33
44––55
66––88
99––1133
((ddeeffaauulltteedd))
ccrreeddiitt rriisskk)) EECCLL pprroovviissiioonnss
TToottaall ooffff --
bbaallaannccee sshheeeett
eexxppoossuurree
((mmaaxxiimmuumm
eexxppoossuurree ttoo
CCrreeddiitt--
iimmppaaiirreedd
Rating category1
OOffff--bbaallaannccee sshheeeett ffiinnaanncciiaall iinnssttrruummeennttss
IIrrrreevvooccaabbllee llooaann ccoommmmiittmmeennttss
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
CCrreeddiitt lliinneess
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 ccrreeddiitt lliinneess
352
FFoorrwwaarrdd ssttaarrttiinngg rreevveerrssee rreeppuurrcchhaassee aanndd sseeccuurriittiieess bboorrrroowwiinngg aaggrreeeemmeennttss
TToottaall ooffff--bbaallaannccee sshheeeett ffiinnaanncciiaall iinnssttrruummeennttss
CCoommmmiitttteedd uunnccoonnddiittiioonnaallllyy rreevvooccaabbllee ccrreeddiitt lliinneess
IIrrrreevvooccaabbllee ccoommmmiitttteedd pprroolloonnggaattiioonn ooff eexxiissttiinngg llooaannss
44,,445577
77,,006644
44,,553355
33,,775577
11,,000099
4,457 7,037 4,375 3,075
27
0
160
0
682
0
752
258
0
22,,779977
1144,,118833
77,,665511
88,,229988
66,,550022
2,797 13,917 7,416 7,127 5,840
266
235 1,171
663
0
00
0
5555
0
11,,338899
1133,,444444
0
00
77,,551122
77,,225544
2211,,224477
1122,,224411
22,,663366
1155,,559944
88,,662277
99,,775522
44,,110077
2,636 15,250 8,304 8,346 3,671
323 1,406
22,,443388
11,,442222
11,,008844
17 2,438 1,422 1,082
344
0
0
0
0
0
0
436
0
660022
568
34
0
0
1
0
22,,665533
1188,,003322
1100,,004499
1100,,883366
44,,770099
0
0
0
0
00
0
0
1177
0
0
115500
0
0
150
4466
0
0
46
00
119966
6633
0
0
63
4488
0
0
48
111111
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.
NNeett ccaarrrryyiinngg
aammoouunntt
((mmaaxxiimmuumm
eexxppoossuurree ttoo
ccrreeddiitt rriisskk))
119922,,881177
192,817
1155,,448800
15,453
26
1
7755,,001122
75,012
3300,,551144
30,514
339977,,776611
380,564
15,620
1,577
2266,,220099
25,718
302
189
773377,,779944
88,,884444
774466,,663388
((4411))
(18)
(8)
(15)
((111144))
(72)
(42)
0
00
((115555))
((3388))
(28)
(10)
0
((33))
(3)
0
0
((4411))
EECCLL
00
0
((88))
(7)
(1)
0
((22))
(2)
00
0
((885500))
(126)
(152)
(572)
((110099))
(27)
(7)
(76)
((996699))
00
((996699))
2200,,997722
19,695
1,127
150
3399,,447788
37,097
2,335
46
11,,444444
6611,,889944
4400,,777788
38,207
2,508
63
55,,661111
5,527
36
48
4466,,339900
Note 20 Expected credit loss measurement (continued)
Financial assets subject to credit risk by rating category
USD million
31.12.20
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,,334444
1,277
67
0
1155,,336677
11,,998811
115566,,225500
1,981
156,250
554433
1122,,112299
543 12,074
55
0
1166,,000099
00
0
11,,118822
1,145
37
0
0
0
2222,,999988
1177,,999955
22,998 16,009 15,367 17,995
33,,224433
3,243
6699,,221177
00
0
226600
231
29
0
11,,884422
1,842
8888
77,,773333
88,,119966
1133,,447777
88
7,733
8,196 13,477
55,,881133
2211,,003388
6677,,227700
221144,,330077
5,813 212,970 63,000 59,447 15,860
5,178
4,269
0
0
448811
228800
389
269
91
11
0
0
2233,,770099
9911,,999933
0
0
1155,,440044
15,404
0
0
220099,,220044
1,338
0
44,,001188
4,015
3
0
226611,,992222
9,770
0
66,,558855
6,334
251
0
9988,,222233
115588,,223311
00
0 158,231
11
1155,,446600
0 15,269
189
0
1
1
00
7744,,221122
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
221122,,441177
55,,001144
226666,,993366
00
9911,,999933
3322
9988,,225555
00
2233,,770099
00
33,,550055
88,,225588
669966,,881155
00
((11,,221111))
Off-balance sheet positions subject to expected credit loss by rating category
USD million
31.12.20
Net carrying
amount
(maximum
exposure to
credit risk)
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
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
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
of which: stage 1
of which: stage 2
of which: stage 3
44,,662233
33,,552222
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
115500
1199,,228899
0
33,,001155
1166,,661100
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
TToottaall 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.
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))
353
345
Financial statements
Consolidated financial statements | UBS Group AG 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 PD and LGD 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
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 looks 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 of 31 December 2021
USD million
CChhaannggee iinn kkeeyy ppaarraammeetteerrss
FFiixxeedd iinnccoommee:: GGoovveerrnnmmeenntt bboonnddss ((aabbssoolluuttee cchhaannggee))
–0.50%
+0.50%
+1.00%
UUnneemmppllooyymmeenntt rraattee ((aabbssoolluuttee cchhaannggee))
–1.00%
–0.50%
+0.50%
+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%
BBaasseelliinnee
UUppssiiddee
MMiilldd ddoowwnnssiiddee
SSeevveerree ddoowwnnssiiddee WWeeiigghhtteedd aavveerraaggee
(1)
1
4
(2)
(1)
1
3
4
2
(1)
(2)
6
3
(2)
(4)
2
1
(1)
(2)
0
1
2
(2)
(1)
1
2
2
1
0
0
4
2
(1)
(3)
2
0
0
0
(29)
39
88
(30)
(17)
21
47
8
4
(10)
(14)
50
24
(26)
(46)
5
2
(2)
(4)
(9)
11
23
(48)
(27)
31
68
17
8
(8)
(16)
73
34
(31)
(31)
6
3
(3)
(6)
(4)
5
14
(13)
(7)
8
18
10
5
(4)
(7)
24
12
(11)
(13)
5
2
(2)
(3)
354
346
Consolidated financial statements | UBS Group AG consolidated financial statements
f) Sensitivity information
ECL model
9.
As outlined in Note 1a, ECL estimates involve significant
interest rates, which can move in both directions under a given
uncertainties at the time they are made.
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 looks for scenario
The models applied to determine point-in-time PD and LGD rely
narratives that reflect the key risk drivers of a given credit portfolio.
on market and statistical data, which has been found to
As forecasting models are complex, due to the combination of
correlate well with historically observed defaults in sufficiently
homogeneous segments. The risk sensitivities for each of the
ECL reporting segments to such factors are summarized in Note
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
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 of 31 December 2021
BBaasseelliinnee
UUppssiiddee
MMiilldd ddoowwnnssiiddee
SSeevveerree ddoowwnnssiiddee WWeeiigghhtteedd aavveerraaggee
USD million
CChhaannggee iinn kkeeyy ppaarraammeetteerrss
FFiixxeedd iinnccoommee:: GGoovveerrnnmmeenntt bboonnddss ((aabbssoolluuttee cchhaannggee))
UUnneemmppllooyymmeenntt rraattee ((aabbssoolluuttee cchhaannggee))
RReeaall GGDDPP ggrroowwtthh ((rreellaattiivvee cchhaannggee))
HHoouussee PPrriiccee IInnddeexx ((rreellaattiivvee cchhaannggee))
EEqquuiittyy ((SS&&PP550000,, EEuurrooSSttooxxxx,, SSMMII)) ((rreellaattiivvee cchhaannggee))
–0.50%
+0.50%
+1.00%
–1.00%
–0.50%
+0.50%
+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%
(1)
1
4
(2)
(1)
1
3
4
2
(1)
(2)
6
3
(2)
(4)
2
1
(1)
(2)
(2)
(1)
0
1
2
1
2
2
1
0
0
4
2
2
0
0
0
(1)
(3)
(29)
39
88
(30)
(17)
21
47
8
4
(10)
(14)
50
24
(26)
(46)
5
2
(2)
(4)
(9)
11
23
(48)
(27)
31
68
17
8
(8)
(16)
73
34
(31)
(31)
6
3
(3)
(6)
(4)
5
14
(13)
(7)
8
18
10
5
(4)
(7)
24
12
(11)
(13)
5
2
(2)
(3)
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 387
(31 December 2020: USD 442 million) instead of
million
USD 503 million (31 December 2020: USD 639 million) if ECL
had been determined solely on the baseline scenario. The
weighted average ECL
to 130%
(31 December 2020: 145%) of the baseline value. The effects of
weighting each of the four scenarios 100% are shown in the
table below.
therefore amounts
Stage allocation and SICR
The determination of what constitutes an 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.
The relevance of the SICR trigger on overall ECL is
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 1,060 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 503
million as of 31 December 2021.
Potential effect on stage 1 and stage 2 positions from changing scenario weights or moving to an ECL lifetime calculation as of 31 December 2021
Actual ECL
allowances and
provisions,
including staging
(as per Note 9)
Pro forma ECL allowances and provisions, including staging
and assuming application of 100% scenario weighting
Pro forma ECL
allowances and
provisions,
assuming all
positions being
subject to lifetime
ECL
WWeeiigghhtteedd aavveerraaggee
110000%% BBaasseelliinnee
110000%% UUppssiiddee
110000%% MMiilldd
ddoowwnnssiiddee
110000%% SSeevveerree
ddoowwnnssiiddee WWeeiigghhtteedd aavveerraaggee
((9955))
((6622))
((115500))
((6655))
((113300))
((550033))
((5533))
((5500))
((111166))
((5566))
((111122))
((338877))
(52)
(48)
(107)
(55)
(108)
((337700))
(119)
(101)
(148)
(71)
(135)
((557744))
(207)
(97)
(244)
(91)
(166)
((880066))
((227777))
((111188))
((225577))
((111177))
((229911))
((11,,006600))
Scenarios
USD million, except where indicated
SSeeggmmeennttaattiioonn
Private clients with mortgages
Real estate financing
Large corporate clients
SME clients
Other segments
TToottaall
Maturity profile
The maturity profile 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 moderate effect on ECLs. A
significant portion of our lending to SMEs is documented under
multi-purpose credit agreements, which allow for various forms
of utilization but are unconditionally cancelable by UBS at any
time. For drawings under such agreements with a fixed maturity,
the respective term is applied for ECL calculations, 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 are sensitive to shortening or extending the maturity
assumption.
354
355
347
Financial statements
Consolidated financial statements | UBS Group AG 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 is with the business divisions.
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 is the individual instrument, and
UBS applies valuation adjustments at an individual instrument
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.
› Refer to Note 21d for more information
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 the business divisions’ 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
356
348
Consolidated financial statements | UBS Group AG consolidated financial statements
Note 21 Fair value measurement
a) Valuation principles
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.
Determination of fair values from quoted market prices or valuation techniques1
USD million
FFiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt ffaaiirr vvaalluuee oonn aa rreeccuurrrriinngg bbaassiiss
3311..1122..2211
31.12.20
LLeevveell 11
LLeevveell 22
LLeevveell 33
TToottaall
Level 1
Level 2
Level 3
Total
Financial assets at fair value held for trading
111133,,669977
1144,,882255
22,,229999
113300,,882211
107,507
15,553
2,337 125,397
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
9977,,995588
77,,113355
77,,884433
770088
00
5533
11,,009900
11,,335511
11,,336644
77,,660044
33,,009999
331177
114499 9999,,119977 90,307 1,101
9,028 2,207
1100
7,374 1,794
2211
555566
789 8,356
11,,444433
112200
171 91,579
10 11,245
23 9,192
817 9,961
0 1,860 1,134 2,995
425
8
88,,449966
99,,222299
88,,886688
44,,554422
448899
181
236
552222
111166,,447799
11,,114400
111188,,114422
795 157,068
1,754 159,617
225555 5533,,004433
00 3322,,774477
00 2277,,886611
00
11,,117799
00
11,,559900
77 5533,,330055
449944 3333,,224411
338844 2288,,224455
11,,441144
223366
11,,660066
1166
319 68,424
0 50,353
0 33,990
0 2,008
0 2,211
5 68,749
537 50,890
853 34,842
350 2,358
6 2,217
00
2211,,883399
00
2211,,883399
0
24,659
0
24,659
Financial assets at fair value not held for trading2
2277,,227788
2288,,662222
44,,118800
6600,,008800
40,986
35,435
3,942
80,364
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 asset
liability is not active, fair value is established using a valuation
or liability as of the measurement date. In certain cases, the inputs
technique, including pricing models. Valuation adjustments may
used to measure fair value may fall within different levels of the
be made to allow for additional factors, including model, liquidity,
fair value hierarchy. For disclosure purposes, the level in the
credit and funding risks, which are not explicitly captured within
hierarchy within which an instrument is classified in its entirety is
the valuation technique, but which would nevertheless be
based on the lowest level input that is significant to the position’s
considered by market participants when establishing a price. The
fair value measurement:
limitations inherent in a particular valuation technique are
– Level 1 – quoted prices (unadjusted) in active markets for
considered in the determination of the classification of an asset or
identical assets and liabilities;
liability within the fair value hierarchy. Generally, the unit of
– Level 2 – valuation techniques for which all significant inputs
account for a financial instrument is the individual instrument, and
are, or are based on, observable market data; or
UBS applies valuation adjustments at an individual instrument
– Level 3 – valuation techniques for which significant inputs are
level, consistent with that unit of account. However, if certain
not based on observable market data.
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 that
control functions, which are independent of the business
are intended to maximize the quality of fair value measurements
divisions. Independent price verification is performed by Finance
reported in the financial statements. New products and valuation
through benchmarking the business divisions’ fair value estimates
techniques must be reviewed and approved by key stakeholders
with observable market prices and other independent sources. A
from the risk and finance control functions. Responsibility for the
governance framework and associated controls are in place in
ongoing measurement of financial and non-financial instruments
order to monitor the quality of third-party pricing sources where
at fair value is with the business divisions.
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
101
290 16,957
88,,886600 19,704 3,593
0 7,699
55,,887744
0 6,629
55,,880044
11,,558855
0
278
11,,002288
86
776655
0
449955
2 20,731
372 17,619
0 23,297
862 8,561
122 6,751
0 1,527 1,527
831
105
631
544
418
408
447
0
10
66 2211,,330033 20,628
330066 1144,,336666
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
2211,,111100
118877
112233 1133,,993377
33,,223366
44,,998822
55,,770044
00
557744
22
00
55,,662244
00
00
00
333388
8833
00
FFiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt ffaaiirr vvaalluuee tthhrroouugghh ootthheerr ccoommpprreehheennssiivvee iinnccoommee oonn aa rreeccuurrrriinngg bbaassiiss
Financial assets measured at fair value through other comprehensive income2
22,,770044
66,,114400
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 assets3
00
22,,665588
4455
44,,884499
2277
11,,226655
55,,225588
00
00
00
00
889922
110000
11,,558855
111177
668811
449955
00
00
00
00
88,,884444
1,144
7,114
0
8,258
44,,884499
22,,668866
11,,331100
0 6,624
47
444
1,103
40
0 6,624
0 1,150
485
0
00
55,,225588
6,264
0
0
6,264
2266
2266
0
1
245
246
TToottaall aasssseettss mmeeaassuurreedd aatt ffaaiirr vvaalluuee
114499,,445599
118877,,990055
77,,664455
334455,,001100
156,696 239,831
8,278 404,805
356
357
349
Financial statements Consolidated financial statements | UBS Group AG 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..2211
31.12.20
LLeevveell 11
LLeevveell 22
LLeevveell 33
TToottaall
Level 1
Level 2
Level 3
Total
Financial liabilities at fair value held for trading
2255,,441133
66,,117700
110055
3311,,668888
26,888
6,652
55
33,595
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 value2
Other financial liabilities designated at fair value2
of which:
Financial liabilities related to unit-linked investment contracts
Securities financing transactions
Over-the-counter debt instruments
1188,,332288
3300
55,,888833
11,,117722
551133
44,,221199
882266
555555
8833 1188,,992244
44,,226666
1177
66,,770099
00
11,,773333
66
22,519
425
31 4,048
3,642 1,036
696 1,127
40 22,985
9 4,089
0 4,678
5 1,828
550099
111188,,555588
22,,224422
112211,,330099
746 156,884
3,471 161,102
225588 5533,,880000
00 2288,,339988
00 3333,,443388
00
11,,441122
00
11,,550033
2211 5544,,007788
227788 2288,,667755
11,,551111 3344,,994499
11,,775533
11,,556666
334411
6633
61 70,527
316 70,149
0 43,389
527 43,916
0 38,870 2,306 41,176
528 2,931
0 2,403
24 2,027
0 2,003
00
00
00
4444,,004455
00
4444,,004455
5599,,660066
1144,,119944
7733,,779999
2299,,225588
881166
3300,,007744
0
0
0
38,742
0
38,742
50,273
10,970
61,243
29,671
716
30,387
00 2211,,446666
00
66,,337755
00
11,,333344
00 2211,,446666
66,,337777
22
22,,112288
779944
0 20,975
0 7,317
0 1,363
0 20,975
0 7,317
697 2,060
TToottaall lliiaabbiilliittiieess mmeeaassuurreedd aatt ffaaiirr vvaalluuee
2255,,992222
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 As of 31 December 2021, USD 17 billion (31 December 2020: USD 21 billion) of Financial assets at fair value not held for trading, USD 8 billion (31 December 2020: USD 8 billion) of Financial assets measured at
fair value through other comprehensive income, USD 36 billion (31 December 2020: USD 16 billion) of Debt issued designated at fair value and USD 1 billion (31 December 2020: USD 1 billion) of Other financial
liabilities designated at fair value are expected to be recovered or settled after 12 months. 33 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.
15,212 325,069
27,635 282,222
225577,,663377
330000,,991166
1177,,335577
358
350
Consolidated financial statements | UBS Group AG 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
UBS uses widely recognized valuation techniques for 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.
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
industry-standard yield curve modeling
generated
from
USD million
FFiinnaanncciiaall lliiaabbiilliittiieess mmeeaassuurreedd aatt ffaaiirr vvaalluuee oonn aa rreeccuurrrriinngg bbaassiiss
3311..1122..2211
31.12.20
LLeevveell 11
LLeevveell 22
LLeevveell 33
TToottaall
Level 1
Level 2
Level 3
Total
Financial liabilities at fair value held for trading
2255,,441133
66,,117700
110055
3311,,668888
26,888
6,652
55
33,595
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
1188,,332288
3300
55,,888833
11,,117722
551133
44,,221199
882266
555555
8833 1188,,992244
22,519
425
40 22,985
1177
00
66
44,,226666
66,,770099
11,,773333
31 4,048
3,642 1,036
696 1,127
9 4,089
0 4,678
5 1,828
550099
111188,,555588
22,,224422
112211,,330099
746 156,884
3,471 161,102
225588 5533,,880000
00 2288,,339988
00 3333,,443388
00
00
11,,441122
11,,550033
2211 5544,,007788
227788 2288,,667755
316 70,149
61 70,527
0 43,389
527 43,916
11,,551111 3344,,994499
0 38,870 2,306 41,176
334411
6633
11,,775533
11,,556666
0 2,403
0 2,003
528 2,931
24 2,027
FFiinnaanncciiaall lliiaabbiilliittiieess ddeessiiggnnaatteedd aatt ffaaiirr vvaalluuee oonn aa rreeccuurrrriinngg bbaassiiss
Brokerage payables designated at fair value
4444,,004455
00
4444,,004455
38,742
0
38,742
Debt issued designated at fair value2
5599,,660066
1144,,119944
7733,,779999
50,273
10,970
61,243
Other financial liabilities designated at fair value2
of which:
Financial liabilities related to unit-linked investment contracts
Securities financing transactions
Over-the-counter debt instruments
2299,,225588
881166
3300,,007744
29,671
716
30,387
00 2211,,446666
00 2211,,446666
00
00
66,,337755
11,,333344
22
779944
66,,337777
22,,112288
0 20,975
0 7,317
0 1,363
0 20,975
0 7,317
697 2,060
00
00
00
0
0
0
TToottaall lliiaabbiilliittiieess mmeeaassuurreedd aatt ffaaiirr vvaalluuee
2255,,992222
225577,,663377
1177,,335577
330000,,991166
27,635 282,222
15,212 325,069
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 As of 31 December 2021, USD 17 billion (31 December 2020: USD 21 billion) of Financial assets at fair value not held for trading, USD 8 billion (31 December 2020: USD 8 billion) of Financial assets measured at
fair value through other comprehensive income, USD 36 billion (31 December 2020: USD 16 billion) of Debt issued designated at fair value and USD 1 billion (31 December 2020: USD 1 billion) of Other financial
liabilities designated at fair value are expected to be recovered or settled after 12 months. 33 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.
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
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.
Traded loans and
loans measured at
fair value
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.
358
359
351
Financial statements Consolidated financial statements | UBS Group AG 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
– Residential mortgage-backed securities, commercial mortgage-backed securities 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
– 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.
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.
360
352
Consolidated financial statements | UBS Group AG consolidated financial statements
Note 21 Fair value measurement (continued)
Note 21 Fair value measurement (continued)
Product
Valuation and classification in the fair value hierarchy
Investment fund
Valuation
– Predominantly exchange-traded, with readily available quoted prices in liquid markets.
units
– 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
– Residential mortgage-backed securities, commercial mortgage-backed securities 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
– 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.
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.
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 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 alternative reference rate (the ARR) (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 adjustments (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
Fair value hierarchy
– Granular and liquid pricing information is generally not available for ARS. As a result, these securities are
classified as Level 3.
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
– Collateral funding curves for these instruments are generally observable and, as a result, these positions
observable quotes.
– Where the collateral terms are non-standard, the funding curve may be considered unobservable and these
are classified as Level 2.
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.
Credit derivative
contracts
Valuation
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
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.
– 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.
Fair value hierarchy
– The majority of interest rate swaps are classified as Level 2, as the standard market contracts that form 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-
360
361
353
Financial statements Consolidated financial statements | UBS Group AG 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 foreign exchange (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.
– Over-the-counter (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.
362
354
Consolidated financial statements | UBS Group AG consolidated financial statements
Note 21 Fair value measurement (continued)
Derivative product
Valuation and classification in the fair value hierarchy
Foreign exchange
Valuation
– Open spot foreign exchange (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
standard market-based sources.
– Over-the-counter (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.
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.
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.
Note 21 Fair value measurement (continued)
d) Valuation adjustments and other items
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.
The table below summarizes the valuation adjustment reserves
recognized on the balance sheet. Details about each category are
provided further below.
Valuation adjustment reserves on the balance sheet
Life-to-date gain / (loss), USD million
DDeeffeerrrreedd ddaayy--11 pprrooffiitt oorr lloossss rreesseerrvveess
OOwwnn ccrreeddiitt aaddjjuussttmmeennttss oonn ffiinnaanncciiaall lliiaabbiilliittiieess ddeessiiggnnaatteedd aatt ffaaiirr vvaalluuee
CCVVAAss,, FFVVAAss,, DDVVAAss aanndd ootthheerr vvaalluuaattiioonn aaddjjuussttmmeennttss
As of
3311..1122..2211
31.12.20
31.12.19
441188
((331155))
((11,,000044))
269
(381)
(959)
146
(88)
(706)
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 is deferred and not initially recognized
in the income statement.
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.
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
22002211
226699
445599
((330088))
((22))
441188
2020
146
362
(238)
0
269
2019
255
171
(278)
(2)
146
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 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 OCA 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
362
363
355
Financial statements Consolidated financial statements | UBS Group AG consolidated financial statements
Note 21 Fair value measurement (continued)
Own credit adjustments on financial liabilities 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..2211
31.12.20
31.12.19
((1144))
6600
4466
2
(295)
(293)
As of
8
(408)
(400)
3311..1122..2211
31.12.20
31.12.19
((331155))
(381)
(88)
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 needed
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,
is
considering all exposures with that counterparty, and
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 the ARR 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.
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
valuations produced directly by models
incorporate
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
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 items
In the first half of 2021, UBS incurred a loss of USD 861 million as
a result of closing out a significant portfolio of swaps with a
US-based client of its prime brokerage business and the
unwinding of related hedges, following the client’s default. This
loss is presented within Other net income from financial
instruments measured at fair value through profit or loss.
Valuation adjustments on financial instruments
Life-to-date gain / (loss), USD million
CCrreeddiitt vvaalluuaattiioonn aaddjjuussttmmeennttss11
FFuunnddiinngg vvaalluuaattiioonn aaddjjuussttmmeennttss
DDeebbiitt vvaalluuaattiioonn aaddjjuussttmmeennttss
OOtthheerr vvaalluuaattiioonn aaddjjuussttmmeennttss
of which: liquidity
of which: model uncertainty
11 Amounts do not include reserves against defaulted counterparties.
364
356
As of
3311..1122..2211
31.12.20
((4444))
((4499))
22
((991133))
((334411))
((557711))
(66)
(73)
0
(820)
(340)
(479)
Consolidated financial statements | UBS Group AG consolidated financial statements
Note 21 Fair value measurement (continued)
Own credit adjustments on financial liabilities designated at fair value
Note 21 Fair value measurement (continued)
e) Transfers between Level 1 and Level 2
Assets and liabilities transferred from Level 2 to Level 1 during 2021 were not material. Assets and liabilities transferred from Level 1
to Level 2 during 2021 were also not material.
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 2021 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
the different underlying
rather
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
FFaaiirr vvaalluuee
AAsssseettss
LLiiaabbiilliittiieess
VVaalluuaattiioonn
tteecchhnniiqquuee((ss))
SSiiggnniiffiiccaanntt
uunnoobbsseerrvvaabbllee
iinnppuutt((ss))11
RRaannggee ooff iinnppuuttss
3311..1122..2211
31.12.20
llooww
hhiigghh
wweeiigghhtteedd
aavveerraaggee22
low high
weighted
average2
unit1
3311..1122..2211 31.12.20
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..2211 31.12.20
00..99
00..00
0.0
1.2
moving the discounting of the uncollateralized derivative cash
estimates, the Group considers a range of market practices,
Auction rate securities
11..66
1.5
Investment fund units3
00..11
0.1
00..00
0.0
Traded loans, loans
measured at fair value,
loan commitments and
guarantees
22..88
2.4
00..00
0.0
Relative value to
market comparable
Discounted expected
cash flows
Relative value to
market comparable
Discounted expected
cash flows
Market comparable
and securitization
model
Discounted expected
cash flows
Relative value to
market comparable
Relative value to
market comparable
Bond price equivalent
1166
114433
9988
1
143
100
Discount margin
443344
443344
268
268
Loan price equivalent
00
110011
9999
0
101
99
Credit spread
117755
880000
443366
190
800
398
Credit spread
2288 11,,554444
224411
40
1,858
333
Credit spread
111155
119977
115533
100
188
140
Net asset value
Price
Funding spread
2244
117755
42
175
Volatility of interest
rates
6655
8811
29
69
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
22
00
44
((2299))
558833
113366
1111
9988
7766
1
0
0
489
100
13
4
100
(34)
65
points
basis
points
points
basis
points
basis
points
basis
points
basis
points
basis
points
basis
points
points
%
%
%
365
357
Equity instruments3
DDeebbtt iissssuueedd ddeessiiggnnaatteedd aatt
ffaaiirr vvaalluuee44
OOtthheerr ffiinnaanncciiaall lliiaabbiilliittiieess
ddeessiiggnnaatteedd aatt ffaaiirr vvaalluuee
DDeerriivvaattiivvee ffiinnaanncciiaall iinnssttrruummeennttss
00..88
0.7
00..11
0.0
1144..22
11.0
00..88
0.7
Discounted expected
cash flows
Interest rate contracts
00..55
0.5
00..33
0.5 Option model
Credit derivative contracts
00..22
0.3
00..33
0.5
Discounted expected
cash flows
Equity / index contracts
00..44
0.9
11..55
2.3 Option model
%
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
most 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 Other financial
liabilities designated at fair value and Derivative financial instruments, as this would not be meaningful. 33 The range of inputs is not disclosed, as there is a dispersion of values given the diverse nature of the
investments. 44 Debt issued designated at fair value primarily consists 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.
(16)
((2255))
110000
100
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..2211
31.12.20
31.12.19
((1144))
6600
4466
2
(295)
(293)
As of
8
(408)
(400)
3311..1122..2211
31.12.20
31.12.19
((331155))
(381)
(88)
Credit valuation adjustments
Other valuation adjustments
In order to measure the fair value of OTC derivative instruments,
Instruments that are measured as part of a portfolio of combined
including funded derivative instruments that are classified as
long and short positions are valued at mid-market levels to ensure
Financial assets at fair value not held for trading, CVAs are needed
consistent valuation of the long- and short-component risks. A
to reflect the credit risk of the counterparty inherent in these
liquidity valuation adjustment is then made to the overall net long
instruments. This amount represents the estimated fair value of
or short exposure to move the fair value to bid or offer as
protection required to hedge the counterparty credit risk of such
appropriate, reflecting current levels of market liquidity. The bid–
instruments. A CVA is determined for each counterparty,
offer spreads used in the calculation of this valuation adjustment
considering all exposures with that counterparty, and
is
are obtained from market transactions and other relevant sources
dependent on the expected future value of exposures, default
and are updated periodically.
probabilities and recovery rates, applicable collateral or netting
Uncertainties associated with the use of model-based
arrangements, break clauses, funding spreads, and other
valuations are incorporated into the measurement of fair value
contractual factors.
Funding valuation adjustments
through the use of model reserves. These reserves reflect the
amounts that the Group estimates should be deducted from
valuations produced directly by models
to
incorporate
FVAs reflect the costs and benefits of funding associated with
uncertainties in the relevant modeling assumptions, in the model
uncollateralized and partially collateralized derivative receivables
and market inputs used, or in the calibration of the model output
and payables and are calculated as the valuation effect from
to adjust for known model deficiencies. In arriving at these
flows from the ARR to OCA using the CVA framework, including
including how it believes market participants would assess these
the probability of counterparty default. An FVA is also applied to
uncertainties. Model reserves are reassessed periodically in light
collateralized derivative assets in cases where the collateral cannot
of data from market transactions, consensus pricing services and
be sold or repledged.
other relevant sources.
Debit valuation adjustments
Other items
A DVA is estimated to incorporate own credit in the valuation of
In the first half of 2021, UBS incurred a loss of USD 861 million as
derivatives where an FVA is not already recognized. The DVA
a result of closing out a significant portfolio of swaps with a
calculation is effectively consistent with the CVA framework,
US-based client of its prime brokerage business and the
being determined for each counterparty, considering all
unwinding of related hedges, following the client’s default. This
exposures with that counterparty and taking into account
loss is presented within Other net income from financial
collateral netting agreements, expected future mark-to-market
instruments measured at fair value through profit or loss.
movements and UBS’s credit default spreads.
Valuation adjustments on financial instruments
Life-to-date gain / (loss), USD million
CCrreeddiitt vvaalluuaattiioonn aaddjjuussttmmeennttss11
FFuunnddiinngg vvaalluuaattiioonn aaddjjuussttmmeennttss
DDeebbiitt vvaalluuaattiioonn aaddjjuussttmmeennttss
OOtthheerr vvaalluuaattiioonn aaddjjuussttmmeennttss
of which: liquidity
of which: model uncertainty
364
11 Amounts do not include reserves against defaulted counterparties.
As of
3311..1122..2211
31.12.20
((4444))
((4499))
22
((991133))
((334411))
((557711))
(66)
(73)
0
(820)
(340)
(479)
Financial statements
Consolidated financial statements | UBS Group AG 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 the relevant benchmark rate).
– 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 ARR, 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 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., Secured Overnight Financing Rate (SOFR)) 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, 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.
366
358
Consolidated financial statements | UBS Group AG 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 the relevant benchmark rate).
– 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.
Loan price equivalent
– 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.
Credit spread
– 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 ARR, 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 and the upper end of the range representing greater
levels of credit risk.
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., Secured Overnight Financing Rate (SOFR)) 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, 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 represent the most significant parameter in determining fair value for instruments that are sensitive to an equity
forward price.
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, net
Foreign exchange derivative contracts, net
Equity / index derivative contracts, net
Other
TToottaall
3311..1122..2211
31.12.20
FFaavvoorraabbllee
cchhaannggeess
1199
4411
666622
2200
117733
2299
55
1199
336688
5500
779900
UUnnffaavvoorraabbllee
cchhaannggeess
((1133))
Favorable
changes
29
Unfavorable
changes
(28)
((5533))
((6666))22
((2200))
((114466))
((1199))
((88))
((1111))
((333355))
((7733))
((774444))
40
105
41
129
11
10
20
318
91
794
(52)
(105)
(41)
(96)
(16)
(14)
(15)
(294)
(107)
(768)
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 across
various parameters and a change in assumptions regarding the underlying statistical distribution.
366
367
359
Financial statements
Consolidated financial statements | UBS Group AG 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 instruments
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
22001199
Net gains /
losses
included in
income1
Transfers
into
Level 3
Transfers
out of
Level 3
Foreign
currency
translation
BBaallaannccee
aass ooff
3311 DDeecceemmbbeerr
22002200
11..88
((00..11))
((00..11))
00..88
((11..44))
11..00
00..00
00..33
00..00
00..00
0.0
0.5
0.8
0.4
0.0
0.0
0.0
0.0
0.0
0.0
(0.1)
0.0
0.0
0.7
0.0
0.1
0.0
(0.5)
(0.7)
(0.3)
0.0
0.0
1.0
0.0
0.0
0.0
0.0
0.0
0.0
0.1
0.1
0.2
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
11..33
00..33
00..44
00..00
00..00
00..77
((00..55))
00..11
((00..22))
00..11
0.3
0.6
0.4
0.0
0.2
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
0.6
0.1
0.0
0.0
(0.3)
(0.2)
0.0
0.0
0.0
0.1
0.0
0.0
(0.1)
0.0
0.0
0.0
0.0
0.0
0.0
44..00
00..00
00..11
00..88
((00..99))
00..00
00..00
00..11
00..00
00..00
1.2
1.5
0.5
0.7
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.3
0.0
0.1
0.4
(0.7)
0.0
(0.1)
(0.2)
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
0.0
0.0
0.0
22..00
11..33
11..22
00..00
00..00
11..22
((00..99))
00..44
((00..66))
00..11
0.1
1.3
0.5
0.1
0.3
1.0
0.0
0.0
0.3
0.8
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.3
0.8
0.1
0.0
(0.2)
(0.6)
(0.1)
0.0
0.2
0.1
0.1
0.0
(0.2)
(0.2)
(0.2)
0.0
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
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
99..99
00..22
00..00
00..00
00..00
77..66
((55..77))
00..55
((11..77))
00..22
1111..00
OOtthheerr ffiinnaanncciiaall lliiaabbiilliittiieess ddeessiiggnnaatteedd
aatt ffaaiirr vvaalluuee
11 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. 22 Total Level
3 assets as of 31 December 2021 were USD 7.6 billion (31 December 2020: USD 8.3 billion). Total Level 3 liabilities as of 31 December 2021 were USD 17.4 billion (31 December 2020: USD 15.2 billion).
((00..55))
00..11
00..00
00..00
00..00
00..00
00..77
00..00
00..33
00..11
00..88
368
360
Consolidated financial statements | UBS Group AG 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 instruments
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
22001199
income1
period Purchases
Sales
Issuances Settlements
Transfers
Transfers
into
Level 3
out of
Foreign
currency
Level 3
translation
BBaallaannccee
aass ooff
3311 DDeecceemmbbeerr
22002200
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
11..88
((00..11))
((00..11))
00..88
((11..44))
11..00
00..00
00..33
00..00
00..00
11..33
00..33
00..44
00..00
00..00
00..77
((00..55))
00..11
((00..22))
00..11
0.0
0.5
0.8
0.4
0.3
0.6
0.4
0.0
1.2
1.5
0.5
0.7
0.1
1.3
0.5
0.1
0.0
0.0
0.0
0.0
0.2
0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.3
1.0
0.0
0.0
0.0
0.0
(0.1)
0.0
0.2
0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.3
0.8
0.0
0.0
0.0
0.7
0.0
0.1
0.0
0.0
0.0
0.0
0.3
0.0
0.1
0.4
0.0
0.0
0.0
0.0
0.0
(0.5)
(0.7)
(0.3)
0.0
0.0
0.0
0.0
(0.7)
0.0
(0.1)
(0.2)
0.0
0.0
0.0
0.0
0.0
0.0
1.0
0.0
0.0
0.6
0.1
0.0
0.0
0.0
0.0
0.0
0.3
0.8
0.1
0.0
0.0
0.0
0.0
0.0
0.0
(0.3)
(0.2)
0.0
0.0
0.0
0.0
0.0
(0.2)
(0.6)
(0.1)
0.0
0.0
0.1
0.1
0.2
0.0
0.0
0.1
0.0
0.0
0.0
0.0
0.0
0.2
0.1
0.1
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
(0.2)
(0.2)
(0.2)
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..00
11..33
11..22
00..00
00..00
11..22
((00..99))
00..44
((00..66))
00..11
44..00
00..00
00..11
00..88
((00..99))
00..00
00..00
00..11
00..00
00..00
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
DDeebbtt iissssuueedd ddeessiiggnnaatteedd aatt ffaaiirr vvaalluuee
99..99
00..22
00..00
00..00
00..00
77..66
((55..77))
00..55
((11..77))
00..22
1111..00
OOtthheerr ffiinnaanncciiaall lliiaabbiilliittiieess ddeessiiggnnaatteedd
aatt ffaaiirr vvaalluuee
11 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. 22 Total Level
3 assets as of 31 December 2021 were USD 7.6 billion (31 December 2020: USD 8.3 billion). Total Level 3 liabilities as of 31 December 2021 were USD 17.4 billion (31 December 2020: USD 15.2 billion).
00..88
00..11
00..11
00..00
00..00
00..33
((00..55))
00..00
00..00
00..00
00..77
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
2200220022
Net gains /
losses
included in
income1
22..33
00..00
((00..11))
0.0
0.8
1.1
0.4
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
11..88
((00..22))
((00..11))
0.5
0.9
0.3
0.0
0.1
(0.1)
(0.1)
0.0
0.1
(0.1)
(0.1)
0.0
33..99
00..11
00..11
0.9
1.5
0.5
1.0
0.0
0.1
0.1
0.0
0.0
0.1
0.1
(0.1)
33..55
00..22
00..00
0.5
2.3
0.5
0.1
(0.1)
0.3
(0.1)
0.1
(0.1)
0.1
(0.1)
0.0
1111..00
00..77
00..66
00..77
00..00
00..00
Purchases
Sales
Issuances
Settlements
Transfers
into
Level 3
Transfers
out of
Level 3
Foreign
currency
translation
BBaallaannccee
aass ooff
3311 DDeecceemmbbeerr
2200221122
00..33
0.0
0.2
0.0
0.1
00..00
0.0
0.0
0.0
0.0
11..00
0.6
0.0
0.1
0.3
00..00
0.0
0.0
0.0
0.0
00..00
00..00
((11..66))
0.0
(0.4)
(0.8)
(0.4)
00..00
0.0
0.0
0.0
0.0
((00..66))
(0.3)
0.0
(0.1)
(0.2)
00..00
0.0
0.0
0.0
0.0
00..00
00..00
11..22
0.0
0.0
1.2
0.0
00..55
0.1
0.3
0.0
0.0
00..00
0.0
0.0
0.0
0.0
00..99
0.0
0.8
0.0
0.0
88..00
00..44
00..00
0.0
0.0
0.0
0.0
((00..77))
(0.2)
(0.4)
(0.1)
0.0
00..00
0.0
0.0
0.0
0.0
((11..88))
(0.1)
(1.5)
0.0
(0.1)
00..33
0.0
0.0
0.0
0.3
00..11
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..33))
0.0
(0.1)
(0.2)
0.0
((00..33))
(0.1)
(0.2)
0.0
0.0
((00..33))
(0.3)
0.0
0.0
0.0
((00..55))
0.0
(0.4)
(0.1)
0.0
00..00
0.0
0.0
0.0
0.0
00..00
0.0
0.0
0.0
0.0
00..00
0.0
0.0
0.0
0.0
00..00
0.0
0.0
0.0
0.0
22..33
0.0
0.6
1.4
0.3
11..11
0.5
0.4
0.2
0.0
44..22
0.9
1.6
0.7
1.0
22..22
0.3
1.5
0.3
0.1
((44..22))
00..22
((11..22))
((00..22))
1144..22
((00..22))
00..00
00..00
00..00
00..88
368
369
361
Financial statements Consolidated financial statements | UBS Group AG 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 sshheeeett11
Financial assets at fair value
held for trading – debt instruments2,3
Derivative financial instruments4,5
Brokerage receivables
Financial assets at fair value not
held for trading – debt instruments6
TToottaall ffiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt ffaaiirr vvaalluuee
Guarantees7
3311..1122..2211
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
2222..44
111188..11
2211..88
3377..00
119999..44
00..22
44..22
2211..66
1111..22
3377..11
00..00
110033..22
00..00
00..00
110033..22
00..00
00..00
00..22
EExxppoossuurree ttoo
ccrreeddiitt rriisskk
aafftteerr ccoollllaatteerraall
aanndd ccrreeddiitt
eennhhaanncceemmeennttss
2222..44
1100..77
00..22
2255..77
5599..11
00..00
31.12.20
Collateral
Credit enhancements
Exposure to
credit risk
after collateral
and 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 sshheeeett11
Financial assets at fair value
held for trading – debt instruments2,3
Derivative financial instruments4,5
Brokerage receivables
Financial assets at fair value not
held for trading – debt instruments6
45.0
TToottaall ffiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt ffaaiirr vvaalluuee
8855..11
Guarantees7
0.0
11 The maximum exposure to loss is generally equal to the carrying amount and subject to change over time with market movements. 22 These positions are generally managed under the market risk framework. For
the purpose of this disclosure, collateral and credit enhancements were not considered. 33 Does not include investment fund units. 44 Includes USD 0 million (31 December 2020: 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 27.8 billion (31 December 2020: USD 21.9 billion) and derivative loan commitments (generally unsecured) of USD 8.2 billion, of which USD 0.8 billion has been sub-participated (31 December 2020: USD 9.4
billion, of which USD 0.8 billion had been sub-participated), is presented in Note 10 under notional amounts. 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 Financial assets at fair value not held for trading collateralized by securities consisted of structured loans and reverse repurchase and securities borrowing
agreements. 77 The amount shown in the “Guarantees” column largely relates to sub-participations.
24.6
159.6
24.7
58.2
226677..11
0.5
24.6
15.2
0.3
6.0
24.4
13.2
4433..66
00..00
0.1
00..00
0.3
138.4
113388..44
00..00
00..00
00..00
370
362
credit risk for these classes of financial instruments.
notional amounts. Both are capped at the maximum exposure to
The maximum exposure to credit risk includes the carrying
credit risk for which they serve as security. The “Risk management
amounts of financial instruments recognized on the balance sheet
and control” section of this report describes management’s view
subject to credit risk and the notional amounts for off-balance
of credit risk and the related exposures, which can differ in certain
sheet arrangements. Where information is available, collateral is
respects from the requirements of IFRS.
TToottaall ffiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt ffaaiirr vvaalluuee
00..00
00..00
00..00
110033..22
00..00
Maximum exposure to credit risk
USD billion
FFiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt
ffaaiirr vvaalluuee oonn tthhee bbaallaannccee sshheeeett11
Financial assets at fair value
held for trading – debt instruments2,3
Derivative financial instruments4,5
Brokerage receivables
Financial assets at fair value not
held for trading – debt instruments6
Guarantees7
USD billion
FFiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt
ffaaiirr vvaalluuee oonn tthhee bbaallaannccee sshheeeett11
Financial assets at fair value
held for trading – debt instruments2,3
Derivative financial instruments4,5
Brokerage receivables
Financial assets at fair value not
held for trading – debt instruments6
Guarantees7
3311..1122..2211
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
31.12.20
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
2222..44
111188..11
2211..88
3377..00
119999..44
00..22
24.6
159.6
24.7
58.2
226677..11
0.5
44..22
2211..66
1111..22
3377..11
6.0
24.4
13.2
4433..66
110033..22
138.4
00..00
0.1
2222..44
1100..77
00..22
2255..77
5599..11
00..00
24.6
15.2
0.3
45.0
8855..11
0.0
00..00
00..22
00..00
0.3
TToottaall ffiinnaanncciiaall aasssseettss mmeeaassuurreedd aatt ffaaiirr vvaalluuee
00..00
00..00
113388..44
00..00
11 The maximum exposure to loss is generally equal to the carrying amount and subject to change over time with market movements. 22 These positions are generally managed under the market risk framework. For
the purpose of this disclosure, collateral and credit enhancements were not considered. 33 Does not include investment fund units. 44 Includes USD 0 million (31 December 2020: 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 27.8 billion (31 December 2020: USD 21.9 billion) and derivative loan commitments (generally unsecured) of USD 8.2 billion, of which USD 0.8 billion has been sub-participated (31 December 2020: USD 9.4
billion, of which USD 0.8 billion had been sub-participated), is presented in Note 10 under notional amounts. 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 Financial assets at fair value not held for trading collateralized by securities consisted of structured loans and reverse repurchase and securities borrowing
agreements. 77 The amount shown in the “Guarantees” column largely relates to sub-participations.
Consolidated financial statements | UBS Group AG 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
presented at fair value. For other collateral, such as real estate, a
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 the
reasonable alternative value is used. Credit enhancements, such
respective collateral and other credit enhancements mitigating
as credit derivative contracts and guarantees, are included at their
Financial instruments not measured at fair value
CCaarrrryyiinngg
aammoouunntt
CCaarrrryyiinngg
aammoouunntt
aapppprrooxxiimmaatteess
ffaaiirr vvaalluuee11
TToottaall
3311..1122..2211
FFaaiirr vvaalluuee
Carrying
amount
31.12.20
Fair value
LLeevveell 11
LLeevveell 22
LLeevveell 33
TToottaall
Total
Carrying
amount
approximates
fair value1
Level 1
Level 2
Level 3
Total
119922..88
1155..55
7755..00
3300..55
339977..88
2266..22
1133..11
55..55
3311..88
554422..00
119922..77
1144..88
7711..66
3300..55
116633..11
00..11
00..00
00..00
00..00
00..00
00..00
00..77
00..00
00..00
119922..88
1155..55
158.2
15.4
11..33
22..11
7755..00
74.2
00..00
4433..88
00..00
119900..11
3300..55
339966..99
32.7
379.5
158.1
14.7
64.9
32.7
172.0
0.1
0.0
0.0
0.0
0.0
0.0
0.6
0.0
0.1
158.2
15.4
7.6
1.7
74.2
0.0
34.2
0.0
174.6
32.7
380.8
44..11
99..33
1100..77
22..44
2266..55
27.2
5.3
9.4
10.9
2.3
28.0
99..11
00..00
44..00
00..00
1133..11
11.0
8.5
0.0
2.6
0.0
11.0
44..11
3311..88
553355..44
00..00
00..00
00..00
11..55
00..00
66..66
00..00
00..00
00..00
55..55
6.3
3311..88
554422..00
37.3
524.6
6.0
37.3
519.4
0.0
0.0
0.0
0.3
0.0
5.3
0.0
0.0
0.0
6.3
37.3
524.7
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
LLiiaabbiilliittiieess22
Amounts due to banks
Payables from securities financing
transactions
Cash collateral payables on derivative
instruments
Customer deposits
1155..88
113399..22
Debt issued measured at amortized cost
Other financial liabilities measured at
amortized cost3
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 2021, USD 0 billion (31 December 2020: USD 0 billion) of Cash and balances at central banks, USD
0 billion (31 December 2020: USD 0 billion) of Loans and advances to banks, USD 1 billion (31 December 2020: USD 1 billion) of Receivables from securities financing transactions, USD 175 billion (31 December 2020:
USD 163 billion) of Loans and advances to customers, USD 19 billion (31 December 2020: USD 20 billion) of Other financial assets measured at amortized cost, USD 1 billion (31 December 2020: USD 0 billion) of
Amounts due to banks, USD 3 billion (31 December 2020: USD 2 billion) of Customer deposits, USD 84 billion (31 December 2020: USD 82 billion) of Debt issued measured at amortized cost and USD 3 billion
(31 December 2020: USD 3 billion) of Other financial liabilities measured at amortized cost were expected to be recovered or settled after 12 months. 33 Excludes lease liabilities.
112255..33
114411..11
139.2
125.5
141.9
16.4
55..44
55..44
00..00
00..00
00..00
0.1
00..00
5.8
55..44
0.0
0.0
0.0
5.8
0.0
5.7
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.
370
371
363
Financial statements
Consolidated financial statements | UBS Group AG 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 tables on this page and the next page provide a summary
of financial assets and financial liabilities subject to offsetting,
enforceable master netting arrangements and similar agreements,
as well as financial collateral received or pledged to mitigate credit
exposures for these financial instruments.
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 page and 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
67.7
116.0
29.4
93.1
93.1
330066..22
70.3
156.9
31.9
85.6
85.6
334444..88
(13.8)
(3.6)
5533..99
111122..44
(2.9)
(88.9)
(51.0)
(18.5)
00..00
55..00
0.0
2299..44
(15.2)
(3.3)
1111..00
(87.6)
55..55
(1.1)
(4.4)
00..00
(87.6)
((110055..00))
55..55
220011..22
(1.1)
((110088..11))
(4.4)
((7777..22))
00..00
1155..99
(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
2211..11
55..77
11..11
5544..66
00..33
8822..66
1177..33
77..77
00..88
7733..99
00..22
9999..77
2211..11
1100..77
1122..11
5544..66
00..33
9988..55
1177..33
1155..22
1111..66
7733..99
00..22
111177..99
7755..00
111188..11
3300..55
6600..11
55..88
228833..77
7744..22
115599..66
3322..77
8800..44
66..77
334466..99
As of 31.12.21, 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 31.12.20, 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
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.
372
364
Consolidated financial statements | UBS Group AG consolidated financial statements
UBS enters into netting agreements with counterparties to
The tables on this page and the next page provide a summary
manage the credit risks associated primarily with repurchase and
of financial assets and financial liabilities subject to offsetting,
reverse repurchase transactions, securities borrowing and lending,
enforceable master netting arrangements and similar agreements,
over-the-counter derivatives, and exchange-traded derivatives.
as well as financial collateral received or pledged to mitigate credit
These netting agreements and similar arrangements generally
exposures for these financial instruments.
enable the counterparties to set off liabilities against available
The Group engages in a variety of counterparty credit risk
assets received in the ordinary course of business and / or in the
mitigation strategies in addition to netting and collateral
event that the counterparties to the transaction are unable to
arrangements. Therefore the net amounts presented in the tables
fulfill their contractual obligations.
on this page and 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
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
67.7
116.0
29.4
93.1
93.1
330066..22
70.3
156.9
31.9
85.6
85.6
334444..88
(13.8)
(3.6)
5533..99
111122..44
(2.9)
(88.9)
(51.0)
(18.5)
00..00
55..00
0.0
2299..44
(15.2)
(3.3)
1111..00
(87.6)
55..55
(1.1)
(4.4)
00..00
(87.6)
((110055..00))
55..55
(1.1)
(4.4)
220011..22
((110088..11))
((7777..22))
00..00
1155..99
(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
2211..11
55..77
11..11
5544..66
00..33
8822..66
1177..33
77..77
00..88
7733..99
00..22
9999..77
2211..11
1100..77
1122..11
5544..66
00..33
9988..55
1177..33
1155..22
1111..66
7733..99
00..22
111177..99
7755..00
111188..11
3300..55
6600..11
55..88
228833..77
7744..22
115599..66
3322..77
8800..44
66..77
334466..99
As of 31.12.21, 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 31.12.20, 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
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)
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
16.9
118.4
(12.8)
(3.6)
44..11
111144..99
(1.8)
(88.9)
(2.3)
(18.1)
30.4
0.0
3300..44
(13.1)
(3.3)
94.8
94.6
226600..66
(88.6)
(88.6)
((110055..00))
66..22
66..00
115555..66
(2.2)
(2.2)
((110066..00))
(3.8)
(3.8)
((2277..55))
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))
00..00
77..99
1144..00
00..22
00..00
2222..11
00..00
1100..99
1133..99
00..77
00..00
2255..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
66..44
11..44
2233..99
00..44
3333..11
11..44
99..00
11..77
2222..66
00..33
3344..88
11..44
1144..33
1155..44
2244..11
00..44
5555..22
11..44
1199..99
1155..77
2233..33
00..33
6600..44
55..55
112211..33
3311..88
3300..11
66..44
118888..77
66..33
116611..11
3377..33
3300..44
77..33
223355..11
As of 31.12.21, 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 31.12.20, 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
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.
372
373
365
Financial statements
Consolidated financial statements | UBS Group AG 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.
borrowed. Pledged mortgage loans serve as collateral for existing
liabilities against Swiss central mortgage institutions and for
existing covered bond issuances of USD 10,843 million as of
31 December 2021 (31 December 2020: USD 12,456 million).
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
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. 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
Loans and advances to customers
Financial assets at fair value not held for trading
Debt securities classified as Other financial assets measured at amortized
cost
Financial assets measured at fair value through other comprehensive
income
TToottaall ffiinnaanncciiaall aasssseettss pplleeddggeedd aass ccoollllaatteerraall22
3311..1122..2211
ooff wwhhiicchh:: aasssseettss
pplleeddggeedd aass
ccoollllaatteerraall tthhaatt
mmaayy bbee ssoolldd oorr
rreepplleeddggeedd bbyy
ccoouunntteerrppaarrttiieess
RReessttrriicctteedd
ffiinnaanncciiaall aasssseettss
31.12.20
of which: assets
pledged as
collateral that
may be sold or
repledged by
counterparties
ooff wwhhiicchh::
mmoorrttggaaggee
llooaannss11
Restricted
financial assets
6633,,772255
1188,,116600
996611
4433,,339977
996611
1166,,333300
64,367
20,361
2,140
47,098
2,140
22,,223344
11,,887700
2,506
2,506
00
8855,,007799
00
149
89,523
149
of which:
mortgage
loans1
18,191
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
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 as of 31 December 2021 (31 December 2020: approximately USD 2.7 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 2021: USD 4.4 billion; 31 December 2020:
USD 1.3 billion).
3,730
741
3,765
756
23,243
33,,440088
339922
44,,774477
11,,223377
2222,,776655
0
110
32,345
121,868
889944
9977
3333,,554400
111188,,661199
374
366
Consolidated financial statements | UBS Group AG 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
borrowed. Pledged mortgage loans serve as collateral for existing
against an existing liability or contingent liability and other assets
liabilities against Swiss central mortgage institutions and for
that are otherwise explicitly restricted such that they cannot be
existing covered bond issuances of USD 10,843 million as of
used to secure funding.
31 December 2021 (31 December 2020: USD 12,456 million).
Financial assets are mainly pledged as collateral in securities
Other restricted financial assets include assets protected under
lending transactions, in repurchase transactions, against loans
client asset segregation rules, assets held by the Group’s
from Swiss mortgage institutions and in connection with the
insurance entities to back related liabilities to the policy holders,
issuance of covered bonds. The Group generally enters into
assets held in certain jurisdictions to comply with explicit minimum
repurchase and securities lending arrangements under standard
local asset maintenance requirements. The carrying amount of the
market agreements. For securities lending, the cash received as
liabilities associated with these other restricted financial assets is
collateral may be more or less than the fair value of the securities
generally equal to the carrying amount of the assets, with the
loaned, depending on the nature of the transaction. For
exception of assets held to comply with local asset maintenance
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 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.
repurchase agreements, the fair value of the collateral sold under
requirements, for which the associated liabilities are greater.
Transferred financial assets subject to continued recognition in full
an agreement to repurchase is generally in excess of the cash
USD million
3311..1122..2211
31.12.20
3311..1122..2211
ooff wwhhiicchh:: aasssseettss
pplleeddggeedd aass
ccoollllaatteerraall tthhaatt
mmaayy bbee ssoolldd oorr
31.12.20
of which: assets
pledged as
collateral that
may be sold or
RReessttrriicctteedd
rreepplleeddggeedd bbyy
ffiinnaanncciiaall aasssseettss
ccoouunntteerrppaarrttiieess
Restricted
repledged by
llooaannss11
financial assets
counterparties
6633,,772255
1188,,116600
996611
4433,,339977
996611
64,367
20,361
2,140
47,098
2,140
22,,223344
11,,887700
2,506
2,506
00
149
ooff wwhhiicchh::
mmoorrttggaaggee
1166,,333300
of which:
mortgage
loans1
18,191
Restricted financial assets
USD million
FFiinnaanncciiaall aasssseettss pplleeddggeedd aass ccoollllaatteerraall
Financial assets at fair value held for trading
Loans and advances to customers
Financial assets at fair value not held for trading
Debt securities classified as Other financial assets measured at amortized
Financial assets measured at fair value through other comprehensive
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
cost
income
income
Other
TToottaall ootthheerr rreessttrriicctteedd ffiinnaanncciiaall aasssseettss
TToottaall ffiinnaanncciiaall aasssseettss pplleeddggeedd aanndd ootthheerr rreessttrriicctteedd ffiinnaanncciiaall aasssseettss
00
8855,,007799
33,,440088
339922
44,,774477
11,,223377
2222,,776655
889944
9977
3333,,554400
111188,,661199
149
89,523
3,730
741
3,765
756
23,243
0
110
32,345
121,868
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 as of 31 December 2021 (31 December 2020: approximately USD 2.7 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 2021: USD 4.4 billion; 31 December 2020:
USD 1.3 billion).
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
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 counterparties
Financial assets measured at fair value through other comprehensive income that may be sold
or repledged by counterparties
TToottaall ffiinnaanncciiaall aasssseettss ttrraannssffeerrrreedd
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 2021, approximately 41% 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
counterparties. For securities lending and repurchase agreements,
a haircut of 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.
CCaarrrryyiinngg aammoouunntt
ooff ttrraannssffeerrrreedd
aasssseettss
4433,,339977
1177,,997700
2244,,114466
11,,228811
996611
11,,887700
00
4466,,222277
CCaarrrryyiinngg aammoouunntt ooff
aassssoocciiaatteedd lliiaabbiilliittiieess
rreeccooggnniizzeedd
oonn bbaallaannccee sshheeeett
1177,,668877
1177,,668877
Carrying amount
of transferred
assets
47,098
19,177
27,595
326
Carrying amount of
associated liabilities
recognized
on balance sheet
18,874
18,874
889988
11,,772255
00
2200,,331111
2,140
2,506
149
51,893
1,378
1,963
148
22,363
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 2021 and as of 31 December 2020.
that are not subject
374
375
367
Financial statements Consolidated financial statements | UBS Group AG 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
particular 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 2021
and 31 December 2020 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..2211
449977,,882288
448833,,442266
1144,,440022
336677,,444400
331199,,117766
3311,,668888
1166,,557755
31.12.20
500,689
487,904
12,785
367,258
315,603
33,595
18,059
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 2021: USD 12.7 billion; 31 December 2020: USD 18.9 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.
376
368
Consolidated financial statements | UBS Group AG 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 2021
particular transfer agreement or from a separate agreement, with
and 31 December 2020 was not material. Life-to-date losses
the counterparty or a third party, entered into in connection with
reported in prior periods primarily relate to legacy positions in
the transfer.
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..2211
449977,,882288
448833,,442266
1144,,440022
336677,,444400
331199,,117766
3311,,668888
1166,,557755
31.12.20
500,689
487,904
12,785
367,258
315,603
33,595
18,059
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 2021: USD 12.7 billion; 31 December 2020: USD 18.9 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 residual contractual maturities for non-derivative and non-
trading financial liabilities as of 31 December 2021 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 2020. Derivative positions
and trading liabilities, predominantly made up of short sale
transactions, are assigned to the Due within 1 month column, as
this provides a conservative reflection of the nature of these
trading activities. The residual 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..2211
6.7
3.8
31.8
530.1
4.0
4.5
0.1
580.9
31.7
121.3
44.0
13.8
28.1
239.0
881199..88
38.3
21.2
1.4
6600..99
2.4
0.3
5.2
12.7
0.1
0.1
20.8
11.5
0.4
11.9
3322..77
0.5
00..55
3.5
1.6
3.3
41.1
0.5
0.5
49.9
13.5
0.5
14.0
6633..99
0.7
0.0
00..77
0.6
0.0
3.2
53.5
1.8
1.8
59.2
24.5
0.4
24.9
8844..11
0.0
0.4
37.6
1.6
1.6
39.5
18.5
1.1
19.6
5599..11
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
31.12.20
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
2.4
0.4
6.6
8.3
0.1
0.1
17.9
16.8
0.6
17.4
3355..33
2.1
0.3
3.5
41.9
0.5
0.5
48.2
7.1
0.6
7.7
5566..00
0.5
0.0
1.8
53.7
2.0
2.0
58.0
9.2
0.7
9.9
6677..99
0.0
0.0
0.2
35.6
1.8
1.8
37.7
9.5
1.1
10.6
4488..33
TToottaall
13.1
5.7
31.8
542.3
148.9
8.4
4.0
750.2
31.7
121.3
44.0
81.9
30.5
309.4
11,,005599..66
39.5
21.2
1.4
6622..11
Total
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
GGuuaarraanntteeeess,, ccoommmmiittmmeennttss aanndd ffoorrwwaarrdd ssttaarrttiinngg ttrraannssaaccttiioonnss
Loan commitments7
Guarantees
Forward starting transactions, reverse repurchase
and securities borrowing agreements7
3.2
3.2
6622..22
6611..33
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 30.8 billion due within 1 month (31 December 2020:
USD 32.6 billion), USD 0.9 billion due between 1 month and 1 year (31 December 2020: USD 1.0 billion) and USD 0 billion due between 1 and 5 years (31 December 2020: USD 0 billion). 55 Includes USD 34 million
(31 December 2020: USD 32 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 36.0 billion (31 December 2020: USD 31.3 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 relevant reporting date. 77 Excludes
derivative loan commitments and forward starting reverse repurchase agreements measured at fair value (see footnote 5).
40.5
17.5
41.4
17.5
00..44
00..55
00..00
00..00
0.5
0.0
0.4
376
377
369
Financial statements
Consolidated financial statements | UBS Group AG consolidated financial statements
Note 25 Interest rate benchmark reform
Background
A market-wide reform of major interest rate benchmarks is being
undertaken globally, with the Financial Conduct Authority (the
FCA) announcing in March 2021 that the publication of London
Interbank Offered Rates (LIBORs) would cease after 31 December
2021 for all non-US dollar LIBORs, as well as for one-week and
two-month USD LIBOR. Publication of the remaining USD LIBOR
tenors will cease immediately after 30 June 2023.
The majority of UBS’s IBOR exposure was linked to CHF LIBOR
and USD LIBOR. The alternative reference rate (the ARR) for CHF
LIBOR is the Swiss Average Rate Overnight (SARON). The ARR for
USD LIBOR is the Secured Overnight Financing Rate (SOFR); in
addition, there are recommended ARRs for GBP LIBOR, JPY LIBOR
and EUR LIBOR.
The Euro Interbank Offered Rate (EURIBOR) was reformed in
2019, with the reform consisting of a change in the underlying
calculation method. Consequently, contracts linked to EURIBOR
are not considered throughout the rest of this Note.
On 25 January 2021, the IBOR Fallbacks Supplement and IBOR
Fallbacks Protocol, which amend the International Swaps and
Derivatives Association (ISDA) standard definitions for interest rate
derivatives to incorporate fallbacks for derivatives linked to certain
IBORs, came into effect. From that date, all newly cleared and
non-cleared derivatives between adhering parties that reference
ISDA standard definitions now include these fallbacks. UBS
adhered to the protocol in November 2020.
UBS’s focus throughout 2021 was on transitioning existing
contracts via bi-lateral and multi-lateral agreements, by leveraging
industry solutions (e.g., the use of fallback provisions) and
through third-party actions (those by clearing houses, agents,
etc.). UBS has established a framework to address the transition
of contracts that do not contain adequate fallback provisions.
line with regulatory guidance, UBS has
Furthermore,
implemented a framework to limit new contracts referencing
IBORs.
in
Governance over the transition to alternative benchmark rates
UBS established a global cross-divisional, cross-functional
governance structure and change program to address the scale
and complexity of the transition. This global program is sponsored
by the Group CFO and led by senior representatives from the
business divisions and UBS’s control and support functions. The
program includes governance and execution structures within
each business division, together with cross-divisional teams from
each control and support function. During 2021, progress was
overseen centrally via a monthly operating committee and a
monthly steering committee, as well as quarterly updates to the
joint Audit and Risk Committees. A dedicated Group-wide forum,
with an increased US regional focus, will oversee progress of the
remaining USD LIBOR transition.
Risks
A core part of UBS’s change program is the identification,
management and monitoring of the risks associated with IBOR
reform and transition. These risks include, but are not limited to,
the following:
– economic risks to UBS and its clients, through the repricing of
existing contracts, reduced transparency and / or liquidity of
pricing information, market uncertainty or disruption;
– accounting risks, where the transition affects the accounting
treatment, including hedge accounting and consequential
income statement volatility;
– valuation risks arising from the variation between benchmarks
that will cease and ARRs, affecting the risk profile of financial
instruments;
– operational risks arising from changes to UBS’s front-to-back
processes and systems to accommodate the transition, e.g.,
data sourcing and processing and bulk migration of contracts;
and
– legal and conduct risks relating to UBS’s engagement with
clients and market counterparties around new benchmark
products and amendments required for existing contracts
referencing benchmarks that will cease.
Overall, the effort required to transition is affected by multiple
factors, including whether negotiations need to take place with
multiple stakeholders (as is the case for syndicated loans or certain
listed securities), market readiness – such as liquidity in ARR-
equivalent products – and a client’s technical readiness to handle
ARR market conventions. UBS remains confident that it has the
transparency, oversight and operational preparedness to progress
with the IBOR transition consistent with market timelines, given the
significant progress made as of 31 December 2021. UBS did not
have and does not expect changes to its risk management approach
and strategy as a result of interest rate benchmark reform.
378
370
Consolidated financial statements | UBS Group AG consolidated financial statements
Note 25 Interest rate benchmark reform
Note 25 Interest rate benchmark reform (continued)
Background
each business division, together with cross-divisional teams from
Transition progress
A market-wide reform of major interest rate benchmarks is being
each control and support function. During 2021, progress was
undertaken globally, with the Financial Conduct Authority (the
overseen centrally via a monthly operating committee and a
FCA) announcing in March 2021 that the publication of London
monthly steering committee, as well as quarterly updates to the
Interbank Offered Rates (LIBORs) would cease after 31 December
joint Audit and Risk Committees. A dedicated Group-wide forum,
2021 for all non-US dollar LIBORs, as well as for one-week and
with an increased US regional focus, will oversee progress of the
two-month USD LIBOR. Publication of the remaining USD LIBOR
remaining USD LIBOR transition.
tenors will cease immediately after 30 June 2023.
The majority of UBS’s IBOR exposure was linked to CHF LIBOR
Risks
and USD LIBOR. The alternative reference rate (the ARR) for CHF
A core part of UBS’s change program is the identification,
LIBOR is the Swiss Average Rate Overnight (SARON). The ARR for
management and monitoring of the risks associated with IBOR
USD LIBOR is the Secured Overnight Financing Rate (SOFR); in
reform and transition. These risks include, but are not limited to,
addition, there are recommended ARRs for GBP LIBOR, JPY LIBOR
the following:
and EUR LIBOR.
– economic risks to UBS and its clients, through the repricing of
The Euro Interbank Offered Rate (EURIBOR) was reformed in
existing contracts, reduced transparency and / or liquidity of
2019, with the reform consisting of a change in the underlying
pricing information, market uncertainty or disruption;
calculation method. Consequently, contracts linked to EURIBOR
– accounting risks, where the transition affects the accounting
are not considered throughout the rest of this Note.
treatment, including hedge accounting and consequential
On 25 January 2021, the IBOR Fallbacks Supplement and IBOR
income statement volatility;
Fallbacks Protocol, which amend the International Swaps and
– valuation risks arising from the variation between benchmarks
Derivatives Association (ISDA) standard definitions for interest rate
that will cease and ARRs, affecting the risk profile of financial
derivatives to incorporate fallbacks for derivatives linked to certain
instruments;
IBORs, came into effect. From that date, all newly cleared and
– operational risks arising from changes to UBS’s front-to-back
non-cleared derivatives between adhering parties that reference
processes and systems to accommodate the transition, e.g.,
ISDA standard definitions now include these fallbacks. UBS
data sourcing and processing and bulk migration of contracts;
adhered to the protocol in November 2020.
and
UBS’s focus throughout 2021 was on transitioning existing
– legal and conduct risks relating to UBS’s engagement with
contracts via bi-lateral and multi-lateral agreements, by leveraging
clients and market counterparties around new benchmark
industry solutions (e.g., the use of fallback provisions) and
products and amendments required for existing contracts
through third-party actions (those by clearing houses, agents,
referencing benchmarks that will cease.
etc.). UBS has established a framework to address the transition
of contracts that do not contain adequate fallback provisions.
Overall, the effort required to transition is affected by multiple
Furthermore,
in
line with regulatory guidance, UBS has
factors, including whether negotiations need to take place with
implemented a framework to limit new contracts referencing
multiple stakeholders (as is the case for syndicated loans or certain
IBORs.
listed securities), market readiness – such as liquidity in ARR-
equivalent products – and a client’s technical readiness to handle
Governance over the transition to alternative benchmark rates
ARR market conventions. UBS remains confident that it has the
UBS established a global cross-divisional, cross-functional
transparency, oversight and operational preparedness to progress
governance structure and change program to address the scale
with the IBOR transition consistent with market timelines, given the
and complexity of the transition. This global program is sponsored
significant progress made as of 31 December 2021. UBS did not
by the Group CFO and led by senior representatives from the
have and does not expect changes to its risk management approach
business divisions and UBS’s control and support functions. The
and strategy as a result of interest rate benchmark reform.
program includes governance and execution structures within
Non-derivative instruments
UBS’s significant non-derivative exposures subject to IBOR reform
primarily related to brokerage receivable and payable balances,
corporate and private loans, and mortgages, linked to CHF and
USD LIBORs. During 2020, UBS transitioned most of its CHF
LIBOR-linked deposits to SARON. In that same year, UBS launched
SARON-based mortgages and corporate loans based on all major
ARRs in the Swiss market, as well as SOFR-based mortgages in the
US market.
Throughout 2021, UBS transitioned substantially all of its
private and corporate loans linked to non-USD IBORs, with the
remaining CHF LIBOR-linked contracts planned to transition on
their first roll date in 2022.
In addition, as of 31 December 2021 UBS had completed the
transition of IBOR-linked non-derivative financial assets and
liabilities related to brokerage accounts, except for balances
originated in the US, which transitioned to SOFR in January 2022.
In March 2021, following the FCA announcement regarding
the cessation timelines for IBORs, UBS initiated a centralized
communication initiative for private mortgages linked to CHF
LIBOR, with the objective of transitioning these exposures, either
through the activation of existing fallbacks or the amendment of
contractual terms where such fallbacks do not exist. During 2021,
mortgages that were linked to CHF LIBOR were reduced to
USD 21 billion as of 31 December 2021, with these remaining
mortgages automatically transitioning to SARON from their next
coupon roll date.
The transition of US securities-based lending to SOFR,
amounting to USD 37 billion as of 31 December 2021, was for
the most part completed in January 2022, with US mortgages
linked to USD LIBOR planned to transition to SOFR in 2022–2023.
As of 31 December 2021, UBS had approximately USD 3 billion
equivalent of Japanese yen- and US dollar-denominated publicly
issued benchmark bonds that, per current contractual terms, if
not called on their respective call dates, would reset based directly
on JPY LIBOR and USD LIBOR. These bonds have robust IBOR
fallback language and the confirmation of interest rate calculation
mechanics will be communicated as market standards formalize
and in advance of any rate resets. In addition, several US dollar-
and Swiss franc-denominated benchmark bonds publicly issued
by UBS reference rates indirectly derived from IBORs, if they are
not called on their respective call dates. UBS aims to transition
those bonds in advance of their reset dates, with the transition of
Swiss franc-denominated benchmark bonds completed in January
2022. These debt instruments have not been included in the table
on the following page, given their current fixed-rate coupon.
As of 31 December 2021, UBS had approximately USD 5 billion
of irrevocable commitments that may be drawn down in different
currencies with IBOR-linked interest rates and that expire after the
relevant benchmark cessation dates; approximately USD 3 billion
of these contracts had transitioned for all IBORs, except USD
LIBOR, and USD 2 billion of these commitments retained a
non-USD IBOR interest rate as of 31 December 2021 with
transition dependent upon the actions of other parties. To the
extent non-USD IBOR-linked amounts are requested under these
contracts, UBS will seek to renegotiate current terms or rely on
legislative solutions.
Derivative instruments
UBS holds derivatives for trading and hedging purposes, including
those designated in hedge accounting relationships. A significant
number of interest rate and cross-currency swaps have floating
legs that reference various benchmarks that are subject to IBOR
reform.
The majority of derivatives are transacted with clearing houses,
in particular LCH, with the transition of these non-USD IBOR-
linked derivatives substantially completed in December 2021. UBS
had also completed the transition of all non-USD IBOR-linked
exchange-traded derivatives (ETDs) through participation in
activities organized by respective exchanges by 31 December
2021.
For derivatives not transacted with clearing houses or
exchanges, UBS and a significant proportion of UBS’s
counterparties have adhered to the ISDA IBOR Fallbacks Protocol,
which builds in agreed fallbacks. The majority of these contracts
had transitioned as of 31 December 2021, with a small number
of contracts transitioned in January 2022, to ensure an orderly
transition when converting high volumes of transactions at the
time of cessation.
378
379
371
Financial statements Consolidated financial statements | UBS Group AG consolidated financial statements
Note 25 Interest rate benchmark reform (continued)
Financial instruments yet to transition to alternative benchmarks
The amounts included in the table below relate to financial
instrument contracts across UBS’s business divisions where UBS
has material exposures subject to IBOR reform that have not yet
transitioned to ARRs, and that:
– contractually reference an interest rate benchmark that will
transition to an alternative benchmark; and
– have a contractual maturity date (including open-ended
contracts) after the agreed cessation dates.
Contracts where penalty terms reference IBORs, or where
exposure to an IBOR is not the primary purpose of the contract,
have not been included, as these contracts do not have a material
impact on the transition process.
In line with information provided to management and external
parties monitoring UBS’s transition progress, the table below
includes the following financial metrics for instruments external
to the Group that are subject to interest rate benchmark reform:
– gross carrying value / exposure for non-derivative financial
instruments; and
– total trade count for derivative financial instruments.
The exposures included in the table below represent the
maximum IBOR exposure, without regard for early termination
rights, with the actual exposure being dependent upon client
preferences and investment decisions.
As of 31 December 2021, UBS had made significant progress
in transitioning LIBOR exposures to ARRs. The remaining non-USD
LIBOR-linked exposures included in the table below primarily
relate to derivatives that successfully transitioned in January 2022
and CHF LIBOR mortgages that will automatically transition to
SARON on their first roll date in 2022.
CCaarrrryyiinngg vvaalluuee ooff nnoonn--ddeerriivvaattiivvee ffiinnaanncciiaall iinnssttrruummeennttss
Total non-derivative financial assets
Total non-derivative financial liabilities
TTrraaddee ccoouunntt ooff ddeerriivvaattiivvee ffiinnaanncciiaall iinnssttrruummeennttss
Total derivative financial instruments
3311..1122..2211
LLIIBBOORR bbeenncchhmmaarrkk rraatteess
MMeeaassuurree
USD million
USD million
CCHHFF
UUSSDD
2211,,66116622
227744
6655,,22334433
11,,99885544
GGBBPP
445544
3344
EEUURR11
11
5555
JJPPYY
00
00
Trade count
88229966
4400,,55000077
11883366
33,,77444466
11884466
OOffff--bbaallaannccee sshheeeett eexxppoossuurreess
Total irrevocable loan commitments
00
11 Relates primarily to EUR LIBOR positions. 22 Relates primarily to CHF LIBOR mortgages, which will automatically transition to SARON on their first roll date in 2022. 33 Includes USD LIBOR securities-based lending
and brokerage accounts, amounting to USD 37 billion, and USD 5 billion respectively, which for the most part transitioned to SOFR in January 2022, as well as USD 1 billion of loans related to revolving multi-currency
credit lines, where IBOR transition efforts are complete, except for USD LIBOR. The remainder primarily relates to US mortgages and corporate lending. 44 Relates to floating-rate notes that per their contractual terms
can reset to rates linked to LIBOR, with transition dependent upon the actions of respective issuers. 55 Relates to contracts that transitioned in January 2022. 66 Includes predominantly bilateral derivatives, which
transitioned in January 2022, and an insignificant amount of cleared derivatives, where the respective clearing houses’ organized transition happened in January 2022. 77 Includes approximately 5,000 cross-currency
derivatives, of which approximately 500 have both a non-USD LIBOR leg and a USD LIBOR leg, where the non-USD leg transitioned in January 2022 before the next fixing date. The remainder represents cross-currency
swaps with an ARR leg and a USD IBOR leg. 88 Includes loan commitments that can be drawn in different currencies at the client‘s discretion, of which approximately USD 3 billion have only USD LIBOR exposure
remaining and approximately USD 2 billion retain a non-USD LIBOR interest rate as of 31 December 2021, with transition dependent upon the actions of other parties. The remainder represents loan commitments
that can be drawn in US dollars only and will transition in 2022–2023.
USD million
1111,,88663388
00
00
00
380
372
Consolidated financial statements | UBS Group AG consolidated financial statements
Note 25 Interest rate benchmark reform (continued)
Note 26 Hedge accounting
Financial instruments yet to transition to alternative benchmarks
to the Group that are subject to interest rate benchmark reform:
The amounts included in the table below relate to financial
– gross carrying value / exposure for non-derivative financial
instrument contracts across UBS’s business divisions where UBS
instruments; and
has material exposures subject to IBOR reform that have not yet
– total trade count for derivative financial instruments.
transitioned to ARRs, and that:
The exposures included in the table below represent the
– contractually reference an interest rate benchmark that will
maximum IBOR exposure, without regard for early termination
transition to an alternative benchmark; and
rights, with the actual exposure being dependent upon client
– have a contractual maturity date (including open-ended
preferences and investment decisions.
contracts) after the agreed cessation dates.
As of 31 December 2021, UBS had made significant progress
Contracts where penalty terms reference IBORs, or where
in transitioning LIBOR exposures to ARRs. The remaining non-USD
exposure to an IBOR is not the primary purpose of the contract,
LIBOR-linked exposures included in the table below primarily
have not been included, as these contracts do not have a material
relate to derivatives that successfully transitioned in January 2022
impact on the transition process.
and CHF LIBOR mortgages that will automatically transition to
In line with information provided to management and external
SARON on their first roll date in 2022.
parties monitoring UBS’s transition progress, the table below
includes the following financial metrics for instruments external
CCaarrrryyiinngg vvaalluuee ooff nnoonn--ddeerriivvaattiivvee ffiinnaanncciiaall iinnssttrruummeennttss
Total non-derivative financial assets
Total non-derivative financial liabilities
TTrraaddee ccoouunntt ooff ddeerriivvaattiivvee ffiinnaanncciiaall iinnssttrruummeennttss
Total derivative financial instruments
OOffff--bbaallaannccee sshheeeett eexxppoossuurreess
Total irrevocable loan commitments
3311..1122..2211
LLIIBBOORR bbeenncchhmmaarrkk rraatteess
MMeeaassuurree
USD million
USD million
CCHHFF
UUSSDD
2211,,66116622
227744
6655,,22334433
11,,99885544
GGBBPP
445544
3344
EEUURR11
11
5555
JJPPYY
00
00
Trade count
88229966
4400,,55000077
11883366
33,,77444466
11884466
11 Relates primarily to EUR LIBOR positions. 22 Relates primarily to CHF LIBOR mortgages, which will automatically transition to SARON on their first roll date in 2022. 33 Includes USD LIBOR securities-based lending
and brokerage accounts, amounting to USD 37 billion, and USD 5 billion respectively, which for the most part transitioned to SOFR in January 2022, as well as USD 1 billion of loans related to revolving multi-currency
credit lines, where IBOR transition efforts are complete, except for USD LIBOR. The remainder primarily relates to US mortgages and corporate lending. 44 Relates to floating-rate notes that per their contractual terms
can reset to rates linked to LIBOR, with transition dependent upon the actions of respective issuers. 55 Relates to contracts that transitioned in January 2022. 66 Includes predominantly bilateral derivatives, which
transitioned in January 2022, and an insignificant amount of cleared derivatives, where the respective clearing houses’ organized transition happened in January 2022. 77 Includes approximately 5,000 cross-currency
derivatives, of which approximately 500 have both a non-USD LIBOR leg and a USD LIBOR leg, where the non-USD leg transitioned in January 2022 before the next fixing date. The remainder represents cross-currency
swaps with an ARR leg and a USD IBOR leg. 88 Includes loan commitments that can be drawn in different currencies at the client‘s discretion, of which approximately USD 3 billion have only USD LIBOR exposure
remaining and approximately USD 2 billion retain a non-USD LIBOR interest rate as of 31 December 2021, with transition dependent upon the actions of other parties. The remainder represents loan commitments
that can be drawn in US dollars only and will transition in 2022–2023.
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. Foreign exchange forwards and foreign
exchange 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.
USD million
00
1111,,88663388
00
00
00
Hedged items and hedge designation
Fair value hedges of interest rate risk related to debt instruments
and loan assets
Fair value hedges of interest rate risk related to debt instruments
and loan assets involve swapping fixed cash flows associated with
the debt issued, debt securities held and, from 2021 onward, loan
assets (principally long-term fixed-rate mortgage loans in Swiss
francs formerly designated within “Fair value hedges of portfolio
interest rate risk related to loans designated under IAS 39”) to
floating cash flows by entering into interest rate swaps that either
receive fixed and pay floating cash flows or that pay fixed and
receive floating cash flows.
Designations have been made in US dollars, euros, Swiss
francs, Australian dollars, Japanese yen and Singapore dollars. For
new hedging instruments and hedged risk designations entered
into in 2021 in these currencies (with the exception of euro), the
benchmark rate was the relevant alternative reference rate (ARR).
Following the interbank offered rate (IBOR) transition for swaps
with LCH (formerly the London Clearing House) in December
2021, the benchmark hedge rate for Swiss franc and Japanese
yen designations was changed from an IBOR rate to the relevant
ARR with the hedge relationship continuing in accordance with
Interest Rate Benchmark Reform – Phase 2 (Amendments to
IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16).
Fair value hedges of portfolio interest rate risk related to loans
designated under IAS 39
Prior to December 2021, the Group hedged an open portfolio of
long-term fixed-rate mortgage loans in Swiss francs using interest
rate swaps that paid a fixed rate of interest and received a floating
rate of interest. Both the hedged portfolio and the hedging
instruments were adjusted on a monthly basis to reflect changes
in size and the maturity profile of the hedged portfolio. Each
month the hedge relationship was discontinued and a new one
designated. Changes in the portfolio were driven by new loans
being originated or loans being 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 relevant
factors, including estimates of prepayments and 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 terminated resulting in a hedge
discontinuance. Hedge designations have been made in the
following currencies: US dollars, euros, Swiss francs, pounds
sterling and Hong Kong dollars. The cash flow hedges in US
dollars, Swiss francs and pounds sterling were discontinued and
replaced with new ARR designations in December 2021.
› Refer to Note 1b for more information
Fair value hedges of foreign exchange risk related to issued 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
months, the hedge relationship
is terminated and new
designations are made to reflect any changes in the net
investments in foreign operations.
380
381
373
Financial statements
Consolidated financial statements | UBS Group AG consolidated financial statements
Note 26 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 the hedging derivative and the hedged item during
their respective terms is also performed.
Prior to December 2021, for the fair value hedge of portfolio
interest rate risk related to loans designated under IAS 39, hedge
effectiveness was 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
USD million
IInntteerreesstt rraattee rriisskk
Fair value hedges
Cash flow hedges
FFoorreeiiggnn eexxcchhaannggee rriisskk
Fair value hedges2
Hedges of net investments in foreign operations
USD million
IInntteerreesstt rraattee rriisskk
Fair value hedges
Cash flow hedges
FFoorreeiiggnn eexxcchhaannggee rriisskk
Fair value hedges2
Hedges of net investments in foreign operations
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.
in
Hedge ineffectiveness from financial instruments measured at
fair value through profit or loss is recognized in Other net income.
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.
As of or for the year ended
3311..1122..2211
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 tthhee
iinnccoommee ssttaatteemmeenntt
8899,,552255
7799,,557733
2277,,887755
1133,,993399
00
1122
8877
2233
77
11
226611
110055
((11,,660044))
((11,,118855))
((22,,113399))
449977
11,,660022
999900
22,,118811
((449977))
((22))
((119966))
4422
00
As of or for the year ended
31.12.20
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 the
income statement
80,759
72,732
21,555
13,775
18
449
3
12
7
194
1,231
2,213
(1,247)
(2,012)
(1,735)
(937)
1,715
936
(16)
201
(20)
(2)
11 Amounts used as the basis for recognizing hedge ineffectiveness for the period. 22 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.
382
374
Consolidated financial statements | UBS Group AG consolidated financial statements
Note 26 Hedge accounting (continued)
Note 26 Hedge accounting (continued)
Economic relationship between hedged item and hedging
hedge ineffectiveness can arise due to the discounting of the
USD million
In hedges of foreign exchange risk related to debt issued,
Fair value hedges: designated hedged items
behavior of the hedging derivative and the hedged item during
foreign operation, where the currency basis may cause
Carrying amount of designated debt securities
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
of which: accumulated amount of fair value hedge adjustment
LLooaannss aanndd aaddvvaanncceess ttoo ccuussttoommeerrss11
Carrying amount of designated loans
of which: accumulated amount of fair value hedge adjustment 2
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 2
3311..1122..2211
31.12.20
IInntteerreesstt rraattee
rriisskk
FFXX rriisskk
Interest rate
risk
FX risk
7744,,770000
2277,,887755
70,429
21,555
447788
22,,667777
((77))
1133,,883355
((110099))
33
2,401
3,242
(38)
10,374
100
111
11 Prior to 31 December 2021, these amounts were designated in fair value hedges of portfolio interest rate risk under IAS 39. 22 As of 31 December 2021, the amount was presented within Loans and advances to
customers, whereas prior to 1 January 2021 amounts were presented within either Other financial assets measured at amortized cost or Other financial liabilities measured at amortized cost.
Fair value hedges: profile of the timing of the nominal amount of the hedging instrument
USD billion
Interest rate swaps
Cross-currency swaps
USD billion
Interest rate swaps1
3311..1122..2211
DDuuee wwiitthhiinn
11 mmoonntthh
00
11
DDuuee bbeettwweeeenn
11 aanndd 33 mmoonntthhss
88
DDuuee bbeettwweeeenn
33 aanndd 1122 mmoonntthhss
1100
DDuuee bbeettwweeeenn
11 aanndd 55 yyeeaarrss
4499
11
66
1133
31.12.20
Due within
1 month
0
Due between
1 and 3 months
4
Due between
3 and 12 months
9
Due between
1 and 5 years
46
Cross-currency swaps
11 In accordance with IFRS 7 requirements, the fair value hedges of portfolio interest rate risk related to loans and advances to customers designated under IAS 39 are not included.
16
4
0
0
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
DDuuee aafftteerr
55 yyeeaarrss
2222
66
Due after
5 years
12
2
TToottaall
9900
2288
Total
70
22
3311..1122..2211
31.12.20
2266
774433
776699
2,560
296
2,856
3311..1122..2211
31.12.20
((4455))
226622
221177
(559)
268
(291)
383
375
instrument
hedging instruments and undesignated risk components and lack
For hedges designated under IFRS 9, the economic relationship
of such discounting and risk components in the hedged items.
between the hedged item and the hedging instrument is
In hedges of net
investments
in
foreign operations,
determined based on a qualitative analysis of their critical terms.
ineffectiveness is unlikely unless the hedged net assets fall below
In cases where hedge designation takes place after origination of
the designated hedged amount. The exceptions are hedges where
the hedging instrument, a quantitative analysis of the possible
the hedging currency is not the same as the currency of the
their respective terms is also performed.
ineffectiveness.
Prior to December 2021, for the fair value hedge of portfolio
Hedge ineffectiveness from financial instruments measured at
interest rate risk related to loans designated under IAS 39, hedge
fair value through profit or loss is recognized in Other net income.
effectiveness was assessed by comparing changes in the fair value
of the hedged portfolio of loans attributable to changes in the
Derivatives not designated in hedge accounting relationships
designated benchmark interest rate with the changes in the fair
Non-hedge accounted derivatives are mandatorily held for trading
value of the interest rate swaps.
Sources of hedge ineffectiveness
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
In hedges of interest rate risk, hedge ineffectiveness can arise
clearing. The one exception relates to forward points on certain
from mismatches of critical terms and / or the use of different
short- and long-duration foreign exchange contracts acting as
curves to discount the hedged item and instrument, or from
economic hedges, which are reported in Net interest income.
entering into a hedge relationship after the trade date of the
hedging derivative.
All hedges: designated hedging instruments and hedge ineffectiveness
As of or for the year ended
3311..1122..2211
CCaarrrryyiinngg aammoouunntt
DDeerriivvaattiivvee
DDeerriivvaattiivvee
ffaaiirr vvaalluuee ooff
ffaaiirr vvaalluuee ooff
iinneeffffeeccttiivveenneessss
NNoottiioonnaall
aammoouunntt
ffiinnaanncciiaall
aasssseettss
ffiinnaanncciiaall
lliiaabbiilliittiieess
hheeddggiinngg
iinnssttrruummeennttss11
hheeddggeedd
rreeccooggnniizzeedd iinn tthhee
iitteemmss11
iinnccoommee ssttaatteemmeenntt
CChhaannggeess iinn
CChhaannggeess iinn
HHeeddggee
8899,,552255
7799,,557733
2277,,887755
1133,,993399
00
1122
8877
2233
((11,,660044))
((11,,118855))
((22,,113399))
449977
11,,660022
999900
22,,118811
((449977))
As of or for the year ended
31.12.20
Carrying amount
Derivative
Derivative
fair value of
fair value of
ineffectiveness
Notional
amount
financial
assets
financial
liabilities
hedging
instruments1
hedged
recognized in the
items1
income statement
Changes in
Changes in
Hedge
80,759
72,732
21,555
13,775
18
449
3
1,231
2,213
(1,247)
(2,012)
(1,735)
(937)
1,715
936
((22))
((119966))
4422
00
(16)
201
(20)
(2)
77
11
226611
110055
12
7
194
Hedges of net investments in foreign operations
11 Amounts used as the basis for recognizing hedge ineffectiveness for the period. 22 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.
USD million
IInntteerreesstt rraattee rriisskk
Fair value hedges
Cash flow hedges
FFoorreeiiggnn eexxcchhaannggee rriisskk
Fair value hedges2
Hedges of net investments in foreign operations
USD million
IInntteerreesstt rraattee rriisskk
Fair value hedges
Cash flow hedges
FFoorreeiiggnn eexxcchhaannggee rriisskk
Fair value hedges2
382
Financial statements Consolidated financial statements | UBS Group AG consolidated financial statements
Apart from EURIBOR hedges, UBS applied 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 cessation dates of the
applicable interest rate benchmarks.
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
› Refer to Note 25 Interest rate benchmark reform for more
information about the transition progress
3311..1122..2211
31.12.20
CCaarrrryyiinngg aammoouunntt
DDeerriivvaattiivvee
ffiinnaanncciiaall
aasssseettss
DDeerriivvaattiivvee
ffiinnaanncciiaall
lliiaabbiilliittiieess
Carrying amount
Derivative
financial
assets
Derivative
financial
liabilities
Notional
amount
00
00
00
00
37,146
11,179
1
0
(12)
0
NNoottiioonnaall
aammoouunntt
2233,,336677
1100,,880033
Note 26 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
interest rate benchmarks subject to
interest rate
benchmark reforms to which the Group’s hedge relationships
were exposed were USD LIBOR, CHF LIBOR, GBP LIBOR, AUD
LIBOR, JPY LIBOR, HKD LIBOR, SGD LIBOR and EONIA. Interest rate
swaps designated in hedge relationships referencing GBP, CHF
and JPY LIBOR transitioned to ARRs in December 2021 when LCH
transitioned its contracts. For other currencies, IBOR quotations
remain available, but all new designations will reference ARR. As
such, ARR designations in these currencies will replace IBOR
designations as IBOR contracts mature.
The Group’s hedge relationships are also exposed to the Euro
Inter-bank Offered Rate (EURIBOR), which 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 interest rate
benchmark reform.
Hedging instruments referencing LIBOR
USD million
IInntteerreesstt rraattee rriisskk
Fair value hedges
Cash flow hedges
384
376
Consolidated financial statements | UBS Group AG consolidated financial statements
Note 26 Hedge accounting (continued)
Interest rate benchmark reform
Note 27 Post-employment benefit plans
a) Defined benefit plans
The Group continues to apply the relief provided by Interest Rate
Apart from EURIBOR hedges, UBS applied the relief to all its
Benchmark Reform (amendments to IFRS 9, IAS 39 and IFRS 7),
fair value hedges of interest rate risk and to those cash flow hedge
published by the IASB in September 2019.
relationships where the hedged risk is LIBOR or EONIA. The
The
interest rate benchmarks subject to
interest rate
following table provides details on the notional amount and
benchmark reforms to which the Group’s hedge relationships
carrying amount of the hedging instruments in those hedge
were exposed were USD LIBOR, CHF LIBOR, GBP LIBOR, AUD
relationships maturing after 31 December 2021, or 30 June 2023
LIBOR, JPY LIBOR, HKD LIBOR, SGD LIBOR and EONIA. Interest rate
for USD LIBOR hedges, which are the cessation dates of the
swaps designated in hedge relationships referencing GBP, CHF
applicable interest rate benchmarks.
and JPY LIBOR transitioned to ARRs in December 2021 when LCH
Hedges of net investments in foreign operations are not
transitioned its contracts. For other currencies, IBOR quotations
affected by the amendments.
remain available, but all new designations will reference ARR. As
such, ARR designations in these currencies will replace IBOR
› 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
› Refer to Note 25 Interest rate benchmark reform for more
information about the transition progress
designations as IBOR contracts mature.
The Group’s hedge relationships are also exposed to the Euro
Inter-bank Offered Rate (EURIBOR), which 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 interest rate
benchmark reform.
Hedging instruments referencing LIBOR
USD million
IInntteerreesstt rraattee rriisskk
Fair value hedges
Cash flow hedges
3311..1122..2211
31.12.20
CCaarrrryyiinngg aammoouunntt
DDeerriivvaattiivvee
ffiinnaanncciiaall
aasssseettss
DDeerriivvaattiivvee
ffiinnaanncciiaall
lliiaabbiilliittiieess
Carrying amount
Derivative
financial
assets
Derivative
financial
liabilities
Notional
amount
00
00
00
00
37,146
11,179
1
0
(12)
0
NNoottiioonnaall
aammoouunntt
2233,,336677
1100,,880033
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.
Swiss pension plan
The Swiss pension plan covers employees of UBS AG in
Switzerland and employees of companies in Switzerland 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.
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 the level of 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.
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
annual interest rate credited to participants is determined by the
Pension Foundation Board at the end of each year.
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
law basis, additional employer and employee
pension
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 2021, the Swiss plan had a technical
funding ratio in accordance with Swiss pension law of 134.8%
(31 December 2020: 132.6%).
The investment strategy of the Swiss plan complies with Swiss
pension law, including the rules and regulations relating to
diversification of plan assets, and is derived from the risk budget
defined by the Pension Foundation Board on the basis of regularly
performed asset and liability management analyses. The Pension
Foundation Board strives for a medium- and long-term balance
between assets and liabilities.
As of 31 December 2021, the Swiss plan was in a surplus
situation on an IFRS measurement basis, as the fair value of the
plan’s assets exceeded the defined benefit obligation (DBO) by
USD 6,577 million (31 December 2020: a surplus of USD 4,862
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 future employer contributions. As
of both 31 December 2021 and 31 December 2020, the
estimated future economic benefit was zero and hence no net
defined benefit asset was recognized on the balance sheet.
Changes to the Swiss pension plan in 2019
The Pension Foundation Board and UBS agreed to implement
measures that took effect from the start of 2019 to support the
long-term financial stability of the Swiss pension fund. The
measures, among other things, lowered the conversion rate and
increased the normal retirement age from 64 to 65. Pensions
already in payment on 1 January 2019 were not affected.
To mitigate the effects for active participants, UBS committed
to pay an extraordinary contribution of up to CHF 720 million
(USD 790 million at the closing exchange rate on 31 December
2021) in three installments in 2020, 2021 and 2022. Two
installments of USD 235 million and USD 254 million paid in 2020
and 2021 reduced OCI with no effect on the income statement.
The third installment, CHF 193 million (USD 212 million at the
closing exchange rate on 31 December 2021), will be paid in the
first quarter of 2022. The regular employer contributions to be
made to the Swiss plan in 2022 are estimated at USD 491 million.
384
385
377
Financial statements
Consolidated financial statements | UBS Group AG consolidated financial statements
Note 27 Post-employment benefit plans (continued)
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 participants
upon retirement. The UK plan has been closed to new entrants
for more than 20 years and, since 2013, 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 2021, UBS made no
deficit funding contributions to the UK plan. In 2020, UBS made
deficit funding contributions of USD 46 million.
The plan assets are invested in a diversified portfolio of
financial assets, which include a longevity swap with an external
insurance company. This 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.
As of 31 December 2021, the longevity swap had a negative value
of USD 3 million (31 December 2020: zero).
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 2021 was USD 337 million (31 December 2020:
USD 347 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.
The employer contributions to be made to the UK defined
benefit plan in 2022 are estimated at USD 5 million, subject to
regular funding reviews during the year.
US pension plans
There are two distinct major defined benefit plans in the US, with
a normal retirement age of 65. Both plans were closed to new
entrants more than 20 years ago. Since they closed, new
employees have participated in a defined contribution plan.
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.
The plan assets of both plans are invested in diversified
portfolios of financial assets. Each plan’s fiduciaries are
responsible for the investment decisions with respect to the plan
assets.
The employer contributions to be made to the US defined
benefit plans in 2022 are estimated at USD 10 million.
German pension plans
There are two defined benefit plans in Germany, which are both
unfunded. The normal retirement age is 65 and benefits are paid
directly by UBS. In the larger of the two plans each participant
accrues a percentage of salary in a retirement savings account.
The accumulated account balance of the participant is credited on
an annual basis with guaranteed interest at a rate of 5%. The plan
has been closed to new entrants and all participants younger than
the age of 55 no longer accrue benefits. 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.
In June 2021, UBS implemented a new funded pension plan
with interest credited to participants equal to actual investment
returns with a guaranteed minimum of 0%. The plan was
implemented retrospectively for new hires since June 2018 and
for all eligible active participants younger than 55 from July 2021.
Each participant accrues a percentage of salary in a retirement
savings account.
The employer contributions to be made to the German defined
benefit plans in 2022 are estimated at USD 12 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.
386
378
Consolidated financial statements | UBS Group AG consolidated financial statements
Note 27 Post-employment benefit plans (continued)
Note 27 Post-employment benefit plans (continued)
UK pension plan
the average yield on one-year US government bonds. For the
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
Curtailments
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
of which: funded plans
of which: unfunded plans
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
Other movements
Foreign currency translation
FFaaiirr vvaalluuee ooff ppllaann aasssseettss aatt tthhee eenndd ooff tthhee yyeeaarr
SSuurrpplluuss // ((ddeeffiicciitt))
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)) ooff mmaajjoorr ppllaannss
NNeett ddeeffiinneedd bbeenneeffiitt aasssseett // ((lliiaabbiilliittyy)) ooff rreemmaaiinniinngg ppllaannss
TToottaall nneett ddeeffiinneedd bbeenneeffiitt aasssseett // ((lliiaabbiilliittyy))
The UK plan is a career-average revalued earnings scheme, and
other defined benefit plan, retirement benefits accrue based on
benefits increase automatically based on UK price inflation. The
the career-average earnings of each individual plan participant.
normal retirement age for participants in the UK plan is 60. The
Former employees with vested benefits have the option to take a
plan provides guaranteed lifetime pension benefits to participants
lump sum payment or a lifetime annuity.
upon retirement. The UK plan has been closed to new entrants
As required under applicable pension laws, both plans have
for more than 20 years and, since 2013, participants are no longer
fiduciaries who, together with UBS, are responsible for the
accruing benefits for current or future service. Instead, employees
governance of the plans.
participate in the UK defined contribution plan.
The plan assets of both plans are invested in diversified
The governance responsibility for the UK plan lies jointly with
portfolios of financial assets. Each plan’s fiduciaries are
the Pension Trustee Board and UBS. The employer contributions
responsible for the investment decisions with respect to the plan
to the pension fund reflect agreed-upon deficit funding
assets.
contributions, which are determined on the basis of the most
The employer contributions to be made to the US defined
recent actuarial valuation using assumptions agreed by the
benefit plans in 2022 are estimated at USD 10 million.
Pension Trustee Board and UBS. In the event of underfunding,
UBS and the Pension Trustee Board must agree on a deficit
German pension plans
recovery plan within statutory deadlines. In 2021, UBS made no
There are two defined benefit plans in Germany, which are both
deficit funding contributions to the UK plan. In 2020, UBS made
unfunded. The normal retirement age is 65 and benefits are paid
deficit funding contributions of USD 46 million.
directly by UBS. In the larger of the two plans each participant
The plan assets are invested in a diversified portfolio of
accrues a percentage of salary in a retirement savings account.
financial assets, which include a longevity swap with an external
The accumulated account balance of the participant is credited on
insurance company. This swap enables the UK pension plan to
an annual basis with guaranteed interest at a rate of 5%. The plan
hedge the risk between expected and actual longevity, which
has been closed to new entrants and all participants younger than
should mitigate volatility in the net defined benefit asset / liability.
the age of 55 no longer accrue benefits. In the other plan,
As of 31 December 2021, the longevity swap had a negative value
amounts are accrued annually based on employee elections
of USD 3 million (31 December 2020: zero).
related to variable compensation. For this plan, the accumulated
In 2019, UBS and the Pension Trustee Board entered into an
account balance is credited on an annual basis with a guaranteed
arrangement whereby a collateral pool was established to provide
interest rate of 6% for amounts accrued before 2010, of 4% for
security for the pension fund. The value of the collateral pool as
amounts accrued from 2010 to 2017 and of 0.9% for amounts
of 31 December 2021 was USD 337 million (31 December 2020:
accrued after 2017. Both plans are subject to German pension
USD 347 million) and includes corporate bonds, government-
law, whereby the responsibility to pay pension benefits when they
related debt
instruments and other financial assets. The
are due resides entirely with UBS. A portion of the pension
arrangement provides the Pension Trustee Board dedicated access
payments is directly increased in line with price inflation.
to a pool of assets in the event of UBS’s insolvency or not paying
In June 2021, UBS implemented a new funded pension plan
a required deficit funding contribution.
with interest credited to participants equal to actual investment
The employer contributions to be made to the UK defined
returns with a guaranteed minimum of 0%. The plan was
benefit plan in 2022 are estimated at USD 5 million, subject to
implemented retrospectively for new hires since June 2018 and
regular funding reviews during the year.
for all eligible active participants younger than 55 from July 2021.
Each participant accrues a percentage of salary in a retirement
US pension plans
savings account.
There are two distinct major defined benefit plans in the US, with
The employer contributions to be made to the German defined
a normal retirement age of 65. Both plans were closed to new
benefit plans in 2022 are estimated at USD 12 million.
entrants more than 20 years ago. Since they closed, new
employees have participated in a defined contribution plan.
Financial information by plan
One of the defined benefit plans is a contribution-based plan
The tables on the following pages provide an analysis of the
in which each participant accrues a percentage of salary in a
movement in the net asset / liability recognized on the balance
retirement savings account. The retirement savings account is
sheet for defined benefit plans, as well as an analysis of amounts
credited annually with interest based on a rate that is linked to
recognized in net profit and in Other comprehensive income.
of which: Net defined benefit asset
of which: Net defined benefit liability 2
Swiss pension plan
2020
24,496
447
72
259
1,279
22002211
2277,,772288
449944
5588
226666
883377
UK pension plan
22002211
44,,116622
00
5588
00
7711
2020
3,654
0
73
0
449
US and German
pension plans
22002211
11,,990055
66
3300
00
((6622))
2020
1,820
6
45
0
105
Total
22002211
3333,,779955
550000
114477
226666
884466
2020
29,970
453
190
259
1,832
00
(164)
5511
((667788))
983
460
11,,446644
0
00
0
((8800))
(1,153)
((11,,009977))
(4)
00
2,333
((880099))
2277,,339988
27,728
1144,,333333 13,765
0
1133,,006655 13,963
2277,,339988 27,728
0
28,219
1,818
84
729
259
(1,153)
(13)
0
2,647
32,590
4,862
3,724
12
00
3322,,559900
22,,332222
7744
776633
226666
((11,,009977))
((1133))
00
((993300))
3333,,997755
66,,557777
44,,886622
1155
1144
((33))
5599
00
00
((114488))
00
((3388))
44,,110055
115500
(14)
505
(42)
3
0
(148)
0
132
4,162
159
11,,559933 1,879
22,,336622 2,124
44,,110055 4,162
0
3,658
388
73
46
0
(148)
0
0
132
4,149
(13)
0
0
00
44,,114499
227777
5588
00
00
((114488))
00
00
((3399))
44,,229977
119922
00
00
44
((7788))
1122
44
00
((111122))
11
((3333))
11,,774400
222222
666699
884499
(34)
134
5
0
0
(108)
0
37
1,905
245
743
917
11,,222222 1,319
586
1,299
118
38
17
0
(108)
(4)
0
0
1,360
(545)
0
0
551188
11,,336600
4400
2266
1166
00
((111122))
((44))
11
00
11,,332299
((441111))
00
00
6699
(212)
((775599)) 1,621
423
11,,553355
3
44
0
((8800))
(1,409)
((11,,335577))
(4)
11
2,501
((888800))
3333,,224422
33,795
1144,,770055 14,169
22,,226622 2,622
1166,,227766 17,004
3322,,772244 33,209
586
33,176
2,324
196
792
259
(1,409)
(17)
0
2,779
38,100
4,304
3,724
12
551188
3388,,110000
22,,663399
115599
777799
226666
((11,,335577))
((1177))
11
((996699))
3399,,660011
66,,335588
44,,886622
1155
11,,882211
((112211))
66,,557777
00
814
313
4,862
0
00
00
00
119922
0
0
0
(13)
00
00
00
((441111))
0
0
0
(545)
11,,882211
((112211))
66,,557777
((221199))
((111122))
((333311))
814
313
4,862
(558)
(123)
(680)
42
(722)
11 Experience (gains) / losses are a component of actuarial remeasurements of the defined benefit obligation and reflect the effects of differences between the previous actuarial assumptions and what has actually
occurred. 22 Refer to Note 19c.
330022
((663333))
386
387
379
Financial statements Consolidated financial statements | UBS Group AG consolidated financial statements
Note 27 Post-employment benefit plans (continued)
IInnccoommee ssttaatteemmeenntt –– eexxppeennsseess rreellaatteedd ttoo ddeeffiinneedd bbeenneeffiitt ppllaannss11
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
Curtailments
NNeett ppeerriiooddiicc eexxppeennsseess rreeccooggnniizzeedd iinn nneett pprrooffiitt ffoorr mmaajjoorr ppllaannss
NNeett ppeerriiooddiicc eexxppeennsseess rreeccooggnniizzeedd iinn nneett pprrooffiitt ffoorr rreemmaaiinniinngg ppllaannss22
TToottaall nneett ppeerriiooddiicc eexxppeennsseess rreeccooggnniizzeedd iinn nneett pprrooffiitt
11 Refer to Note 6. 22 Includes differences between actual and estimated performance award accruals.
OOtthheerr ccoommpprreehheennssiivvee iinnccoommee –– ggaaiinnss // ((lloosssseess)) oonn ddeeffiinneedd bbeenneeffiitt ppllaannss
Swiss pension plan
3311..1122..2211 31.12.20
447
449944
UK pension plan
3311..1122..2211 31.12.20
0
00
US and German
pension plans
3311..1122..2211 31.12.20
6
66
Total
3311..1122..2211 31.12.20
453
550000
5588
((7744))
1155
1133
00
((8800))
442266
72
(84)
12
13
0
0
459
5588
((5588))
73
(73)
00
00
00
00
00
0
0
3
0
3
3300
((2266))
00
44
44
00
1188
45
(38)
0
4
0
0
18
114477
((115599))
1155
1177
44
((8800))
444444
2255
447700
190
(196)
12
17
3
0
479
23
502
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
TToottaall ggaaiinnss // ((lloosssseess)) rreeccooggnniizzeedd iinn ootthheerr ccoommpprreehheennssiivvee iinnccoommee ffoorr mmaajjoorr ppllaannss
Swiss pension plan
3311..1122..2211 31.12.20
(1,279)
((883377))
887700
((33))
00
((119933))
00
((4477))
(777)
(230)
0
26
261
(99)
((11,,446644))
(460)
22,,332222
1,818
((11,,882211))
((333366))
(814)
(276)
UK pension plan
3311..1122..2211 31.12.20
(449)
((7711))
331199
(504)
00
((331166))
00
99
((2233))
((5599))
227777
00
220077
0
(1)
0
22
(8)
42
388
0
(61)
US and German
pension plans
3311..1122..2211 31.12.20
(105)
6622
Total
3311..1122..2211 31.12.20
(1,832)
((884466))
7777
00
((11))
((11))
((33))
22
((1122))
4400
00
110033
(141)
11,,226677 (1,421)
0
1
24
50
(34)
(5)
118
0
14
((33))
(230)
((331188))
((119944))
55
((6688))
((11,,553355))
0
50
333
(142)
(423)
22,,663399
2,324
((11,,882211))
((2277))
(814)
(323)
TToottaall ggaaiinnss // ((lloosssseess)) rreeccooggnniizzeedd iinn ootthheerr ccoommpprreehheennssiivvee iinnccoommee ffoorr rreemmaaiinniinngg ppllaannss
TToottaall ggaaiinnss // ((lloosssseess)) rreeccooggnniizzeedd iinn ootthheerr ccoommpprreehheennssiivvee iinnccoommee22
(327)
11 Experience (gains) / losses are a component of actuarial remeasurements of the defined benefit obligation and reflect the effects of differences between the previous actuarial assumptions and what has actually
occurred. 22 Refer to the “Statement of comprehensive income.”
(4)
3300
22
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..2211
31.12.20
UK pension plan
US and German pension
plans1
3311..1122..2211
31.12.20
3311..1122..2211
31.12.20
1155..11
15.7
1188..88
19.0
99..55
10.2
11,,331122
22,,663366
33,,882244
66,,222200
55,,557722
1,293
2,630
3,839
6,166
5,646
111100
224488
441188
774433
775511
114
232
406
744
758
1188,,009922
18,884
33,,002288
3,206
112233
223377
333388
449955
339922
551199
122
235
346
532
413
541
388
380
Note 27 Post-employment benefit plans (continued)
Note 27 Post-employment benefit plans (continued)
Actuarial assumptions
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. UBS regularly
reviews the actuarial assumptions used in calculating the DBO to
determine their continuing relevance.
› Refer to Note 1a item 5 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 projections
S3PA with CMI 2020 projections1
Pri-2012 with MP-2021 projection scale2
Dr. K. Heubeck 2018 G
MMoorrttaalliittyy ttaabbllee
BVG 2020 G with CMI 2019 projections
S3PA with CMI 2020 projections1
Pri-2012 with MP-2021 projection scale2
Dr. K. Heubeck 2018 G
Swiss pension plan
3311..1122..2211
31.12.20
UK pension plan
US and German pension
plans1
3311..1122..2211
31.12.20
3311..1122..2211
31.12.20
00..3344
22..0011
00..0000
11..0044
0.10
2.00
0.00
0.60
11..8822
00..0000
33..3322
00..0000
1.42
0.00
2.89
0.00
22..1100
22..3355
11..8800
11..1188
1.62
2.25
1.70
1.12
Life expectancy at age 65 for a male member currently
aged 65
aged 45
3311..1122..2211
31.12.20
3311..1122..2211
31.12.20
2211..77
2233..44
2211..99
2200..55
21.7
23.4
21.8
20.8
2233..33
2244..55
2233..33
2233..22
23.2
24.6
23.2
23.6
Life expectancy at age 65 for a female member currently
aged 65
aged 45
3311..1122..2211
31.12.20
3311..1122..2211
31.12.20
2233..44
2244..99
2233..33
2233..99
23.4
24.9
23.2
24.3
2255..00
2266..33
2244..77
2266..11
24.9
26.3
24.5
26.5
US and German pension
11 In 2020, S3PA with CMI 2019 projections was used. 22 In 2020, Pri-2012 with MP-2020 projection scale was used.
Consolidated financial statements | UBS Group AG consolidated financial statements
IInnccoommee ssttaatteemmeenntt –– eexxppeennsseess rreellaatteedd ttoo ddeeffiinneedd bbeenneeffiitt ppllaannss11
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
Curtailments
NNeett ppeerriiooddiicc eexxppeennsseess rreeccooggnniizzeedd iinn nneett pprrooffiitt ffoorr mmaajjoorr ppllaannss
NNeett ppeerriiooddiicc eexxppeennsseess rreeccooggnniizzeedd iinn nneett pprrooffiitt ffoorr rreemmaaiinniinngg ppllaannss22
TToottaall nneett ppeerriiooddiicc eexxppeennsseess rreeccooggnniizzeedd iinn nneett pprrooffiitt
11 Refer to Note 6. 22 Includes differences between actual and estimated performance award accruals.
OOtthheerr ccoommpprreehheennssiivvee iinnccoommee –– ggaaiinnss // ((lloosssseess)) oonn ddeeffiinneedd bbeenneeffiitt ppllaannss
Swiss pension plan
UK pension plan
US and German
pension plans
Total
3311..1122..2211 31.12.20
3311..1122..2211 31.12.20
3311..1122..2211 31.12.20
3311..1122..2211 31.12.20
449944
5588
((7744))
1155
1133
00
((8800))
442266
447
72
(84)
12
13
0
0
459
00
5588
((5588))
00
00
00
00
00
0
73
(73)
0
0
3
0
3
66
3300
((2266))
00
44
44
00
6
45
(38)
0
4
0
0
1188
18
((115599))
(196)
550000
114477
1155
1177
44
((8800))
444444
2255
447700
453
190
12
17
3
0
479
23
502
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 life expectancy
of which: change in other actuarial assumptions
of which: experience gains / (losses) 1
Return on plan assets excluding interest income
of which: change in rate of interest credit on retirement savings assumption
Asset ceiling effect excluding interest expense and foreign currency translation
TToottaall ggaaiinnss // ((lloosssseess)) rreeccooggnniizzeedd iinn ootthheerr ccoommpprreehheennssiivvee iinnccoommee ffoorr mmaajjoorr ppllaannss
TToottaall ggaaiinnss // ((lloosssseess)) rreeccooggnniizzeedd iinn ootthheerr ccoommpprreehheennssiivvee iinnccoommee ffoorr rreemmaaiinniinngg ppllaannss
TToottaall ggaaiinnss // ((lloosssseess)) rreeccooggnniizzeedd iinn ootthheerr ccoommpprreehheennssiivvee iinnccoommee22
Swiss pension plan
UK pension plan
US and German
pension plans
Total
3311..1122..2211 31.12.20
3311..1122..2211 31.12.20
3311..1122..2211 31.12.20
3311..1122..2211 31.12.20
((883377))
(1,279)
887700
((33))
00
((119933))
00
((4477))
(777)
(230)
0
26
261
(99)
((11,,446644))
(460)
22,,332222
1,818
((11,,882211))
((333366))
(814)
(276)
((7711))
331199
00
((331166))
00
99
((2233))
((5599))
227777
00
220077
(449)
(504)
0
(1)
0
22
(8)
42
388
0
(61)
6622
7777
00
((11))
((11))
((33))
22
((1122))
4400
00
110033
0
1
24
50
(34)
(5)
118
0
14
(105)
(141)
((884466))
(1,832)
11,,226677 (1,421)
((33))
(230)
((331188))
((119944))
55
((6688))
((11,,553355))
((11,,882211))
((2277))
3300
22
0
50
333
(142)
(423)
(814)
(323)
(4)
(327)
22,,663399
2,324
11 Experience (gains) / losses are a component of actuarial remeasurements of the defined benefit obligation and reflect the effects of differences between the previous actuarial assumptions and what has actually
occurred. 22 Refer to the “Statement of comprehensive income.”
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
UK pension plan
plans1
3311..1122..2211
31.12.20
3311..1122..2211
31.12.20
3311..1122..2211
31.12.20
1155..11
15.7
1188..88
19.0
99..55
10.2
11,,331122
22,,663366
33,,882244
66,,222200
55,,557722
1,293
2,630
3,839
6,166
5,646
111100
224488
441188
774433
775511
114
232
406
744
758
1188,,009922
18,884
33,,002288
3,206
112233
223377
333388
449955
339922
551199
122
235
346
532
413
541
388
389
381
Financial statements Consolidated financial statements | UBS Group AG consolidated financial statements
Note 27 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
Swiss pension plan
3311..1122..2211
31.12.20
UK pension plan
US and German pension plans
3311..1122..2211
31.12.20
3311..1122..2211
31.12.20
((11,,669955))
11,,993333
110099
((110044))
11,,333333
––33
222244
((222244))55
(1,793)
2,048
117
(111)
1,413
–3
236
(188)
((336611))
441111
––22
––22
333344
((330066))
––44
––44
(370)
423
–2
–2
358
(316)
–4
–4
((7788))
8844
00
00
66
((66))
88
((77))
(91)
99
1
(1)
8
(7)
9
(8)
Increase in longevity by one additional year
991155
1,061
118844
182
5566
60
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 2021 and as of 31 December 2020, 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 2021, 19% of retirement savings were subject to a legal minimum rate of
1.00%.
390
382
Consolidated financial statements | UBS Group AG consolidated financial statements
Note 27 Post-employment benefit plans (continued)
Note 27 Post-employment benefit plans (continued)
Sensitivity analysis of significant actuarial assumptions
circumstances may arise, which could result in variations that are
The table below presents a sensitivity analysis for each significant
outside the range of alternatives deemed reasonably possible.
actuarial assumption, showing how the DBO would have been
Caution should be used in extrapolating the sensitivities below on
Fair value of plan assets
The tables below provide information about the composition and fair value of plan assets of the Swiss, UK, US and German pension plans.
affected by changes in the relevant actuarial assumption that
the DBO, as the sensitivities may not be linear.
Composition and fair value of plan assets
were reasonably possible at the balance sheet date. Unforeseen
Sensitivity analysis of significant actuarial assumptions1
Increase / (decrease) in defined benefit obligation
Swiss pension plan
UK pension plan
US and German pension plans
3311..1122..2211
31.12.20
3311..1122..2211
31.12.20
3311..1122..2211
31.12.20
((11,,669955))
11,,993333
110099
((110044))
11,,333333
––33
222244
((222244))55
(1,793)
2,048
117
(111)
1,413
–3
236
(188)
((336611))
441111
333344
((330066))
––22
––22
––44
––44
(370)
423
358
(316)
–2
–2
–4
–4
((7788))
8844
00
00
66
((66))
88
((77))
(91)
99
1
(1)
8
(7)
9
(8)
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
Increase by 50 basis points
Decrease by 50 basis points
LLiiffee eexxppeeccttaannccyy
1.00%.
RRaattee ooff iinntteerreesstt ccrreeddiitt oonn rreettiirreemmeenntt ssaavviinnggss
Increase in longevity by one additional year
991155
1,061
118844
182
5566
60
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 2021 and as of 31 December 2020, 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 2021, 19% of retirement savings were subject to a legal minimum rate of
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..2211
31.12.20
FFaaiirr vvaalluuee
PPllaann aasssseett
aallllooccaattiioonn %%
Fair value
Plan asset
allocation %
QQuuootteedd
iinn aann aaccttiivvee
mmaarrkkeett
118877
OOtthheerr
00
TToottaall
118877
00
00
33,,553300
558800
33,,553300
558800
884433
66,,221133
00
22,,665522
884433
88,,886655
44,,444466
55,,009933
11,,331144
44,,221111
666688
2222,,997733
00
00
00
33,,555588
668822
1111,,000022
44,,444466
55,,009933
11,,331144
77,,776699
11,,334499
3333,,997755
3311..1122..2211
3333,,997755
119944
2288
2255
11,,007799
9933
112288
11
1100
22
22
2266
1133
1155
44
2233
44
110000
Quoted
in an active
market
219
Other
0
Total
219
0
0
3,582
331
3,582
331
826
6,284
0
1,958
826
8,242
3,721
6,146
1,303
3,363
663
22,525
0
0
0
3,722
473
10,065
3,721
6,146
1,303
7,085
1,136
32,590
31.12.20
32,590
231
34
24
1,416
96
149
1
11
1
3
25
11
19
4
22
3
100
11 The bond credit ratings are primarily based on S&P’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 S&P’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 2021 and 31 December 2020. Net of collateral, derivative financial instruments
amounted to USD 43 million as of 31 December 2021 (31 December 2020: negative USD 17 million).
390
391
383
Financial statements Consolidated financial statements | UBS Group AG consolidated financial statements
Note 27 Post-employment benefit plans (continued)
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–
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..2211
31.12.20
FFaaiirr vvaalluuee
PPllaann aasssseett
aallllooccaattiioonn %%
Fair value
Plan asset
allocation %
QQuuootteedd
iinn aann aaccttiivvee
mmaarrkkeett
114477
22,,660055
337722
44
4444
992211
553322
1122
117799
111155
OOtthheerr
00
TToottaall
114477
00
00
00
44
00
114477
00
00
00
22,,660055
337722
44
4477
992211
667799
1122
117799
111155
Quoted
in an active
market
195
Other
0
Total
195
2,150
53
0
34
1,077
919
47
149
110
0
0
0
3
0
131
0
0
0
2,150
53
0
37
1,077
1,050
47
149
110
33
6611
99
00
11
2211
1166
00
44
33
5
52
1
0
1
26
25
1
4
3
Real estate
Domestic
Foreign
Other
112222
4400
((331133))
IInnssuurraannccee ccoonnttrraaccttss
88
DDeerriivvaattiivveess
5544
AAsssseett--bbaacckkeedd sseeccuurriittiieess
1111
OOtthheerr iinnvveessttmmeennttss22
((770077))
TToottaall ffaaiirr vvaalluuee ooff ppllaann aasssseettss
44,,229977
11 The bond credit ratings are primarily based on S&P’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 S&P’s rating classification. 22 Mainly relates to repurchase arrangements on UK treasury bonds.
114
37
(86)
8
(3)
6
(794)
4,149
98
0
(86)
0
(3)
0
(803)
3,940
111100
66
((331133))
00
5577
00
((771177))
44,,007744
3
1
(2)
0
0
0
(19)
100
33
11
((77))
00
11
00
((1166))
110000
1122
3344
00
88
((33))
1111
1100
222233
16
37
0
8
0
6
9
209
392
384
Consolidated financial statements | UBS Group AG consolidated financial statements
Note 27 Post-employment benefit plans (continued)
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–
Foreign, below BBB–
IInnvveessttmmeenntt ffuunnddss
Equity
Domestic
Foreign
Bonds1
Real estate
Domestic
Foreign
Other
Domestic, AAA to BBB–
Domestic, below BBB–
Foreign, AAA to BBB–
Foreign, below BBB–
IInnssuurraannccee ccoonnttrraaccttss
DDeerriivvaattiivveess
AAsssseett--bbaacckkeedd sseeccuurriittiieess
OOtthheerr iinnvveessttmmeennttss22
TToottaall ffaaiirr vvaalluuee ooff ppllaann aasssseettss
3311..1122..2211
31.12.20
FFaaiirr vvaalluuee
PPllaann aasssseett
aallllooccaattiioonn %%
Fair value
Plan asset
allocation %
OOtthheerr
TToottaall
114477
Quoted
in an active
market
195
Other
Total
195
QQuuootteedd
iinn aann aaccttiivvee
mmaarrkkeett
114477
22,,660055
337722
44
4444
992211
553322
1122
117799
111155
111100
66
((331133))
00
5577
00
((771177))
44,,007744
00
00
00
00
44
00
00
00
00
114477
1122
3344
00
88
((33))
1111
1100
222233
22,,660055
337722
44
4477
992211
667799
1122
117799
111155
112222
4400
((331133))
88
5544
1111
((770077))
44,,229977
33
6611
99
00
11
2211
1166
00
44
33
33
11
00
11
00
((77))
2,150
53
0
34
1,077
919
47
149
110
98
0
(86)
0
(3)
0
131
1,050
0
0
0
0
3
0
0
0
0
0
8
0
6
9
16
37
2,150
53
0
37
1,077
47
149
110
114
37
(86)
8
(3)
6
5
52
1
0
1
26
25
1
4
3
3
1
0
0
0
(2)
11 The bond credit ratings are primarily based on S&P’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 S&P’s rating classification. 22 Mainly relates to repurchase arrangements on UK treasury bonds.
((1166))
110000
(803)
3,940
(794)
4,149
209
(19)
100
Note 27 Post-employment benefit plans (continued)
US and German pension plans
USD million
CCaasshh aanndd ccaasshh eeqquuiivvaalleennttss
EEqquuiittyy
Domestic
Foreign
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..2211
31.12.20
FFaaiirr vvaalluuee
QQuuootteedd
iinn aann aaccttiivvee
mmaarrkkeett
1111
OOtthheerr
00
7799
3311
448866
1177
9977
66
33
5566
226699
114477
1111
22
00
00
00
00
00
00
00
00
00
00
00
00
TToottaall
1111
7799
3311
448866
1177
9977
66
33
5566
226699
114477
1111
22
PPllaann aasssseett
aallllooccaattiioonn %%
11
66
22
3377
11
77
00
00
44
2200
1111
11
00
Fair value
Quoted
in an active
market
38
Other
0
0
0
490
7
99
1
210
169
195
34
19
3
0
0
0
0
0
0
0
0
0
0
0
0
Total
38
0
0
490
7
99
1
210
169
195
34
19
3
Plan asset
allocation %
3
0
0
36
0
7
0
15
12
14
2
1
0
Real estate
Domestic
Other
1
6
IInnssuurraannccee ccoonnttrraaccttss
0
OOtthheerr iinnvveessttmmeennttss
0
TToottaall ffaaiirr vvaalluuee ooff ppllaann aasssseettss
100
11 The bond credit ratings are primarily based on S&P’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 S&P’s rating classification.
99
9999
11
55
11,,332299
0
79
0
0
1,345
14
79
1
0
1,360
00
9999
00
55
11,,331199
11
77
00
00
110000
14
0
1
0
15
99
00
11
00
1100
392
393
385
Financial statements Consolidated financial statements | UBS Group AG consolidated financial statements
Note 27 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 each plan,
include direct contributions and matching
which may
contributions. Employer contributions to defined contribution
plans are recognized as an expense.
Expenses related to defined contribution plans
USD million
US plan
UK plan
Remaining plans
TToottaall11
11 Refer to Note 6.
c) Related-party disclosure
For the year ended
3311..1122..2211
31.12.20
31.12.19
119988
110011
6644
336633
190
88
65
343
173
82
71
326
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 2021, the minimum
commitment toward the Swiss pension fund under the related
leases was approximately USD 9 million (31 December 2020:
USD 11 million).
› Refer to the “Composition and fair value of plan assets” table in
Note 27a 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, the US and Germany 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..2211
31.12.20
31.12.19
3399
44
55
34
5
10
34
4
11
The transaction volumes in UBS shares and UBS debt instruments and the balances of UBS shares held were:
Transaction volumes – UBS shares and UBS debt instruments
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)
394
386
For the year ended
3311..1122..2211
31.12.20
990077
3377
11,,668888
4400
1,758
28
2,605
6
3311..1122..2211
1144,,007733
225522
31.12.20
14,854
210
Consolidated financial statements | UBS Group AG consolidated financial statements
Note 27 Post-employment benefit plans (continued)
Note 28 Employee benefits: variable compensation
b) Defined contribution plans
a) Plans offered
UBS sponsors a number of defined contribution plans, with the
which may
include direct contributions and matching
most significant plans in the US and the UK. UBS’s obligation is
contributions. Employer contributions to defined contribution
limited to its contributions made in accordance with each plan,
plans are recognized as an expense.
UBS is the principal provider of banking services for the pension
leases was approximately USD 9 million (31 December 2020:
fund of UBS in Switzerland. In this capacity, UBS is engaged to
USD 11 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 relationship with
› Refer to the “Composition and fair value of plan assets” table in
Note 27a for more information about fair value of investments
in UBS instruments held by the Swiss pension fund
UBS.
The following amounts have been received or paid by UBS
Also, UBS leases certain properties that are owned by the Swiss
from and to the post-employment benefit plans located in
pension fund. As of 31 December 2021, the minimum
Switzerland, the UK, the US and Germany in respect of these
commitment toward the Swiss pension fund under the related
banking activities and arrangements.
The transaction volumes in UBS shares and UBS debt instruments and the balances of UBS shares held were:
Transaction volumes – UBS shares and UBS debt instruments
Expenses related to defined contribution plans
USD million
US plan
UK plan
Remaining plans
TToottaall11
11 Refer to Note 6.
c) Related-party disclosure
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..2211
31.12.20
31.12.19
119988
110011
6644
336633
190
88
65
343
173
82
71
326
For the year ended
3311..1122..2211
31.12.20
31.12.19
3399
44
55
34
5
10
34
4
11
For the year ended
3311..1122..2211
31.12.20
990077
3377
11,,668888
4400
1,758
28
2,605
6
3311..1122..2211
1144,,007733
225522
31.12.20
14,854
210
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 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. 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
The Deferred Contingent Capital Plan
The Deferred Contingent Capital Plan (DCCP) is a deferred
compensation plan for all employees who are subject to deferral
requirements. Such employees are awarded notional additional tier
1 (AT1) capital instruments, which, at the discretion of UBS, can be
settled as a cash payment or a perpetual, marketable AT1 capital
instrument. DCCP awards generally vest in full after five years,
unless the award is written down following the occurrence of a
viability event (as defined under the terms of an AT1 instrument) or
if the Group’s CET1 capital ratio falls below a defined threshold.
Additional performance conditions apply to GEB members.
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.
below.
› Refer to Note 1a item 5 for a description of the accounting policy
related to share-based and other deferred compensation plans
Financial advisor variable compensation
Mandatory deferred compensation plans
The Long-Term Incentive Plan
The Long-Term Incentive Plan (LTIP) is a mandatory deferred
share-based compensation plan for senior leaders of the Group
(i.e., GEB members and selected senior management).
The number of notional shares delivered at vesting depends on
two equally weighted performance metrics over a three-year
performance period: reported return on common equity tier 1
capital and relative total shareholder return, which measures the
performance of UBS against an index of Global Systemically
Important Banks as determined by the Financial Stability Board.
In line with market practice for US wealth management
businesses, the compensation for US financial advisors in Global
Wealth Management predominantly includes 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. These awards are based on strategic
performance measures, including production and length of
service with UBS. 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.
The final number of shares will vest in three equal installments
in each of the three years following the performance period for
GEB members, and cliff vest in the first year following the
performance period for selected senior management.
Financial advisor compensation also includes expenses related
to compensation commitments with financial advisors entered
into at the time of recruitment that are subject to vesting
requirements.
The Equity Ownership Plan
The Equity Ownership Plan (EOP) is a deferred share-based
compensation plan for employees who are subject to deferral
requirements but do not receive LTIP awards. Vesting under the
EOP generally occurs in equal installments two and three years
after grant, subject to continued employment and, in certain
cases, achievement of defined performance conditions.
Asset Management employees receive some or all of their EOP
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.
Share delivery obligations
Share delivery obligations related to employee share-based
compensation awards were 175 million shares as of 31 December
2021 (31 December 2020: 172 million shares). Share delivery
obligations are calculated on the basis of undistributed notional
share awards, taking applicable performance conditions into
account.
As of 31 December 2021, UBS held 149 million treasury shares
(31 December 2020: 157 million) that were available to satisfy
share delivery obligations.
394
395
387
Financial statements
Consolidated financial statements | UBS Group AG consolidated financial statements
Note 28 Employee benefits: variable compensation (continued)
b) Effect on the income statement
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 2021, as well as expenses that were deferred
and will be recognized in the income statement for 2022 and later.
The majority of expenses deferred to 2022 and later that are related
to the 2021 performance year pertain to awards granted in February
2022. The total unamortized compensation expense for unvested
share-based awards granted up to 31 December 2021 will be
recognized in future periods over a weighted average period of 2.5
years.
Variable compensation including financial advisor variable compensation
EExxppeennsseess rreeccooggnniizzeedd iinn 22002211
EExxppeennsseess ddeeffeerrrreedd ttoo 22002222 aanndd llaatteerr11
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
405
183
140
54
29
22,,778888
119911
22,,997799
4,134
3,858
106
170
41
44,,117755
77,,115555
RReellaatteedd ttoo tthhee
22002211
ppeerrffoorrmmaannccee
yyeeaarr
2,383
RReellaatteedd ttoo pprriioorr
ppeerrffoorrmmaannccee
yyeeaarrss
(10)
TToottaall
2,373
817
363
297
73
84
33,,119900
222299
33,,441199
4,382
412
180
158
19
56
440022
3388
444400
248
(6)
3,853
51
202
438
668855
11,,112255
157
372
479
44,,886600
88,,22880044
RReellaatteedd ttoo tthhee
22002211
ppeerrffoorrmmaannccee
yyeeaarr
0
RReellaatteedd ttoo pprriioorr
ppeerrffoorrmmaannccee
yyeeaarrss
0
797
393
299
50
56
779977
221155
11,,001122
434
0
123
311
662
11,,009977
22,,110099
624
184
329
33
78
662244
118822
880066
641
0
146
495
1,682
22,,332233
33,,112299
TToottaall
0
1,421
577
628
83
133
11,,442211
339977
11,,881188
1,075
0
269
806
2,344
33,,441199
55,,223388
11 Estimate as of 31 December 2021. Actual amounts to be expensed in future periods may vary, e.g., due to forfeiture of awards. 22 Consists 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. Amounts in the “Related to the 2021 performance year” columns
represent commitments entered into in 2021. 44 Includes USD 651 million in expenses related to share-based compensation (performance awards: USD 435 million; other variable compensation: USD 59 million;
financial advisor compensation: USD 157 million). A further USD 85 million in expenses related to share-based compensation was recognized within other expense categories included in Note 6 (salaries: USD 5 million
related to role-based allowances; social security: USD 64 million; other personnel expenses: USD 16 million related to the Equity Plus Plan). Total personnel expense related to share-based equity-settled compensation
excluding social security was USD 641 million.
396
388
Consolidated financial statements | UBS Group AG consolidated financial statements
Note 28 Employee benefits: variable compensation (continued)
Note 28 Employee benefits: variable compensation (continued)
b) Effect on the income statement
Variable compensation including financial advisor variable compensation (continued)
Effect on the income statement for the financial year and future
The majority of expenses deferred to 2022 and later that are related
periods
to the 2021 performance year pertain to awards granted in February
The table below provides information about compensation expenses
2022. The total unamortized compensation expense for unvested
related to total variable compensation, including financial advisor
share-based awards granted up to 31 December 2021 will be
variable compensation, that were recognized in the financial year
recognized in future periods over a weighted average period of 2.5
ended 31 December 2021, as well as expenses that were deferred
years.
and will be recognized in the income statement for 2022 and later.
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
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
EExxppeennsseess rreeccooggnniizzeedd iinn 22002211
EExxppeennsseess ddeeffeerrrreedd ttoo 22002222 aanndd llaatteerr11
RReellaatteedd ttoo tthhee
22002211
RReellaatteedd ttoo pprriioorr
ppeerrffoorrmmaannccee
ppeerrffoorrmmaannccee
RReellaatteedd ttoo tthhee
22002211
RReellaatteedd ttoo pprriioorr
ppeerrffoorrmmaannccee
ppeerrffoorrmmaannccee
yyeeaarr
2,383
405
183
140
54
29
22,,778888
119911
22,,997799
4,134
3,858
106
170
41
44,,117755
77,,115555
yyeeaarrss
(10)
412
180
158
19
56
440022
3388
444400
248
51
202
438
668855
TToottaall
2,373
817
363
297
73
84
33,,119900
222299
33,,441199
4,382
157
372
479
44,,886600
88,,22880044
yyeeaarr
0
797
393
299
50
56
779977
221155
11,,001122
434
0
123
311
662
11,,009977
22,,110099
yyeeaarrss
0
624
184
329
33
78
662244
118822
880066
641
0
146
495
1,682
22,,332233
33,,112299
TToottaall
0
1,421
577
628
83
133
11,,442211
339977
11,,881188
1,075
0
269
806
2,344
33,,441199
55,,223388
TToottaall vvaarriiaabbllee ccoommppeennssaattiioonn iinncclluuddiinngg FFAA vvaarriiaabbllee ccoommppeennssaattiioonn
11,,112255
11 Estimate as of 31 December 2021. Actual amounts to be expensed in future periods may vary, e.g., due to forfeiture of awards. 22 Consists 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. Amounts in the “Related to the 2021 performance year” columns
represent commitments entered into in 2021. 44 Includes USD 651 million in expenses related to share-based compensation (performance awards: USD 435 million; other variable compensation: USD 59 million;
financial advisor compensation: USD 157 million). A further USD 85 million in expenses related to share-based compensation was recognized within other expense categories included in Note 6 (salaries: USD 5 million
related to role-based allowances; social security: USD 64 million; other personnel expenses: USD 16 million related to the Equity Plus Plan). Total personnel expense related to share-based equity-settled compensation
excluding social security was USD 641 million.
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 2020
Expenses deferred to 2021 and later1
Related to the
2020
performance
year
2,167
Related to prior
performance
years
(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
Related to the
2020
performance
year
0
Related to prior
performance
years
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
Total
2,141
1,068
463
463
54
88
33,,220099
222200
33,,442299
3,589
3,154
119
316
502
44,,009911
77,,55220044
Total
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 Consists 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. Amounts in the “Related to the 2020 performance year” columns
represent commitments entered into in 2020. 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.
(6)
3,853
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 Consists 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. Amounts in the “Related to the 2019 performance year” columns represent commitments
entered into in 2019. 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.
396
397
389
Financial statements Consolidated financial statements | UBS Group AG consolidated financial statements
Note 28 Employee benefits: variable compensation (continued)
c) Outstanding share-based compensation awards
Share and performance share awards
Movements in outstanding share-based awards during 2021 and 2020 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
22002211
117744,,990000,,339955
6688,,772211,,554499
((5522,,113377,,228877))
((1100,,990066,,009966))
118800,,557788,,556611
110077,,882288,,997799
WWeeiigghhtteedd aavveerraaggee
ggrraanntt ddaattee ffaaiirr vvaalluuee
((UUSSDD))
1122
Number of shares
2020
156,064,763
Weighted average
grant date fair value
(USD)
14
1155
1133
1133
1133
72,250,157
(46,899,362)
(6,515,164)
174,900,395
118,260,527
11
15
13
12
The total carrying amount of the liability related to cash-settled share-based awards as of 31 December 2021 and 31 December 2020
was USD 37 million and USD 36 million, respectively.
d) Valuation
UBS share awards
UBS measures compensation expense based on the average
market price of UBS shares 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 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.
398
390
Consolidated financial statements | UBS Group AG consolidated financial statements
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
was USD 37 million and USD 36 million, respectively.
d) Valuation
UBS share awards
Note 28 Employee benefits: variable compensation (continued)
Note 29 Interests in subsidiaries and other entities
c) Outstanding share-based compensation awards
a) Interests in subsidiaries
Share and performance share awards
Movements in outstanding share-based awards during 2021 and 2020 are provided in the table below.
Movements in outstanding share-based compensation awards
WWeeiigghhtteedd aavveerraaggee
Weighted average
NNuummbbeerr ooff sshhaarreess
ggrraanntt ddaattee ffaaiirr vvaalluuee
Number of shares
grant date fair value
22002211
((UUSSDD))
2020
(USD)
117744,,990000,,339955
6688,,772211,,554499
((5522,,113377,,228877))
((1100,,990066,,009966))
118800,,557788,,556611
110077,,882288,,997799
1122
1155
1133
1133
1133
156,064,763
72,250,157
(46,899,362)
(6,515,164)
174,900,395
118,260,527
14
11
15
13
12
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
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 (the SEC).
Individually significant subsidiaries
The two tables below list the Group’s individually significant
subsidiaries as of 31 December 2021. Unless otherwise stated, the
subsidiaries listed below have share capital consisting solely of
ordinary shares 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 branch network and a significant proportion of its business
activity is conducted outside Switzerland, including in the UK, the
US, Singapore, Hong Kong SAR and other countries. UBS Europe
SE has branches and offices in a number of EU Member States,
including Germany, Italy, Luxembourg and Spain. Share capital is
provided in the currency of the legally registered office.
The total carrying amount of the liability related to cash-settled share-based awards as of 31 December 2021 and 31 December 2020
Individually significant subsidiaries of UBS Group AG as of 31 December 2021
Company
UBS AG
Registered office
Zurich and Basel, Switzerland
UBS Business Solutions AG1
11 UBS Business Solutions AG holds subsidiaries in China, India, Israel and Poland.
Zurich, Switzerland
UBS measures compensation expense based on the average
referenced to the cost of purchasing an at-the-money European
Individually significant subsidiaries of UBS AG as of 31 December 20211
on the basis of the duration of the post-vesting restriction and is
market price of UBS shares on the grant date as quoted on the
put option for the term of the transfer restriction. The grant date
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
SIX Swiss Exchange, taking into consideration post-vesting sale
fair value of notional shares without dividend entitlements also
and hedge restrictions, non-vesting conditions and market
includes a deduction for the present value of future expected
conditions, where applicable. The fair value of the share awards
dividends to be paid between the grant date and distribution.
subject to post-vesting sale and hedge restrictions is discounted
Share capital in million
Equity interest accumulated in %
CHF
CHF
385.8
1.0
100.0
100.0
Share capital in million
4,150.02
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 4,150,000,000. 33 Consists of common share capital of USD
100,000 and non-voting preferred share capital of USD 1,283,000,000.
398
399
391
Financial statements
Consolidated financial statements | UBS Group AG consolidated financial statements
Note 29 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 contribute to the Group’s
total assets and aggregated profit before tax thresholds and are thus disclosed in accordance with requirements set by the SEC.
Other subsidiaries of UBS AG as of 31 December 2021
Company
UBS Asset Management (Americas) Inc.
Registered office
Wilmington, Delaware, USA
UBS Asset Management (Hong Kong) Limited
Hong Kong SAR, China
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
UBS Business Solutions US LLC
Wilmington, Delaware, USA
Group Functions
UBS Credit Corp.
UBS (France) S.A.
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 O‘Connor LLC
UBS Realty Investors LLC
UBS Securities Australia Ltd
UBS Securities Hong Kong Limited
UBS Securities Japan Co., Ltd.
UBS SuMi TRUST Wealth Management Co., Ltd.
Monte Carlo, Monaco
Global Wealth Management
Wilmington, Delaware, USA
Asset Management
Boston, Massachusetts, USA
Asset Management
Sydney, Australia
Hong Kong SAR, China
Tokyo, Japan
Tokyo, Japan
Investment Bank
Investment Bank
Investment Bank
Global Wealth Management
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
USD
USD
EUR
EUR
CHF
EUR
USD
USD
AUD
HKD
JPY
JPY
254.0
15.0
0.5
0.0
0.0
133.0
13.0
1.0
49.2
1.0
9.0
0.31
4,154.2
34,708.7
5,165.0
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
51.0
Consolidated structured entities
Consolidated structured entities (SEs) include certain investment
funds, securitization vehicles and client investment vehicles. UBS
has no individually significant subsidiaries that are SEs.
In 2021 and 2020, 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.
400
392
Consolidated financial statements | UBS Group AG consolidated financial statements
Note 29 Interests in subsidiaries and other entities (continued)
Note 29 Interests in subsidiaries and other entities (continued)
Other subsidiaries
b) Interests in associates and joint ventures
The table below lists other direct and indirect subsidiaries of UBS AG that are not individually significant but contribute to the Group’s
total assets and aggregated profit before tax thresholds and are thus disclosed in accordance with requirements set by the SEC.
Other subsidiaries of UBS AG as of 31 December 2021
Company
Registered office
UBS Asset Management (Americas) Inc.
Wilmington, Delaware, USA
UBS Asset Management (Hong Kong) Limited
Hong Kong SAR, China
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
UBS Business Solutions US LLC
Wilmington, Delaware, USA
Group Functions
UBS Credit Corp.
UBS (France) S.A.
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 O‘Connor LLC
UBS Realty Investors LLC
UBS Securities Australia Ltd
UBS Securities Hong Kong Limited
UBS Securities Japan Co., Ltd.
UBS SuMi TRUST Wealth Management Co., Ltd.
11 Includes a nominal amount relating to redeemable preference shares.
Monte Carlo, Monaco
Global Wealth Management
Wilmington, Delaware, USA
Asset Management
Boston, Massachusetts, USA
Asset Management
Sydney, Australia
Hong Kong SAR, China
Tokyo, Japan
Tokyo, Japan
Investment Bank
Investment Bank
Investment Bank
Global Wealth Management
Share capital in million
Equity interest
accumulated in %
USD
HKD
GBP
CHF
USD
USD
EUR
EUR
CHF
EUR
USD
USD
AUD
HKD
JPY
JPY
0.0
254.0
15.0
0.5
0.0
0.0
133.0
13.0
1.0
49.2
1.0
9.0
0.31
4,154.2
34,708.7
5,165.0
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
100.0
51.0
Consolidated structured entities
not provide support, financial or otherwise, to a consolidated SE
Consolidated structured entities (SEs) include certain investment
when the Group was not contractually obligated to do so, nor
funds, securitization vehicles and client investment vehicles. UBS
does the Group have any intention to do so in the future.
has no individually significant subsidiaries that are SEs.
Furthermore, the Group did not provide support, financial or
In 2021 and 2020, the Group did not enter into any
otherwise, to a previously unconsolidated SE that resulted in the
contractual obligation that could require the Group to provide
Group controlling the SE during the reporting period.
financial support to consolidated SEs. In addition, the Group did
As of 31 December 2021 and 2020, no associate or joint venture
was individually material to the Group. Also, there were no
significant restrictions on the ability of associates or joint ventures
to transfer funds to UBS Group AG or its subsidiaries as cash
dividends or to repay loans or advances made. There were no
quoted market prices for any associates or joint ventures of the
Group.
Investments in associates and joint ventures
USD million
Carrying amount at the beginning of the year
Additions
Reclassifications1
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
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
22002211
11,,555577
11
((338866))
115500
110055
4455
11
((3399))
((3399))
11,,224433
11,,220000
11,,004433
115577
4433
2020
1,051
388
0
83
84
(1)
(40)
(33)
108
1,557
1,513
965
399
150
44
11 In the second quarter of 2021, UBS reclassified its minority investment (48.8%) in Clearstream Fund Centre AG (previously Fondcenter AG) of USD 386 million to Properties and other non-current assets held for sale
and sold the investment in the same quarter. Refer to Note 30 for more information. 22 For 2021, consists of USD 79 million from associates and USD 26 million from joint ventures. For 2020, consists of USD 64
million from associates and USD 19 million from joint ventures. 33 For 2021, consists of USD 44 million from associates and USD 1 million from joint ventures. For 2020, consists of negative USD 1 million from
associates. 44 In 2021, UBS AG’s equity interest amounted to 17.31%. UBS AG is represented on the Board of Directors.
400
401
393
Financial statements Consolidated financial statements | UBS Group AG consolidated financial statements
Note 29 Interests in subsidiaries and other entities (continued)
c) Unconsolidated structured entities
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 a transaction facilitated by the entity. During
2021, 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 2021
because it did not control them.
Interests in unconsolidated structured 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.
Sponsored unconsolidated structured entities in which UBS did
not have an interest at year-end
During 2021 and 2020, the Group did not earn material income
from sponsored unconsolidated SEs in which UBS did not have an
interest at year-end.
During 2021 and 2020, UBS and third parties did not transfer
any assets into sponsored securitization vehicles created in the
year. UBS and third parties transferred assets, alongside deposits
and debt issuances (which are assets from the perspective of the
vehicle), of USD 1 billion and USD 2 billion, respectively, into
sponsored client vehicles created in 2021 (2020: USD 0 billion and
USD 9 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 46 billion (31 December
2020: USD 37 billion).
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
224466
55
3355
332244
66110033
22
22
330044
Securitization
vehicles
375
6
35
4163
3
CClliieenntt
vveehhiicclleess
116622
4455
44,,552255
0022
44,,773322
1111
1111
881155
Client
vehicles
131
49
12
6,624
02
6,805
11
3311..1122..2211
IInnvveessttmmeenntt
ffuunnddss
66,,774433
115555
112255
222222
00
77,,224477
228811
228811
11558866
31.12.20
Investment
funds
7,595
158
179
172
8,104
376
TToottaall
77,,115511
220055
112255
225577
44,,884499
11
1122,,558888
229944
229944
Total
8,101
213
179
208
6,624
0
15,326
390
MMaaxxiimmuumm
eexxppoossuurree ttoo lloossss11
77,,115511
220055
112255
225577
44,,884499
225500
Maximum
exposure to loss1
8,101
211
179
208
6,624
250
0
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 2021, USD 0.1 billion of the USD 0.6 billion (31 December 2020: USD 0.2 billion of the USD 0.4 billion)
was held in Group Functions – Non-core and Legacy Portfolio. 44 Represents the principal amount outstanding. 55 Represents the market value of total assets. 66 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. In 2021, UBS updated the presentation of this table to remove its interests in unconsolidated
structured investment funds and the corresponding total asset information, where UBS’s interest is driven solely from UBS’s role as the fund’s investment manager and the fees it receives. This information is now
separately disclosed in the accompanying text on the following page. Prior-period information has been aligned with this new presentation.
1365
1246
394
376
390
11
3
402
394
Note 29 Interests in subsidiaries and other entities (continued)
Note 29 Interests in subsidiaries and other entities (continued)
The Group retains or purchases interests in unconsolidated SEs
in the form of direct investments, financing, guarantees, letters of
credit, derivatives, as well as 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 this subject
to change over time with market movements. Guarantees, letters
of credit and credit derivatives are an exception, with the
contract’s notional amount, adjusted for losses already incurred,
representing the maximum loss that the Group is exposed to.
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 risks inherent in the unconsolidated
SE or risk-reducing effects of collateral or other credit
enhancements.
In 2021 and 2020, 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 2021 and 2020, 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 in securitization vehicles
As of 31 December 2021 and 31 December 2020, the Group held
interests, both retained and acquired, in various securitization
vehicles that relate 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 2021 Pillar 3 Report, available under “Pillar 3
disclosures” at ubs.com/investors, for the following reasons:
(i) exclusion of 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 for Pillar 3 disclosures); and (iii) different classification
of vehicles viewed as sponsored by the Group versus sponsored
by third parties.
› Refer to the 31 December 2021 Pillar 3 Report, available under
“Pillar 3 disclosures” at ubs.com/investors, for more information
Interests in client vehicles
Client vehicles are established predominantly for clients to gain
exposure to specific assets or risk exposures. Such vehicles may
enter into derivative agreements, with UBS or a third party, to
align the cash flows of the entity with the investor’s intended
investment objective, or to introduce other desired risk exposures.
As of 31 December 2021 and 31 December 2020, the Group
retained interests in client vehicles sponsored by UBS and third
parties that relate to financing, secondary market and derivative
trading activities, and to hedge structured product offerings.
Interests in investment funds
Investment funds have a collective investment objective, and are
either passively managed, so that any decision making does not
have a substantive effect on variability, or are actively managed
and investors or their governing bodies do not have substantive
voting or similar rights.
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 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
based on various market factors and considers the fund’s nature
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 based on the performance of the
entity. Depending on the structure of the fund, these fees may be
collected directly from the fund’s assets and / or from the
investors. Any amounts due are collected on a regular basis and
are generally backed by the fund’s assets. Therefore interest in
such funds is not represented by the on-balance sheet fee
receivable but rather by the future exposure to variable fees. The
total assets of such funds were USD 370 billion and USD 359
billion as of 31 December 2021 and 31 December 2020,
respectively, and have been excluded from the table on the
previous page. The Group did not have any material exposure to
loss from these interests as of 31 December 2021 or as of
31 December 2020.
Consolidated financial statements | UBS Group AG consolidated financial statements
c) Unconsolidated structured entities
UBS is considered to sponsor another entity if, in addition to
Sponsored unconsolidated structured entities in which UBS did
ongoing involvement with the entity, it had a key role in
not have an interest at year-end
establishing that entity or
in bringing together relevant
During 2021 and 2020, the Group did not earn material income
counterparties for a transaction facilitated by the entity. During
from sponsored unconsolidated SEs in which UBS did not have an
2021, the Group sponsored the creation of various SEs and
interest at year-end.
interacted with a number of non-sponsored SEs, including
During 2021 and 2020, UBS and third parties did not transfer
securitization vehicles, client vehicles and certain investment
any assets into sponsored securitization vehicles created in the
funds, that UBS did not consolidate as of 31 December 2021
year. UBS and third parties transferred assets, alongside deposits
because it did not control them.
Interests in unconsolidated structured entities
and debt issuances (which are assets from the perspective of the
vehicle), of USD 1 billion and USD 2 billion, respectively, into
sponsored client vehicles created in 2021 (2020: USD 0 billion and
The table below presents the Group’s interests in and maximum
USD 9 billion, respectively). For sponsored investment funds,
exposure to loss from unconsolidated SEs, as well as the total
transfers arose during the period as investors invested and
assets held by the SEs in which UBS had an interest as of year-
redeemed positions, thereby changing the overall size of the
end, except for investment funds sponsored by third parties, for
funds, which, when combined with market movements, resulted
which the carrying amount of UBS’s interest as of year-end has
in a total closing net asset value of USD 46 billion (31 December
been disclosed.
2020: USD 37 billion).
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
Derivative financial instruments
TToottaall aasssseettss
TToottaall lliiaabbiilliittiieess
((UUSSDD bbiilllliioonn))
AAsssseettss hheelldd bbyy tthhee uunnccoonnssoolliiddaatteedd ssttrruuccttuurreedd eennttiittiieess iinn wwhhiicchh UUBBSS hhaadd aann iinntteerreesstt
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
Derivative financial instruments
TToottaall aasssseettss
TToottaall lliiaabbiilliittiieess
((UUSSDD bbiilllliioonn))
SSeeccuurriittiizzaattiioonn
vveehhiicclleess
MMaaxxiimmuumm
eexxppoossuurree ttoo lloossss11
CClliieenntt
vveehhiicclleess
116622
4455
44,,552255
0022
44,,773322
1111
1111
881155
Client
vehicles
131
49
6,624
12
02
6,805
11
11
3311..1122..2211
IInnvveessttmmeenntt
ffuunnddss
66,,774433
115555
112255
222222
00
77,,224477
228811
228811
11558866
158
179
172
8,104
376
376
31.12.20
Investment
funds
7,595
TToottaall
77,,115511
220055
112255
225577
44,,884499
11
1122,,558888
229944
229944
Total
8,101
213
179
208
6,624
0
15,326
390
390
224466
55
3355
332244
66110033
22
22
330044
375
6
35
4163
3
3
77,,115511
220055
112255
225577
44,,884499
225500
8,101
211
179
208
6,624
250
0
Securitization
vehicles
Maximum
exposure to loss1
AAsssseettss hheelldd bbyy tthhee uunnccoonnssoolliiddaatteedd ssttrruuccttuurreedd eennttiittiieess iinn wwhhiicchh UUBBSS hhaadd aann iinntteerreesstt
394
1365
1246
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 2021, USD 0.1 billion of the USD 0.6 billion (31 December 2020: USD 0.2 billion of the USD 0.4 billion)
was held in Group Functions – Non-core and Legacy Portfolio. 44 Represents the principal amount outstanding. 55 Represents the market value of total assets. 66 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. In 2021, UBS updated the presentation of this table to remove its interests in unconsolidated
structured investment funds and the corresponding total asset information, where UBS’s interest is driven solely from UBS’s role as the fund’s investment manager and the fees it receives. This information is now
separately disclosed in the accompanying text on the following page. Prior-period information has been aligned with this new presentation.
402
403
395
Financial statements
Consolidated financial statements | UBS Group AG consolidated financial statements
Note 30 Changes in organization and acquisitions and disposals of subsidiaries and businesses
Sale of wealth management business in Spain in 2022
In October 2021, UBS signed an agreement to sell its domestic
wealth management business in Spain to Singular Bank. The
agreement
transition of employees, client
relationships, products and services of the wealth management
business of UBS in Spain. The transaction is subject to customary
closing conditions and is expected to close in the third quarter of
2022.
includes
the
As of 31 December 2021, the assets and liabilities of the
business were presented in Global Wealth Management as a
disposal group held for sale within Other non-financial assets and
Other non-financial liabilities and amounted to USD 647 million
and USD 823 million, respectively. Upon the closing of the
transaction, UBS expects to record a pre-tax gain of approximately
USD 0.2 billion.
Sale of UBS Swiss Financial Advisers AG in 2022
In December 2021, UBS signed an agreement to sell its wholly
owned subsidiary UBS Swiss Financial Advisers AG (SFA) to
Vontobel. SFA is an SEC-registered investment advisor and
FINMA-licensed securities firm that offers US clients tailored
investment solutions in a Switzerland-based environment. The
transaction is subject to customary closing conditions and
regulatory approvals and is expected to close in the third quarter
of 2022.
As of 31 December 2021, the assets and liabilities that are
subject to the transaction were presented in Global Wealth
Management as a disposal group held for sale within Other non-
financial assets and Other non-financial liabilities and amounted
to USD 446 million and USD 475 million, respectively. Upon the
closing of the transaction, UBS does not expect a material effect
on profit or loss or shareholders’ equity of the Group.
Acquisitions of subsidiaries and businesses in 2022
Acquisition of Wealthfront in 2022
In January 2022, UBS entered into an agreement to acquire
Wealthfront, an industry-leading digital wealth management
provider, for a cash consideration of USD 1.4 billion. The
acquisition is aligned with UBS’s growth strategy in the Americas,
will broaden our reach among affluent investors and will add a
new digital-first offering increasing our distribution capabilities.
The transaction is subject to customary closing conditions,
including regulatory approvals, and is expected to close in the
second half of 2022. Upon the closing of the transaction,
Wealthfront will become a wholly owned subsidiary of UBS and
UBS expects to recognize additional goodwill and other intangible
assets of approximately USD 1.2 billion.
Strategic partnership with Sumitomo Mitsui Trust
Holdings
In 2019, UBS entered into a strategic wealth management
partnership in Japan with Sumitomo Mitsui Trust Holdings, Inc.
(SuMi Trust Holdings). In January 2020, the first phase was
launched, with operations commencing in the joint venture that
was established to promote the respective services. At the time,
UBS and SuMi Trust Holdings also started offering each other’s
products and services to their respective clients.
In the third quarter of 2021, the second phase of the
partnership was completed, with the launch of a new operational
partnership entity, UBS SuMi TRUST Wealth Management Co.,
Ltd., which is 51%-owned and controlled by UBS, requiring UBS
to consolidate this entity. The new entity offers global securities
and wealth management capabilities, together with the custody,
real estate, inheritance and wealth transfer expertise of a
Japanese trust banking group. Upon completion of this
transaction in the third quarter of 2021, shareholders’ equity of
the Group increased by USD 155 million, with no effect on profit
or loss.
Disposals of subsidiaries and businesses
Sale of remaining investment in Clearstream Fund Centre AG
In the second quarter of 2021, UBS sold its remaining minority
investment in Clearstream Fund Centre AG to Deutsche Börse AG
for CHF 390 million. The transaction followed the sale of a
majority investment and successful transfer of control of
Fondcenter AG to Deutsche Börse AG in 2020, when UBS
recognized a post-tax gain on sale of USD 631 million in Other
income. The sale of the remaining 48.8% investment resulted in
a post-tax gain of USD 37 million in 2021, which was recognized
in Other income, with no associated net tax expense. Long-term
commercial cooperation arrangements remain in place for the
provision of services by Clearstream to UBS, including jointly
servicing banks and insurance companies.
Sale of wealth management business in Austria
In the third quarter of 2021, UBS completed the sale of its
domestic wealth management business in Austria to LGT. The sale
resulted in a pre-tax gain of USD 100 million, which was
recognized in Other income, and an associated tax expense of
USD 25 million.
404
396
Strategic partnership with Sumitomo Mitsui Trust
Sale of wealth management business in Spain in 2022
Holdings
In October 2021, UBS signed an agreement to sell its domestic
wealth management business in Spain to Singular Bank. The
In 2019, UBS entered into a strategic wealth management
agreement
includes
the
transition of employees, client
partnership in Japan with Sumitomo Mitsui Trust Holdings, Inc.
relationships, products and services of the wealth management
(SuMi Trust Holdings). In January 2020, the first phase was
business of UBS in Spain. The transaction is subject to customary
launched, with operations commencing in the joint venture that
closing conditions and is expected to close in the third quarter of
UBS and SuMi Trust Holdings also started offering each other’s
As of 31 December 2021, the assets and liabilities of the
products and services to their respective clients.
business were presented in Global Wealth Management as a
In the third quarter of 2021, the second phase of the
disposal group held for sale within Other non-financial assets and
partnership was completed, with the launch of a new operational
Other non-financial liabilities and amounted to USD 647 million
partnership entity, UBS SuMi TRUST Wealth Management Co.,
and USD 823 million, respectively. Upon the closing of the
Ltd., which is 51%-owned and controlled by UBS, requiring UBS
transaction, UBS expects to record a pre-tax gain of approximately
to consolidate this entity. The new entity offers global securities
USD 0.2 billion.
and wealth management capabilities, together with the custody,
real estate, inheritance and wealth transfer expertise of a
Sale of UBS Swiss Financial Advisers AG in 2022
Japanese trust banking group. Upon completion of this
In December 2021, UBS signed an agreement to sell its wholly
transaction in the third quarter of 2021, shareholders’ equity of
owned subsidiary UBS Swiss Financial Advisers AG (SFA) to
the Group increased by USD 155 million, with no effect on profit
Vontobel. SFA is an SEC-registered investment advisor and
or loss.
Disposals of subsidiaries and businesses
FINMA-licensed securities firm that offers US clients tailored
investment solutions in a Switzerland-based environment. The
transaction is subject to customary closing conditions and
regulatory approvals and is expected to close in the third quarter
Sale of remaining investment in Clearstream Fund Centre AG
of 2022.
In the second quarter of 2021, UBS sold its remaining minority
As of 31 December 2021, the assets and liabilities that are
investment in Clearstream Fund Centre AG to Deutsche Börse AG
subject to the transaction were presented in Global Wealth
for CHF 390 million. The transaction followed the sale of a
Management as a disposal group held for sale within Other non-
majority investment and successful transfer of control of
financial assets and Other non-financial liabilities and amounted
Fondcenter AG to Deutsche Börse AG in 2020, when UBS
to USD 446 million and USD 475 million, respectively. Upon the
recognized a post-tax gain on sale of USD 631 million in Other
closing of the transaction, UBS does not expect a material effect
income. The sale of the remaining 48.8% investment resulted in
on profit or loss or shareholders’ equity of the Group.
a post-tax gain of USD 37 million in 2021, which was recognized
in Other income, with no associated net tax expense. Long-term
Acquisitions of subsidiaries and businesses in 2022
commercial cooperation arrangements remain in place for the
provision of services by Clearstream to UBS, including jointly
Acquisition of Wealthfront in 2022
servicing banks and insurance companies.
Sale of wealth management business in Austria
In January 2022, UBS entered into an agreement to acquire
Wealthfront, an industry-leading digital wealth management
provider, for a cash consideration of USD 1.4 billion. The
In the third quarter of 2021, UBS completed the sale of its
acquisition is aligned with UBS’s growth strategy in the Americas,
domestic wealth management business in Austria to LGT. The sale
will broaden our reach among affluent investors and will add a
resulted in a pre-tax gain of USD 100 million, which was
new digital-first offering increasing our distribution capabilities.
recognized in Other income, and an associated tax expense of
The transaction is subject to customary closing conditions,
USD 25 million.
including regulatory approvals, and is expected to close in the
second half of 2022. Upon the closing of the transaction,
Wealthfront will become a wholly owned subsidiary of UBS and
UBS expects to recognize additional goodwill and other intangible
assets of approximately USD 1.2 billion.
Consolidated financial statements | UBS Group AG consolidated financial statements
Note 30 Changes in organization and acquisitions and disposals of subsidiaries and businesses
Note 31 Related parties
was established to promote the respective services. At the time,
2022.
a) Remuneration of key management personnel
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).
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)
Share-based compensation3
TToottaall
3311..1122..2211
31.12.20
31.12.19
3311
1177
2266
33
11
4455
112244
33
18
27
3
1
47
129
32
14
21
3
1
37
108
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, share-based compensation for 2021, 2020 and 2019 was entirely
composed of LTIP awards.For the Chairman of the BoD the share-based compensation for 2021, 2020 and 2019 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 (2021: USD / CHF 0.92; 2020: USD / CHF 0.94; 2019: USD / CHF 0.99).
121
107
111133
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 7.5 million (CHF 6.9 million) in 2021, USD 7.0 million
(CHF 6.6 million) in 2020 and USD 7.3 million (CHF 7.3 million) in
2019.
b) Equity holdings of key management personnel
Equity holdings of key management personnel1
3311..1122..2211
31.12.20
Number of shares held by members of the BoD, GEB and parties closely linked to them2
11 No options were held in 2021 and 2020 by non-independent members of the BoD and any GEB member or any of its related parties. 22 Excludes shares granted under variable compensation plans with forfeiture
provisions.
5,288,317
44,,559977,,000066
Of the share totals above, no shares were held by close family
members of key management personnel on 31 December 2021
and 31 December 2020. 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 2021 and 31 December 2020. As of 31 December
2021, no member of the BoD or GEB was the beneficial owner of
more than 1% of UBS Group AG’s shares.
404
405
397
Financial statements
Consolidated financial statements | UBS Group AG consolidated financial statements
Note 31 Related parties (continued)
c) Loans, advances and mortgages to 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
Independent BoD members are granted
loans and
firm.
mortgages in the ordinary course of business at general market
conditions.
Movements in the loan, advances and mortgage balances are
as follows.
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
22002211
3388
1111
((1155))
3344
2020
33
14
(8)
38
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 2021 and 31 December 2020. 33 Swiss franc amounts disclosed represent the respective US dollar amounts
translated at the relevant year-end closing exchange rate.
3311
34
d) Other related-party transactions with entities controlled by key management personnel
In 2021 and 2020, 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 2021, 31 December
2020 and 31 December 2019, there were no outstanding
balances related to such transactions. Furthermore, in 2021 and
2020, 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 2021 and 2020, 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
Other transactions with associates and joint ventures
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 29 for an overview of investments in associates and joint ventures
22002211
663300
113333
((449977))
((1144))
225511
224433
2020
982
527
(1,001)
123
630
621
As of or for the year ended
3311..1122..2211
31.12.20
115577
110044
112277
77
139
128
91
9
406
398
Consolidated financial statements | UBS Group AG consolidated financial statements
Note 31 Related parties (continued)
Note 32 Invested assets and net new money
c) Loans, advances and mortgages to key management personnel
The non-independent members of the BoD and GEB members are
firm.
Independent BoD members are granted
loans and
granted loans, fixed advances and mortgages in the ordinary
mortgages in the ordinary course of business at general market
course of business on substantially the same terms and conditions
conditions.
The following disclosures provide a breakdown of UBS’s invested
assets and a presentation of their development, including net new
money, as required by the Swiss Financial Market Supervisory
Authority.
that are available to other employees, including interest rates and
Movements in the loan, advances and mortgage balances are
Invested assets
collateral, and neither involve more than the normal risk of
as follows.
collectability nor contain any other unfavorable features for the
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
BBaallaannccee aatt tthhee eenndd ooff tthhee yyeeaarr ((CCHHFF mmiilllliioonn))2, 3
translated at the relevant year-end closing exchange rate.
11 All loans are secured loans. 22 There were no unused uncommitted credit facilities as of 31 December 2021 and 31 December 2020. 33 Swiss franc amounts disclosed represent the respective US dollar amounts
d) Other related-party transactions with entities controlled by key management personnel
In 2021 and 2020, UBS did not enter into transactions with
2020, entities controlled by key management personnel did not
entities that are directly or indirectly controlled or jointly
sell any goods or provide any services to UBS, and therefore did
controlled by UBS’s key management personnel or their close
not receive any fees from UBS. UBS also did not provide services
family members and as of 31 December 2021, 31 December
to such entities in 2021 and 2020, and therefore also received no
2020 and 31 December 2019, there were no outstanding
fees.
balances related to such transactions. Furthermore, in 2021 and
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 they 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 managing the
investment and the one distributing 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
Net new money in a reporting period is the amount of invested
assets entrusted to UBS by new and existing clients, less those
withdrawn by existing clients and clients who terminated
relationships 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 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 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 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 the client assets were already with
UBS.
e) Transactions with associates and joint ventures
Invested assets and net new money
Loans to and outstanding receivables from associates and joint ventures
Carrying amount at the beginning of the year
USD million
Additions
Reductions
Foreign currency translation
Carrying amount at the end of the year
of which: unsecured loans and receivables
Other transactions with associates and joint ventures
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 29 for an overview of investments in associates and joint ventures
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..2211
31.12.20
441199
11,,770055
22,,447722
44,,559966
335566
115599
22002211
44,,118877
115599
333399
((6655))
((2244))
((55))
397
1,459
2,331
4,187
311
127
2020
3,607
127
359
96
(1)
0
44,,559966
4,187
22002211
2020
3388
1111
((1155))
3344
3311
33
14
(8)
38
34
22002211
663300
113333
((449977))
((1144))
225511
224433
115577
110044
112277
77
2020
982
527
(1,001)
123
630
621
139
128
91
9
As of or for the year ended
3311..1122..2211
31.12.20
406
407
399
Financial statements
Consolidated financial statements | UBS Group AG consolidated financial statements
Note 33 Currency translation rates
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..2211
31.12.20
3311..1122..2211
31.12.20
31.12.19
11..1100
11..1144
11..3355
00..8877
1.13
1.22
1.37
0.97
11..0099
11..1188
11..3377
00..9911
1.07
1.15
1.29
0.94
1.01
1.12
1.28
0.92
11 Monthly income statement items of operations with a functional currency other than the US dollar are translated into US dollars using month-end rates. 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
Russia’s invasion of Ukraine
Russia’s invasion of Ukraine on 24 February 2022 has triggered
disruptions and uncertainties in the markets and the global
economy, as well as coordinated implementation of sanctions by
Switzerland, the United States, the European Union, the United
Kingdom and others against Russia and, certain Russian entities
and nationals. These events, together with potential counter-
sanctions and other measures taken by Russia, impact UBS’s
businesses.
UBS’s country risk exposure to Russia was approximately
USD 0.6 billion across its business divisions as of 31 December
2021. This exposure has been reduced since year-end 2021. In
addition, UBS is currently monitoring settlement risk on certain
open transactions with Russian bank- or non-bank counterparties
or Russian underlyings, as market closures, the imposition of
exchange controls, sanctions or other measures may limit our
ability to settle existing transactions or to realize on collateral,
which may result in unexpected increases in exposures. UBS’s
balance sheet as of 31 December 2021 also included net assets of
USD 51 million held in UBS’s Russian subsidiary, OOO UBS Bank.
As of 3 March 2022, UBS also had approximately USD 0.2 billion
of exposure arising from reliance on Russian assets as collateral
on Lombard lending and other secured financing in Global Wealth
Management.
As of 3 March 2022, UBS identified a small number of Global
Wealth Management clients subject to the recently introduced
sanctions with total loans outstanding of under USD 10 million.
UBS continues to closely monitor related effects on its financial
statements, including estimated direct and indirect impacts on
expected credit loss calculations and on fair value measurement
of assets, liabilities and off-balance sheet exposures. The situation
continues to evolve and broader
implications for other
counterparties of UBS, including financial institutions, are not
possible to assess at this time; however, there were no material
adverse effects on UBS’s financial statements as of 4 March 2022.
› Refer to “Top and emerging risks” and “Country risk” in the
“Risk management and control” section and to “Performance in
the financial services industry is affected by market conditions
and the macroeconomic climate” in the “Risk factors” section of
this report for more information
408
400
Consolidated financial statements | UBS Group AG consolidated financial statements
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.
CClloossiinngg eexxcchhaannggee rraattee
As of
AAvveerraaggee rraattee11
For the year ended
3311..1122..2211
31.12.20
3311..1122..2211
31.12.20
31.12.19
11..1100
11..1144
11..3355
00..8877
1.13
1.22
1.37
0.97
11..0099
11..1188
11..3377
00..9911
1.07
1.15
1.29
0.94
1.01
1.12
1.28
0.92
11 Monthly income statement items of operations with a functional currency other than the US dollar are translated into US dollars using month-end rates. 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
Russia’s invasion of Ukraine
of exposure arising from reliance on Russian assets as collateral
Russia’s invasion of Ukraine on 24 February 2022 has triggered
on Lombard lending and other secured financing in Global Wealth
disruptions and uncertainties in the markets and the global
Management.
economy, as well as coordinated implementation of sanctions by
As of 3 March 2022, UBS identified a small number of Global
Switzerland, the United States, the European Union, the United
Wealth Management clients subject to the recently introduced
Kingdom and others against Russia and, certain Russian entities
sanctions with total loans outstanding of under USD 10 million.
and nationals. These events, together with potential counter-
UBS continues to closely monitor related effects on its financial
sanctions and other measures taken by Russia, impact UBS’s
statements, including estimated direct and indirect impacts on
businesses.
expected credit loss calculations and on fair value measurement
UBS’s country risk exposure to Russia was approximately
of assets, liabilities and off-balance sheet exposures. The situation
USD 0.6 billion across its business divisions as of 31 December
continues to evolve and broader
implications for other
2021. This exposure has been reduced since year-end 2021. In
counterparties of UBS, including financial institutions, are not
addition, UBS is currently monitoring settlement risk on certain
possible to assess at this time; however, there were no material
open transactions with Russian bank- or non-bank counterparties
adverse effects on UBS’s financial statements as of 4 March 2022.
or Russian underlyings, as market closures, the imposition of
exchange controls, sanctions or other measures may limit our
ability to settle existing transactions or to realize on collateral,
which may result in unexpected increases in exposures. UBS’s
› Refer to “Top and emerging risks” and “Country risk” in the
“Risk management and control” section and to “Performance in
the financial services industry is affected by market conditions
and the macroeconomic climate” in the “Risk factors” section of
balance sheet as of 31 December 2021 also included net assets of
this report for more information
USD 51 million held in UBS’s Russian subsidiary, OOO UBS Bank.
As of 3 March 2022, UBS also had approximately USD 0.2 billion
1 CHF
1 EUR
1 GBP
100 JPY
408
Note 33 Currency translation rates
Note 35 Main differences between IFRS and Swiss GAAP
The consolidated financial statements of UBS Group AG are
prepared in accordance with International Financial Reporting
Standards (IFRS). The Swiss Financial Market Supervisory Authority
(FINMA) requires financial groups presenting financial statements
under IFRS to provide a narrative explanation of the main
differences between
IFRS and Swiss generally accepted
accounting principles (GAAP) (the FINMA Accounting Ordinance,
FINMA Circular 2020/1 “Accounting – banks” and the Banking
Ordinance (the BO)). Included in this Note are the significant
differences in the recognition and measurement between IFRS
and the provisions of the BO and the guidelines of FINMA
governing true and fair view financial statement reporting
pursuant to Art. 25 to Art. 42 of the BO.
1. Consolidation
Under IFRS, all entities that are controlled by the holding entity
are consolidated. Under Swiss GAAP, controlled entities deemed
immaterial to the Group or held only temporarily are exempt from
instead are recorded as participations
consolidation, but
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 not held to maturity, i.e., instruments available
for sale, and 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
instruments with a permanent holding intent are classified as
participations in Non-consolidated investments in subsidiaries and
other participations and are measured at cost less impairment.
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 and realized gains or losses upon disposal of the
investment are recorded as Extraordinary income / Extraordinary
expenses.
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 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 agreements and
cash collateral on securities lending agreements, amounts due
under unit-linked investment contracts, and brokerage payables.
Under Swiss GAAP, the fair value option can only be applied
to structured debt instruments consisting 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.
4. Allowances and provisions for credit losses
Swiss GAAP permit use of IFRS for 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 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 within the
scope of Swiss GAAP ECL requirements, which are not subject to
ECL under
IFRS due to classification and measurements
differences, UBS applies an alternative approach. Where Pillar 1
internal ratings-based (IRB) models are applied to measure 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
where the Pillar 1 standardized approach (SA) is used to measure
credit risk, ECL is determined using a portfolio approach that
derives a conservative probability of default (PD) and loss given
default (LGD) for the entire portfolio.
5. Hedge accounting
Under IFRS, when cash flow hedge accounting is applied, the fair
value gain or loss on the effective portion of a derivative
designated as a cash flow hedge is recognized initially in equity
and reclassified to the income statement when certain conditions
are met. When fair value hedge accounting is applied, the fair
value change of the hedged item attributable to the hedged risk
is reflected in the measurement of the hedged item and is
recognized in the income statement along with the change in the
fair value of the hedging derivative. Under Swiss GAAP, the
effective portion of the fair value change of a 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.
409
401
Financial statements
Consolidated financial statements | UBS Group AG consolidated financial statements
Note 35 Main differences between IFRS and Swiss GAAP (continued)
6. Goodwill and intangible assets
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 permit 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 the UBS AG standalone financial
statements and Swiss GAAP (FER 16) for the Swiss pension plan
in the UBS AG and the UBS Switzerland AG standalone financial
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.
For defined benefit plans, IFRS require the full defined benefit
obligation net of the plan assets to be recorded on the balance
sheet subject to the asset ceiling rules, 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 require employer contributions to the pension
fund to be recognized as personnel expenses in the income
statement. Swiss GAAP also require an assessment of whether,
based on the pension fund’s financial statements prepared in
accordance with Swiss accounting standards (FER 26), an
economic benefit to, or obligation of, the employer arises from
the pension fund that 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 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.
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 leases are not recognized on the balance sheet, with
payments recognized as General and 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 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 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, in
both the normal course of business and 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
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, and reversals of
impairments of participations and fixed assets, are classified as
extraordinary items under Swiss GAAP. This distinction is not
available under IFRS.
410
402
Standalone financial
statements
Table of contents
404 UBS Group AG standalone financial statements
404
405
406
Income statement
Balance sheet
Statement of proposed appropriation of total profit and
dividend distribution out of total profit and capital
contribution reserve
407 Notes to the UBS Group AG standalone financial
statements
407
408
1
2
Corporate information
Accounting policies
412
412
412
412
412
413
413
414
414
415
417
417
418
Liquid assets
Balance sheet notes
9
10 Marketable securities
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
410
410
410
410
410
411
411
4
5
6
7
8
Income statement notes
3
Dividend income from investments in subsidiaries
Other operating income
Financial income
Personnel expenses
Other operating expenses
Financial expenses
419 Additional information
419
21
419
419
420
22
23
24
421
25
Assets pledged to secure own liabilities
Contingent liabilities
Significant shareholders
Share ownership of the members of the Board of
Directors, the Group Executive Board and other
employees
Related parties
422
Report of the statutory auditor on the financial statements
403
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..2211
31.12.20
3311..1122..2211
31.12.20
3
4
5
6
7
8
44,,667722
1122
11,,880066
66,,449900
2211
4444
44
11,,775511
11,,881199
44,,667711
77
44,,666644
3,853
17
1,836
5,706
19
69
4
1,765
1,858
3,848
6
3,841
44,,227700
1122
11,,665533
55,,993355
1199
4400
44
11,,660033
11,,666655
44,,227700
66
44,,226644
3,646
16
1,714
5,376
18
63
4
1,650
1,735
3,641
6
3,635
404
404
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..2211
31.12.20
3311..1122..2211
31.12.20
3
4
5
6
7
8
44,,667722
1122
11,,880066
66,,449900
2211
4444
44
11,,775511
11,,881199
44,,667711
77
44,,666644
3,853
17
1,836
5,706
19
69
4
1,765
1,858
3,848
6
3,841
44,,227700
1122
11,,665533
55,,993355
1199
4400
44
11,,660033
11,,666655
44,,227700
66
44,,226644
3,646
16
1,714
5,376
18
63
4
1,650
1,735
3,641
6
3,635
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..2211
31.12.20
3311..1122..2211
31.12.20
9
10
11
12
13
14
15
16
17
18
19
20
11,,990011
110022
44,,994422
992277
77,,887722
4411,,119999
4400,,888899
5566,,335500
00
2266
9977,,557766
110055,,444488
2,198
84
5,555
947
8,784
41,199
40,889
50,062
4
21
91,286
100,071
6633,,558877
58,340
44,,773322
11,,884466
66,,557788
5555,,003344
33,,111166
5588,,114499
6644,,772277
3,853
2,097
5,950
50,993
3,128
54,120
60,071
11,,773333
9933
44,,550055
884455
77,,117777
3377,,556600
3377,,227777
5511,,337733
00
2244
8888,,995577
9966,,113333
5577,,997700
44,,331144
11,,668833
55,,999977
5500,,117722
22,,884411
5533,,001133
5599,,001100
1,946
74
4,919
839
7,779
36,483
36,209
44,332
3
19
80,837
88,616
51,662
3,412
1,857
5,269
45,156
2,770
47,925
53,194
774411
1,268
667755
1,123
337777
2266,,116611
2266,,116611
2266,,116611
1144,,114466
((44,,662299))
((11,,224422))
00
44,,666644
4400,,772200
393
27,048
27,048
27,048
12,738
(4,020)
(180)
0
3,841
40,000
110055,,444488
100,071
337700
2255,,668822
2255,,668822
2255,,668822
1111,,115533
((44,,334455))
((11,,114455))
00
44,,226644
3377,,112244
9966,,113333
386
26,506
26,506
26,506
8,812
(3,917)
(174)
0
3,635
35,421
88,616
404
405
405
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 6 April 2022 approve the appropriation
of total profit and an ordinary dividend distribution of USD 0.50
(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 0.50 (gross) per dividend-bearing share, USD 0.25 of which out of total profit1
PPrrooffiitt // ((lloossss)) ccaarrrriieedd ffoorrwwaarrdd
USD million
CHF million
For the year ended
For the year ended
3311..1122..2211
44,,666644
00
44,,666644
((33,,773399))
((992266))
00
3311..1122..2211
44,,226644
00
44,,226644
((33,,442233))
((884411))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 926 million presented is based on the total number of shares issued as of
31 December 2021. 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, converted at
closing exchange rate as of 31 December 2021 (CHF / USD 1.10).
Total statutory capital reserve: capital contribution reserve before proposed distribution1
Dividend distribution: USD 0.50 (gross) per dividend-bearing share, USD 0.25 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..2211
2266,,116611
((992266))
2255,,223366
3311..1122..2211
2255,,668822
((884411))33
2244,,884400
11 The Swiss Federal Tax Administration’s current position is that, of the CHF 25.7 billion capital contribution reserve available as of 31 December 2021, an amount limited to CHF 11.0 billion is available from which
dividends may be paid without a Swiss withholding tax deduction. This amount includes a reduction of capital contribution reserves of CHF 223 million in 2021 (based on the purchase price). 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 926 million presented is based on the total number of shares issued as of 31 December 2021.
33 For illustrative purposes, converted at closing exchange rate as of 31 December 2021 (CHF / USD 1.10).
As set out above, half of the ordinary dividend distribution of
USD 0.50 (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 US dollars.
Shareholders whose shares are held through SIX SIS AG 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 or
directly registered in the US share register with Computershare
will be paid dividends in US dollars. The total amount of the
dividend distribution will be capped at CHF 3,400 million (the
Cap). To the extent that the Swiss franc 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 US dollar per share amount
of the dividend will be reduced on a pro rata basis so that the
total Swiss franc 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 14 April 2022 to holders
of shares on the record date of 13 April 2022. The shares will be
traded ex-dividend as of 12 April 2022 and, accordingly, the last
day on which the shares may be traded with entitlement to
receive the dividend will be 11 April 2022.
406
406
Statement of proposed appropriation of total profit and dividend distribution out of total profit and capital
contribution reserve
Notes to the UBS Group AG standalone financial statements
Note 1 Corporate information
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 capital
notes and TLAC-eligible senior unsecured debt 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.
In 2021, as approved by the Annual General Meeting held on
8 April 2021, the cancellation of 156,632,400 shares, each with
a nominal value of CHF 0.10, purchased under the 2018–2021
share repurchase program, was executed. The cancellation of
shares resulted in reclassifications within equity but had no net
effect on the total equity attributable to shareholders. Share
capital was reduced by the nominal value of the repurchased
shares upon cancellation, i.e., USD 16 million (CHF 16 million).
Following the requirements of the Swiss tax law for Switzerland-
domiciled companies with shares listed on a Swiss stock
exchange, effective 1 January 2020, the capital contribution
reserve was reduced by 50% of the total capital reduction amount
exceeding the nominal value upon cancellation of the shares
repurchased from 2020 onward, i.e., USD 236 million (CHF 224
million). The voluntary earnings reserve was reduced by the
remaining portion of the total capital reduction amount
exceeding
the
repurchased shares, i.e., USD 1,792 million (CHF 1,762 million).
the nominal value upon cancellation of
As of 31 December 2021, UBS Group AG’s distributable items
for the purpose of AT1 capital instruments were USD 40.3 billion
(CHF 36.7 billion)
(31 December 2020: USD 39.5 billion
(CHF 35.0 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.
UBS Group AG standalone financial statements
The Board of Directors proposes that the Annual General Meeting
(gross) in cash per share of CHF 0.10 nominal value under the
of Shareholders (AGM) on 6 April 2022 approve the appropriation
terms set out below:
of total profit and an ordinary dividend distribution of USD 0.50
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..2211
44,,666644
00
44,,666644
((33,,773399))
((992266))
00
3311..1122..2211
2266,,116611
((992266))
2255,,223366
3311..1122..2211
44,,226644
00
44,,226644
((33,,442233))
((884411))22
00
3311..1122..2211
2255,,668822
((884411))33
2244,,884400
USD million
CHF million
For the year ended
For the year ended
Dividend distribution: USD 0.50 (gross) per dividend-bearing share, USD 0.25 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 926 million presented is based on the total number of shares issued as of
31 December 2021. 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, converted at
closing exchange rate as of 31 December 2021 (CHF / USD 1.10).
Total statutory capital reserve: capital contribution reserve before proposed distribution1
Dividend distribution: USD 0.50 (gross) per dividend-bearing share, USD 0.25 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 25.7 billion capital contribution reserve available as of 31 December 2021, an amount limited to CHF 11.0 billion is available from which
dividends may be paid without a Swiss withholding tax deduction. This amount includes a reduction of capital contribution reserves of CHF 223 million in 2021 (based on the purchase price). 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 926 million presented is based on the total number of shares issued as of 31 December 2021.
33 For illustrative purposes, converted at closing exchange rate as of 31 December 2021 (CHF / USD 1.10).
As set out above, half of the ordinary dividend distribution of
Cap). To the extent that the Swiss franc equivalent of the total
USD 0.50 (gross) in cash per share is payable out of total profit
dividend distribution would exceed the Cap on the day of the
and the other half is payable out of the capital contribution
AGM, based on the exchange rate determined by the Board of
reserve. The portion of the dividend paid out of total profit will be
Directors in its reasonable opinion, the US dollar per share amount
subject to a 35% Swiss withholding tax.
of the dividend will be reduced on a pro rata basis so that the
The ordinary dividend distribution is declared in US dollars.
total Swiss franc 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 Swiss francs, based on a published exchange
total profit and the capital contribution reserve is approved, the
rate calculated up to five decimal places on the day prior to the
payment of the dividend will be made on 14 April 2022 to holders
ex-dividend date. Shareholders holding shares through DTC or
of shares on the record date of 13 April 2022. The shares will be
directly registered in the US share register with Computershare
traded ex-dividend as of 12 April 2022 and, accordingly, the last
will be paid dividends in US dollars. The total amount of the
day on which the shares may be traded with entitlement to
dividend distribution will be capped at CHF 3,400 million (the
receive the dividend will be 11 April 2022.
406
407
407
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 2,808 million as of 31 December 2021 (31 December 2020:
negative CHF 3,867 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.
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
408
408
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
respectively.
Accrued
Corresponding gains and losses resulting from fair value changes
are recognized in Financial income and Financial expenses,
respectively.
and deferred
expenses
income,
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
UBS Group AG standalone financial statements
Note 2 Accounting policies
Note 2 Accounting policies (continued)
The UBS Group AG standalone financial statements are prepared
as of the balance sheet date. Gains and losses resulting from fair
Long-term interest-bearing liabilities
rate method for converting US dollar amounts into Swiss francs:
Investments in AIVs that have no quoted market price or no
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.
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 2021, a net gain of USD 9 million (CHF 8 million)
from settlement of share-based awards was recognized in
Voluntary earnings reserve (2020 comparative period: net gain of
USD 38 million (CHF 37 million)).
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
presented net
in the
income statement.
Investments
in
Accrued
expenses
and deferred
income,
respectively.
Share-based and other deferred compensation plans
Share-based compensation plans
The grant date fair value of equity-settled share-based
is generally
compensation awards granted to employees
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
in accordance with the principles of the Swiss law on accounting
value changes are recognized in Financial income and Financial
and financial reporting (32nd title of the Swiss Code of
expenses, respectively.
The functional currency of UBS Group AG is the US dollar. The
Financial assets
significant accounting and valuation principles applied are
Obligations).
described below.
Presentation currencies
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
As the primary presentation currency of the standalone financial
measured at fair value based on their quoted market prices or
statements of UBS Group AG is the US dollar, amounts in Swiss
other observable market prices as of the balance sheet date. Gains
francs are additionally presented for each component of the
and losses resulting from fair value changes are recognized in
financial statements. UBS Group AG applies the modified closing
Financial income and Financial expenses, respectively.
assets and liabilities are translated at the closing rate, equity
other observable market price are recognized as Financial assets
positions at historic rates and income and expense items at the
and are measured at their acquisition cost adjusted for
weighted average rate for the period. All resulting currency
impairment losses.
translation effects are recognized separately in Voluntary earnings
Financial assets further include loans granted to UBS AG that
reserve, amounting to a negative currency translation effect of
substantially mirror the terms of the perpetual AT1 capital notes
CHF 2,808 million as of 31 December 2021 (31 December 2020:
and the TLAC-eligible senior unsecured debt instruments issued,
negative CHF 3,867 million).
Foreign currency translation
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
Transactions denominated in foreign currency are translated into
US dollars at the spot exchange rate on the date of the
Derivative instruments
transaction. At the balance sheet date, all current assets and
short-term liabilities, as well as Financial assets measured at fair
UBS Group AG uses derivative instruments to manage exposures
value that are denominated in a foreign currency, are translated
to foreign currency risks from investments in foreign subsidiaries.
into US dollars using the closing exchange rate. For Other non-
The derivative instruments are entered into with UBS AG,
current assets and long-term liabilities, where the asset mirrors
mirroring the conditions of the closing transactions UBS AG enters
the terms of a corresponding liability or the asset and liability
into with third parties.
otherwise form an economic hedge relationship, the asset and
Derivative instruments are measured at fair value based on
liability are treated as one unit of account for foreign currency
quoted market prices or other observable market prices as of the
translation purposes, with offsetting unrealized foreign currency
balance sheet date. Unrealized gains and losses are recognized on
translation gains and losses based on the closing exchange rate
the balance sheet as Accrued income and prepaid expenses and
subsidiaries measured at historic cost are translated at the spot
Corresponding gains and losses resulting from fair value changes
exchange rate on the date of the transaction. Currency translation
are recognized in Financial income and Financial expenses,
effects from dividends paid in Swiss francs are recognized in
respectively.
equity. All other currency translation effects are recognized in the
income statement.
Investments in subsidiaries
The main currency translation rates used by UBS Group AG are
provided in Note 33 of the consolidated financial statements.
Investments in subsidiaries are equity interests that are held to
Marketable securities
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.
Marketable
securities
include
investments
in alternative
The investments are measured individually and carried at cost less
investment vehicles (AIVs) with a short-term holding period. The
impairment.
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
› 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
based on quoted market prices or other observable market prices
Group
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.
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.
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.
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 to a liability representing its obligation
toward the employees.
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
408
409
409
Financial statements
UBS Group AG standalone financial statements
Income statement notes
Note 3 Dividend income from investments in subsidiaries
Dividend income from investments in subsidiaries in 2021
consisted of USD 4,539 million (CHF 4,149 million) received from
UBS AG related to the financial year ended 31 December 2020,
which was approved by the Annual General Meeting of the
Shareholders of UBS AG on 7 April 2021, USD 133 million
(CHF 122 million) received from UBS Business Solutions AG
related to the financial year ended 31 December 2020, which was
approved by the Annual General Meeting of Shareholders of UBS
Business Solutions AG on 7 April 2021, and USD 0.2 million
(CHF 0.2 million) net liquidation dividend received from UBS
Group Funding
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 (Switzerland) AG in
(Switzerland) AG
Liquidation held on 8 October 2020. In 2020, dividend income
from investments in subsidiaries consisted of USD 3,848 million
(CHF 3,641 million) received from UBS AG related to the financial
year ended 31 December 2019, 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 (Switzerland) AG in
Liquidation held on 8 October 2020.
Note 4 Other operating income
Other operating income includes gains related to equity-settled and cash-settled awards.
Note 5 Financial income
Interest income on onward lending to UBS AG1
Interest income on other interest-bearing assets
Fair value gains on investments in AIVs
Other
TToottaall ffiinnaanncciiaall iinnccoommee
USD million
For the year ended
CHF million
For the year ended
3311..1122..2211
11,,775566
31.12.20
1,769
3311..1122..2211
11,,660088
31.12.20
1,653
2211
2233
66
14
49
4
1199
2211
66
13
44
4
11,,880066
1,836
11,,665533
1,714
11 Interest income on onward lending to UBS AG of the proceeds from the issuances of TLAC-eligible senior unsecured debt and loss-absorbing additional tier 1 perpetual capital notes. Refer to Note 1 for more
information.
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 2021 and 2020.
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 2021, the
UBS Group employed 71,385 personnel (31 December 2020:
71,551) on a full-time equivalent basis.
410
410
UBS Group AG standalone financial statements
Income statement notes
Note 7 Other operating expenses
Note 3 Dividend income from investments in subsidiaries
Dividend income from investments in subsidiaries in 2021
Liquidation held on 8 October 2020. In 2020, dividend income
consisted of USD 4,539 million (CHF 4,149 million) received from
from investments in subsidiaries consisted of USD 3,848 million
UBS AG related to the financial year ended 31 December 2020,
(CHF 3,641 million) received from UBS AG related to the financial
which was approved by the Annual General Meeting of the
year ended 31 December 2019, which was approved by the
Shareholders of UBS AG on 7 April 2021, USD 133 million
Annual General Meeting of the Shareholders of UBS AG on
(CHF 122 million) received from UBS Business Solutions AG
27 April 2020 (USD 2,550 million (CHF 2,462 million)) and the
related to the financial year ended 31 December 2020, which was
Extraordinary General Meeting of the Shareholders of UBS AG on
approved by the Annual General Meeting of Shareholders of UBS
19 November 2020 (USD 1,298 million (CHF 1,179 million)), and
Business Solutions AG on 7 April 2021, and USD 0.2 million
USD 5 million (CHF 5 million) net liquidation dividend received
(CHF 0.2 million) net liquidation dividend received from UBS
from UBS Group Funding (Switzerland) AG in Liquidation
Group Funding
(Switzerland) AG
in Liquidation following
following liquidation of the entity in the course of 2020, which
liquidation of the entity in the course of 2020, which was
was approved by the Extraordinary General Meeting of the
approved by the Extraordinary General Meeting of the
Shareholders of UBS Group Funding (Switzerland) AG in
Shareholders of UBS Group Funding (Switzerland) AG in
Liquidation held on 8 October 2020.
Fair value losses on AIV awards
Capital tax
Other
TToottaall ootthheerr ooppeerraattiinngg eexxppeennsseess
Note 8 Financial expenses
Interest expense on interest-bearing liabilities
Other
TToottaall ffiinnaanncciiaall eexxppeennsseess
USD million
For the year ended
CHF million
For the year ended
3311..1122..2211
31.12.20
3311..1122..2211
31.12.20
2233
99
1111
4444
48
9
12
69
2211
88
1100
4400
43
8
12
63
USD million
For the year ended
CHF million
For the year ended
3311..1122..2211
31.12.20
3311..1122..2211
11,,774400
1111
11,,775511
1,756
10
1,765
11,,559933
1100
11,,660033
31.12.20
1,641
9
1,650
Other operating income includes gains related to equity-settled and cash-settled awards.
Note 4 Other operating income
Note 5 Financial income
Interest income on onward lending to UBS AG1
Interest income on other interest-bearing assets
Fair value gains on investments in AIVs
Other
TToottaall ffiinnaanncciiaall iinnccoommee
information.
Note 6 Personnel expenses
USD million
For the year ended
CHF million
For the year ended
3311..1122..2211
11,,775566
31.12.20
1,769
3311..1122..2211
11,,660088
31.12.20
1,653
2211
2233
66
14
49
4
1199
2211
66
13
44
4
11,,880066
1,836
11,,665533
1,714
11 Interest income on onward lending to UBS AG of the proceeds from the issuances of TLAC-eligible senior unsecured debt and loss-absorbing additional tier 1 perpetual capital notes. Refer to Note 1 for more
Personnel expenses include recharges from UBS AG and UBS
UBS Group AG had no employees throughout 2021 and 2020.
Business Solutions AG for personnel-related costs for activities
All employees of the UBS Group, including the members of the
performed by the personnel of those companies for the benefit of
Group Executive Board (GEB) of UBS Group AG, were employed
UBS Group AG.
by subsidiaries of UBS Group AG. As of 31 December 2021, the
UBS Group employed 71,385 personnel (31 December 2020:
71,551) on a full-time equivalent basis.
410
411
411
Financial statements
UBS Group AG standalone financial statements
Balance sheet notes
Note 9 Liquid assets
As of 31 December 2021, liquid assets consisted of USD 590
million
(CHF 538 million) held on current accounts at
UBS Switzerland AG and UBS AG and USD 1,311 million
(CHF 1,195 million) of time deposits placed with UBS AG. As of
31 December 2020, liquid assets consisted of 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.
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..2211
44,,225522
663399
5511
44,,994422
31.12.20
4,987
517
51
5,555
3311..1122..2211
33,,887766
558833
4466
44,,550055
31.12.20
4,416
458
45
4,919
11 Short-term receivables from the onward lending to UBS AG of the proceeds from the issuances of TLAC-eligible senior unsecured debt and loss-absorbing additional tier 1 perpetual capital notes. 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..2211
31.12.20
3311..1122..2211
31.12.20
770033
222244
992277
754
193
947
664411
220044
884455
668
171
839
412
412
UBS Group AG standalone financial statements
Balance sheet notes
Note 9 Liquid assets
Note 10 Marketable securities
Note 11 Other short-term receivables
Receivables from employing entities related to compensation awards
Onward lending to UBS AG1
Other
TToottaall ootthheerr sshhoorrtt--tteerrmm rreecceeiivvaabblleess
more information.
Note 12 Accrued income and prepaid expenses
Accrued interest income
Other accrued income and prepaid expenses
TToottaall aaccccrruueedd iinnccoommee aanndd pprreeppaaiidd eexxppeennsseess
As of 31 December 2021, liquid assets consisted of USD 590
31 December 2020, liquid assets consisted of USD 987 million
million
(CHF 538 million) held on current accounts at
(CHF 874 million) held on current accounts at UBS Switzerland AG
UBS Switzerland AG and UBS AG and USD 1,311 million
and UBS AG and USD 1,211 million (CHF 1,072 million) of time
Marketable securities include investments in AIVs related to compensation awards vesting within 12 months after the balance sheet date.
11 Short-term receivables from the onward lending to UBS AG of the proceeds from the issuances of TLAC-eligible senior unsecured debt and loss-absorbing additional tier 1 perpetual capital notes. Refer to Note 1 for
USD million
CHF million
3311..1122..2211
44,,225522
663399
5511
44,,994422
31.12.20
4,987
517
51
5,555
3311..1122..2211
33,,887766
558833
4466
44,,550055
31.12.20
4,416
458
45
4,919
USD million
CHF million
3311..1122..2211
31.12.20
3311..1122..2211
31.12.20
770033
222244
992277
754
193
947
664411
220044
884455
668
171
839
(CHF 1,195 million) of time deposits placed with UBS AG. As of
deposits placed with UBS AG.
Individually significant subsidiaries of UBS Group AG as of 31 December 2021
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 SAR 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.
Company
UBS AG
Registered office
Zurich and Basel, Switzerland
UBS Business Solutions AG1
11 UBS Business Solutions AG holds subsidiaries in China, India, Israel and Poland.
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 20211
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
4,150.02
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 4,150,000,000. 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 29 in the “Consolidated financial statements”
section of this report for more information
Note 14 Financial assets
Long-term receivables from UBS AG
of which: onward lending1
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..2211
5555,,776633
31.12.20
49,554
3311..1122..2211
5500,,883377
31.12.20
43,882
5544,,778811
48,598
4499,,994422
43,035
333322
22
225533
248
2
258
330033
22
223300
219
2
229
5566,,335500
50,062
5511,,337733
44,332
11 Onward lending to UBS AG of the proceeds from the issuances of TLAC-eligible senior unsecured debt and loss-absorbing additional tier 1 perpetual capital notes. Refer to Note 1 for more information.
412
413
413
Financial statements UBS Group AG standalone financial statements
Note 15 Current interest-bearing liabilities
As of 31 December 2021, current interest-bearing liabilities
totaled USD 4,732 million (CHF 4,314 million) comprising TLAC-
eligible senior unsecured debt instruments of USD 4,252 million
(CHF 3,876 million) and loans from UBS AG and UBS Switzerland
AG of USD 480 million (CHF 437 million). 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).
Notes issued, overview by amount, maturity and coupon
3311..1122..2211
CCaarrrryyiinngg aammoouunntt
31.12.20
Carrying amount
CCoonnttrraaccttuuaall
mmaattuurriittyy
FFiirrsstt ooppttiioonnaall
ccaallll ddaattee
iinn ttrraannssaaccttiioonn
ccuurrrreennccyy
in transaction
currency
CCoouuppoonn11
nn//aa
iinn CCHHFF
iinn UUSSDD
1155..44..2211
1144..44..2211
33MM UUSSDD LLIIBBOORR ++ 117788 bbppss
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 notes
Swiss franc-denominated TLAC-eligible senior
unsecured notes
Euro-denominated TLAC-eligible senior unsecured
notes
0
TToottaall nnootteess iissssuueedd
22,,552244
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.
33MM UUSSDD LLIIBBOORR ++ 115533 bbppss
0
22,,885500
11,,229977
33,,887766
11,,442233
44,,225522
1166..1111..2222
2222..22..2222
22..6655%%
11..7755%%
00..7755%%
in USD
in CHF
11..22..2222
11..22..2222
1,850
1,000
1,850
22,,000000
1,638
11,,225500
1,000
11,,882233
22,,000000
886
332299
330000
550000
550000
445566
330000
33%%
nn//aa
nn//aa
nn//aa
nn//aa
nn//aa
00
00
00
00
00
00
0
0
0
0
0
0
0
0
0
0
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..2211
11,,115577
31.12.20
1,312
3311..1122..2211
11,,005544
31.12.20
1,162
338844
777733
666644
2255
518
794
728
57
335500
770055
660066
2233
458
703
644
51
11,,884466
2,097
11,,668833
1,857
414
414
UBS Group AG standalone financial statements
Note 15 Current interest-bearing liabilities
Note 17 Long-term interest-bearing liabilities
As of 31 December 2021, current interest-bearing liabilities
2020, current interest-bearing liabilities totaled USD 3,853 million
totaled USD 4,732 million (CHF 4,314 million) comprising TLAC-
(CHF 3,412 million) comprising TLAC-eligible senior unsecured
eligible senior unsecured debt instruments of USD 4,252 million
debt instruments of USD 2,850 million (CHF 2,524 million) and
(CHF 3,876 million) and loans from UBS AG and UBS Switzerland
loans from UBS AG and UBS Switzerland AG of USD 1,003 million
AG of USD 480 million (CHF 437 million). As of 31 December
(CHF 889 million).
As of 31 December 2021, long-term interest-bearing liabilities
totaled USD 55,034 million (CHF 50,172 million) comprising loss-
absorbing AT1 perpetual capital notes and TLAC-eligible senior
unsecured debt instruments of USD 54,781 million (CHF 49,942
million) and fixed-term loans from UBS AG of USD 253 million
(CHF 230 million). 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).
CCoonnttrraaccttuuaall
FFiirrsstt ooppttiioonnaall
mmaattuurriittyy
ccaallll ddaattee
iinn ttrraannssaaccttiioonn
in transaction
CCoouuppoonn11
ccuurrrreennccyy
iinn UUSSDD
iinn CCHHFF
currency
in USD
in CHF
3311..1122..2211
CCaarrrryyiinngg aammoouunntt
31.12.20
Carrying amount
nn//aa
33MM UUSSDD LLIIBBOORR ++ 117788 bbppss
00
00
00
00
00
00
1,000
1,000
886
1,850
1,850
1,638
nn//aa
33MM UUSSDD LLIIBBOORR ++ 115533 bbppss
550000
550000
445566
22,,000000
22,,000000
11,,882233
330000
332299
330000
11,,225500
11,,442233
44,,225522
11,,229977
33,,887766
0
0
0
0
0
0
0
0
0
0
0
0
22,,885500
22,,552244
nn//aa
nn//aa
nn//aa
nn//aa
33%%
22..6655%%
00..7755%%
11..7755%%
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
In million, except where indicated
US dollar-denominated TLAC-eligible senior
US dollar-denominated TLAC-eligible senior
US dollar-denominated TLAC-eligible senior
US dollar-denominated TLAC-eligible senior
unsecured notes
unsecured notes
unsecured notes
unsecured notes
unsecured notes
TToottaall nnootteess iissssuueedd
notes
date.
Swiss franc-denominated TLAC-eligible senior
Euro-denominated TLAC-eligible senior unsecured
1144..44..2211
1155..44..2211
11..22..2222
11..22..2222
2222..22..2222
1166..1111..2222
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..2211
11,,115577
31.12.20
1,312
3311..1122..2211
11,,005544
31.12.20
1,162
338844
777733
666644
2255
518
794
728
57
335500
770055
660066
2233
458
703
644
51
11,,884466
2,097
11,,668833
1,857
Notes issued, overview by amount, maturity and coupon
Notes issued, overview by amount, maturity and coupon
In million, except where indicated
US dollar-denominated high-trigger loss-absorbing
additional tier 1 perpetual capital notes2
US dollar-denominated high-trigger loss-absorbing
additional tier 1 perpetual capital notes3
Euro-denominated TLAC-eligible senior unsecured
notes4
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
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
Euro-denominated TLAC-eligible senior unsecured
notes
US dollar-denominated TLAC-eligible senior
unsecured notes
US dollar-denominated TLAC-eligible senior
unsecured notes
CCoonnttrraaccttuuaall
mmaattuurriittyy
FFiirrsstt ooppttiioonnaall
ccaallll ddaattee
PPeerrppeettuuaall
2222..33..2211
PPeerrppeettuuaall
1100..88..2211
CCoouuppoonn11
66..887755%%
77..112255%%
2200..99..2222
2200..99..2211
33MM EEUURR LLIIBBOORR ++ 7700 bbppss
11..22..2222
11..22..2222
2222..22..2222
1166..1111..2222
nn//aa
33MM UUSSDD LLIIBBOORR ++ 115533 bbppss
nn//aa
nn//aa
nn//aa
22..6655%%
00..7755%%
11..7755%%
3311..1122..2211
CCaarrrryyiinngg aammoouunntt
31.12.20
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
00
00
00
00
00
00
00
00
00
1,500
1,500
1,328
1,100
1,100
974
1,750
2,137
1,892
500
500
443
2,000
2,000
1,771
300
339
300
1,250
1,526
1,352
2233..55..2233
2233..55..2222
33..449911%%
22,,000000
22,,000000
11,,882233
2,000
2,000
1,771
2233..55..2233
2233..55..2222
33MM UUSSDD LLIIBBOORR ++ 112222 bbppss
11,,000000
11,,000000
991122
1,000
1,000
886
1155..88..2233
1155..88..2222
33MM UUSSDD LLIIBBOORR ++ 9955 bbppss
11,,225500
11,,225500
11,,114400
1,250
1,250
1,107
1155..88..2233
1155..88..2222
22..885599%%
22,,000000
22,,000000
11,,882233
2,000
2,000
1,771
44..33..2244
nn//aa
1188..55..2244
1188..55..2233
22..112255%%
00..662255%%
775500
885544
777788
750
916
811
440000
443399
440000
400
452
400
3300..77..2244
3300..77..2233
11..000088%%
11,,330000
11,,330000
11,,118855
1,300
1,300
1,151
88..1111..2244
88..1111..2233
00..771199%%
113300,,000000
11,,113300
11,,003300
130,000
1,259
1,115
3300..1111..2244
3300..1111..2233
11..55%%
11,,225500
11,,442233
11,,229977
1,250
1,526
1,352
3300..11..2255
3300..11..2244
00..887755%%
440000
443399
440000
400
452
400
1177..44..2255
1177..44..2244
11..2255%%
11,,775500
11,,999922
11,,881166
1,750
2,137
1,892
2244..99..2255
nn//aa
44..112255%%
22,,550000
22,,550000
22,,227799
2,500
2,500
2,214
2299..11..2266
2299..11..2255
2233..22..2266
1155..44..2266
11..99..2266
nn//aa
nn//aa
nn//aa
33..1111..2266
33..1111..2255
00..2255%%
11..2255%%
11,,550000
11,,770088
11,,555577
1,500
1,832
1,622
115500
116655
115500
150
169
150
44..112255%%
22,,000000
22,,000000
11,,882233
2,000
2,000
1,771
11..2255%%
00..2255%%
11,,225500
11,,442233
11,,229977
1,250
1,526
1,352
11,,225500
11,,442233
11,,229977
0
0
0
3300..11..2277
3300..11..2266
11..336644%%
11,,330000
11,,330000
11,,118855
1,300
1,300
1,151
1100..88..2277
1100..88..2266
11..449944%%
22,,000000
22,,000000
11,,882233
0
0
0
414
415
415
Financial statements UBS Group AG standalone financial statements
Note 17 Long-term interest-bearing liabilities (continued)
Notes issued, overview by amount, maturity and coupon (continued)
3311..1122..2211
CCaarrrryyiinngg aammoouunntt
31.12.20
Carrying amount
CCoonnttrraaccttuuaall
mmaattuurriittyy
FFiirrsstt ooppttiioonnaall
ccaallll ddaattee
CCoouuppoonn1
iinn ttrraannssaaccttiioonn
ccuurrrreennccyy
iinn UUSSDD
iinn CCHHFF
in transaction
currency
in USD
in CHF
2244..22..2288
nn//aa
00..2255%%
11,,000000
11,,113388
11,,003388
0
0
0
2233..33..2288
2233..33..2277
44..225533%%
22,,000000
22,,000000
11,,882233
2,000
2,000
1,771
55..1111..2288
55..1111..2277
00..2255%%
11,,550000
11,,770088
11,,555577
1,500
1,832
1,622
99..1111..2288
99..1111..2277
00..997733%%
2200,,000000
117744
115588
20,000
194
171
99..1111..2288
99..1111..2277
2244..88..2299
2244..88..2288
33..1111..2299
33..1111..2288
00..443355%%
00..337755%%
11..887755%%
444400
448833
444400
336600
339955
336600
440000
554411
449944
0
0
0
0
0
0
0
0
0
1133..88..3300
1133..88..2299
33..112266%%
11,,550000
11,,550000
11,,336688
1,500
1,500
1,328
33..1111..3311
nn//aa
00..887755%%
11,,225500
11,,442233
11,,229977
1111..22..3322
1111..22..3311
22..009955%%
22,,000000
22,,000000
11,,882233
2244..22..3333
nn//aa
1188..88..3355
1188..88..3300
00..662255%%
ZZeerroo ccoouuppoonn aaccccrreettiinngg
((aannnnuuaall yyiieelldd ooff 22..55%%))
2244..1111..3355
2244..1111..2233
33..1122..3355
33..1122..2233
2255..22..3366
2255..22..2244
44..33..3366
44..33..2244
44..1111..4499
44..1111..2222
44..33..5500
44..33..2255
1144..44..5500
1144..44..2255
2222..55..5500
2222..55..2255
2277..55..5500
2277..55..2255
2222..99..5500
2222..99..2233
1122..11..5511
1122..11..2266
2299..11..5511
2299..11..2266
2266..22..5511
2266..22..2266
2266..22..5511
2266..22..2266
2266..55..5511
2266..55..2266
22..2211%%
22..33%%
22..3377%%
22..4499%%
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%%))
ZZeerroo ccoouuppoonn aaccccrreettiinngg
((aannnnuuaall yyiieelldd ooff 22..77%%))
ZZeerroo ccoouuppoonn aaccccrreettiinngg
((aannnnuuaall yyiieelldd ooff 22..88%%))
ZZeerroo ccoouuppoonn aaccccrreettiinngg
((aannnnuuaall yyiieelldd ooff 33%%))
ZZeerroo ccoouuppoonn aaccccrreettiinngg
((aannnnuuaall yyiieelldd ooff 33..0011%%))
ZZeerroo ccoouuppoonn aaccccrreettiinngg
((aannnnuuaall yyiieelldd ooff 33..55%%))
11,,225500
11,,442233
11,,229977
3377
4400
4455
2255
4400
2277
4400
3333
2255
4400
2255
3366
3300
2233
3366
0
0
0
36
40
45
0
0
0
0
0
28
40
35
0
0
0
0
0
25
35
31
0
0
115522
115522
113388
146
146
129
112288
112288
111177
124
124
109
221144
221144
119955
206
206
182
110066
110066
9966
102
102
90
552288
552288
448822
510
510
452
5577
5577
110033
110033
5522
9944
333388
333388
330099
117744
117744
115599
9922
6677
6611
227711
227711
224477
55
55
49
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
PPeerrppeettuuaall
1199..22..2222
55..7755%%
11,,000000
11,,113388
11,,003388
1,000
1,221
1,081
PPeerrppeettuuaall
3311..11..2233
55%%
22,,000000
22,,000000
11,,882233
2,000
2,000
1,771
PPeerrppeettuuaall
2288..1111..2233
55..887755%%
770000
551199
447733
700
529
469
PPeerrppeettuuaall
3311..11..2244
77%%
22,,550000
22,,550000
22,,227799
2,500
2,500
2,214
PPeerrppeettuuaall
2277..88..2244
44..337755%%
770000
550099
446644
700
540
478
PPeerrppeettuuaall
44..99..2244
44..8855%%
775500
555566
550077
750
567
502
In million, except where indicated
Euro-denominated TLAC-eligible senior unsecured
notes
US dollar-denominated TLAC-eligible senior
unsecured notes
Euro-denominated TLAC-eligible senior unsecured
notes
Yen-denominated TLAC-eligible senior unsecured
notes
Swiss franc-denominated TLAC-eligible senior
unsecured notes
Swiss franc-denominated TLAC-eligible senior
unsecured notes
GB pound-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
Euro-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 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
Australian dollar-denominated TLAC-eligible
senior unsecured notes
US dollar-denominated TLAC-eligible senior
unsecured notes
Euro-denominated low-trigger loss-absorbing
additional tier 1 perpetual capital notes5
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
416
416
0
0
0
33%%
77%%
664
750
750
668844
775500
775500
668844
775500
775500
275
311
275
227755
227755
330022
11,,550000
1,395
1,575
1,575
11,,443366
11,,557755
11,,557755
1,107
1,250
1,250
11,,114400
11,,225500
11,,225500
22..66..2266
77..88..2255
iinn CCHHFF
in CHF
in USD
iinn UUSSDD
2299..77..2266
1100..22..3311
1199..22..2255
44..337755%%
55..112255%%
33..887755%%
66..887755%%
1133..1111..2255
PPeerrppeettuuaall
PPeerrppeettuuaall
PPeerrppeettuuaall
PPeerrppeettuuaall
PPeerrppeettuuaall
PPeerrppeettuuaall
CCoouuppoonn1
CCoonnttrraaccttuuaall
mmaattuurriittyy
FFiirrsstt ooppttiioonnaall
ccaallll ddaattee
iinn ttrraannssaaccttiioonn
ccuurrrreennccyy
in transaction
currency
11,,336688
11,,550000
5544,,778811 4499,,994422
Note 17 Long-term interest-bearing liabilities (continued)
Note 17 Long-term interest-bearing liabilities (continued)
Notes issued, overview by amount, maturity and coupon (continued)
Notes issued, overview by amount, maturity and coupon (continued)
3311..1122..2211
CCaarrrryyiinngg aammoouunntt
31.12.20
Carrying amount
In million, except where indicated
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
additional tier 1 perpetual capital notes
US 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
0
TToottaall nnootteess iissssuueedd
5500,,773355 4444,,992277
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 22 March 2021. 33 Instrument was redeemed on 10 August 2021. 44 Instrument was redeemed on 20 September 2021. 55 Instrument was called on 13 January 2022.
UBS Group AG standalone financial statements
In million, except where indicated
Euro-denominated TLAC-eligible senior unsecured
notes
notes
notes
notes
notes
US dollar-denominated TLAC-eligible senior
unsecured notes
Euro-denominated TLAC-eligible senior unsecured
Yen-denominated TLAC-eligible senior unsecured
Swiss franc-denominated TLAC-eligible senior
Swiss franc-denominated TLAC-eligible senior
GB pound-denominated TLAC-eligible senior
US dollar-denominated TLAC-eligible senior
unsecured notes
unsecured notes
unsecured notes
unsecured notes
Euro-denominated TLAC-eligible senior unsecured
US dollar-denominated TLAC-eligible senior
unsecured notes
Euro-denominated TLAC-eligible senior unsecured
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
US dollar-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
US dollar-denominated TLAC-eligible senior
US dollar-denominated TLAC-eligible senior
US dollar-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
US dollar-denominated TLAC-eligible senior
US dollar-denominated TLAC-eligible senior
Australian dollar-denominated TLAC-eligible
senior unsecured notes
US dollar-denominated TLAC-eligible senior
unsecured notes
Euro-denominated low-trigger loss-absorbing
additional tier 1 perpetual capital notes5
US dollar-denominated high-trigger loss-absorbing
Singapore dollar-denominated high-trigger loss-
US dollar-denominated high-trigger loss-absorbing
Australian dollar-denominated high-trigger loss-
Singapore dollar-denominated high-trigger loss-
3311..1122..2211
CCaarrrryyiinngg aammoouunntt
31.12.20
Carrying amount
CCoonnttrraaccttuuaall
FFiirrsstt ooppttiioonnaall
mmaattuurriittyy
ccaallll ddaattee
iinn ttrraannssaaccttiioonn
in transaction
CCoouuppoonn1
ccuurrrreennccyy
iinn UUSSDD
iinn CCHHFF
currency
in USD
in CHF
2244..22..2288
nn//aa
00..2255%%
11,,000000
11,,113388
11,,003388
0
0
0
2233..33..2288
2233..33..2277
44..225533%%
22,,000000
22,,000000
11,,882233
2,000
2,000
1,771
55..1111..2288
55..1111..2277
00..2255%%
11,,550000
11,,770088
11,,555577
1,500
1,832
1,622
99..1111..2288
99..1111..2277
00..997733%%
2200,,000000
117744
115588
20,000
194
171
00..443355%%
00..337755%%
11..887755%%
444400
448833
444400
336600
339955
336600
440000
554411
449944
1133..88..3300
1133..88..2299
33..112266%%
11,,550000
11,,550000
11,,336688
1,500
1,500
1,328
1111..22..3322
1111..22..3311
22..009955%%
22,,000000
22,,000000
11,,882233
00..662255%%
11,,225500
11,,442233
11,,229977
ZZeerroo ccoouuppoonn aaccccrreettiinngg
((aannnnuuaall yyiieelldd ooff 22..55%%))
99..1111..2288
99..1111..2277
2244..88..2299
2244..88..2288
33..1111..2299
33..1111..2288
33..1111..3311
2244..22..3333
nn//aa
nn//aa
1188..88..3355
1188..88..3300
2244..1111..3355
2244..1111..2233
33..1122..3355
33..1122..2233
2255..22..3366
2255..22..2244
44..33..3366
44..33..2244
44..1111..4499
44..1111..2222
44..33..5500
44..33..2255
1144..44..5500
1144..44..2255
2222..55..5500
2222..55..2255
2277..55..5500
2277..55..2255
2222..99..5500
2222..99..2233
1122..11..5511
1122..11..2266
2299..11..5511
2299..11..2266
2266..22..5511
2266..22..2266
22..2211%%
22..33%%
22..3377%%
22..4499%%
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%%))
ZZeerroo ccoouuppoonn aaccccrreettiinngg
((aannnnuuaall yyiieelldd ooff 22..77%%))
ZZeerroo ccoouuppoonn aaccccrreettiinngg
((aannnnuuaall yyiieelldd ooff 22..88%%))
ZZeerroo ccoouuppoonn aaccccrreettiinngg
((aannnnuuaall yyiieelldd ooff 33%%))
ZZeerroo ccoouuppoonn aaccccrreettiinngg
ZZeerroo ccoouuppoonn aaccccrreettiinngg
((aannnnuuaall yyiieelldd ooff 33..55%%))
0
0
0
0
0
0
36
40
45
0
0
0
0
0
0
0
0
0
0
0
0
0
28
40
35
0
0
0
0
0
0
0
0
0
0
0
0
0
25
35
31
0
0
0
0
0
0
0
3377
4400
4455
2255
4400
2277
4400
3333
2255
4400
2255
3366
3300
2233
3366
115522
115522
113388
146
146
129
112288
112288
111177
124
124
109
221144
221144
119955
206
206
182
110066
110066
9966
102
102
90
552288
552288
448822
510
510
452
55
55
49
5577
5577
110033
110033
5522
9944
333388
333388
330099
117744
117744
115599
2266..22..5511
2266..22..2266
((aannnnuuaall yyiieelldd ooff 33..0011%%))
9922
6677
6611
2266..55..5511
2266..55..2266
227711
227711
224477
PPeerrppeettuuaall
1199..22..2222
55..7755%%
11,,000000
11,,113388
11,,003388
1,000
1,221
1,081
additional tier 1 perpetual capital notes
PPeerrppeettuuaall
3311..11..2233
55%%
22,,000000
22,,000000
11,,882233
2,000
2,000
1,771
absorbing additional tier 1 perpetual capital notes
PPeerrppeettuuaall
2288..1111..2233
55..887755%%
770000
551199
447733
700
529
469
additional tier 1 perpetual capital notes
PPeerrppeettuuaall
3311..11..2244
77%%
22,,550000
22,,550000
22,,227799
2,500
2,500
2,214
absorbing additional tier 1 perpetual capital notes
PPeerrppeettuuaall
2277..88..2244
44..337755%%
770000
550099
446644
700
540
478
absorbing additional tier 1 perpetual capital notes
PPeerrppeettuuaall
44..99..2244
44..8855%%
775500
555566
550077
750
567
502
00..887755%%
11,,225500
11,,442233
11,,229977
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..2211
31.12.20
3311..1122..2211
31.12.20
33,,111166
11,,223311
11,,888855
33,,111166
3,128
1,326
1,802
3,128
22,,884411
11,,112222
11,,771199
22,,884411
2,770
1,174
1,595
2,770
As of 31 December 2021, the issued share capital consisted of
3,702,422,995 (31 December 2020: 3,859,055,395) registered
shares with a nominal value of CHF 0.10 each. In 2021,
as approved by the Annual General Meeting held on 8 April 2021,
the cancellation of 156,632,400 shares, each with a nominal
value of CHF 0.10, purchased under the 2018–2021 share
repurchase program, was executed. Share capital has been
reduced by the nominal value of the repurchased shares upon
cancellation, i.e., USD 16 million (CHF 16 million).
› 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
416
417
417
0
0
Financial statements UBS Group AG standalone financial statements
Note 20 Treasury shares
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22001199
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 22002200
of which: treasury shares held by UBS Group AG 1
of which: treasury shares held by UBS AG and other subsidiaries
Acquisitions
Disposals
Cancellation2
Delivery of shares to settle equity-settled awards
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22002211
of which: treasury shares held by UBS Group AG 1
of which: treasury shares held by UBS AG
Number of registered shares
Average price in USD
Average price in CHF
224433,,002211,,229966
242,930,084
91,212
128,372,257
(10,188,059)
(53,728,492)
330077,,447777,,000022
306,114,513
1,362,490
221144,,665500,,117755
((44,,001155,,771111))
((115566,,663322,,440000))
((5588,,228833,,773388))
330033,,119955,,332288
330011,,881122,,111111
11,,338833,,221177
1133..5577
13.57
12.65
12.27
11.12
13.40
1133..1144
13.13
14.13
1166..3344
1144..9955
1133..0055
1133..5555
1155..3355
1155..3344
1177..8877
1133..3355
13.35
12.75
11.53
9.85
12.85
1122..8800
12.80
12.62
1155..0066
1133..6633
1122..7788
1122..7755
1144..4411
1144..4400
1166..0033
11 Treasury shares held by UBS Group AG had a carrying value of USD 4,629 million (CHF 4,345 million) as of 31 December 2021 (31 December 2020: USD 4,020 million (CHF 3,917 million)). Shares repurchased
under our 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
1,242 million (CHF 1,139 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. 22 In 2021, as approved by
the Annual General Meeting held on 8 April 2021, the cancellation of 156,632,400 shares, each with a nominal value of CHF 0.10, purchased under the 2018–2021 share repurchase program, was executed. Refer
to Note 1 for more information.
418
418
UBS Group AG standalone financial statements
Note 20 Treasury shares
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22001199
of which: treasury shares held by UBS Group AG
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
Acquisitions
Disposals
Acquisitions
Disposals
Cancellation2
Delivery of shares to settle equity-settled awards
BBaallaannccee aass ooff 3311 DDeecceemmbbeerr 22002211
of which: treasury shares held by UBS Group AG 1
of which: treasury shares held by UBS AG
Number of registered shares
Average price in USD
Average price in CHF
Additional information
224433,,002211,,229966
242,930,084
91,212
128,372,257
(10,188,059)
(53,728,492)
330077,,447777,,000022
306,114,513
1,362,490
221144,,665500,,117755
((44,,001155,,771111))
((115566,,663322,,440000))
((5588,,228833,,773388))
330033,,119955,,332288
330011,,881122,,111111
11,,338833,,221177
1133..5577
13.57
12.65
12.27
11.12
13.40
1133..1144
13.13
14.13
1166..3344
1144..9955
1133..0055
1133..5555
1155..3355
1155..3344
1177..8877
1133..3355
13.35
12.75
11.53
9.85
12.85
1122..8800
12.80
12.62
1155..0066
1133..6633
1122..7788
1122..7755
1144..4411
1144..4400
1166..0033
Note 21 Assets pledged to secure own liabilities
As of 31 December 2021, total pledged assets of UBS Group AG
amounted to USD 3,476 million (CHF 3,169 million). These assets
consisted of certain liquid assets, marketable securities and
financial assets and were pledged to UBS AG. As of 31 December
2020, total pledged assets of UBS Group AG amounted to
USD 2,623 million (CHF 2,323 million). The associated liabilities
secured by these pledged assets were USD 676 million (CHF 617
million) and USD 1,208 million (CHF 1,070 million) as of
31 December 2021 and 31 December 2020, respectively.
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.
11 Treasury shares held by UBS Group AG had a carrying value of USD 4,629 million (CHF 4,345 million) as of 31 December 2021 (31 December 2020: USD 4,020 million (CHF 3,917 million)). Shares repurchased
under our 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
1,242 million (CHF 1,139 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. 22 In 2021, as approved by
the Annual General Meeting held on 8 April 2021, the cancellation of 156,632,400 shares, each with a nominal value of CHF 0.10, purchased under the 2018–2021 share repurchase program, was executed. Refer
to Note 1 for more information.
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
DTC (Cede & Co.), New York2,3
3311..1122..2211
88..8899
55..7788
31.12.20
10.39
4.99
Nortrust Nominees Ltd., London2
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 below. 33 DTC (Cede & Co.), New York, “The Depository
Trust Company,” is a US securities clearing organization.
44..8800
5.15
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
aforementioned thresholds.
Pursuant to the Swiss Code of Obligations, UBS Group AG
discloses in its 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 2021, the
following entities held more than 3% of the total share capital of
UBS Group AG: Massachusetts Financial Services Company,
Boston, which disclosed a holding of 3.01% on 22 June 2021;
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 the aforementioned thresholds requiring
SIX notification under the FMIA do not necessarily appear in the
table above.
On 24 January 2022, Dodge & Cox International Stock Fund,
San Francisco, disclosed a holding of 3.02% of the total share
capital of UBS Group AG. No new disclosures of significant
shareholdings have been made since that date.
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.
› 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) that
were registered in the UBS share register with 3% or more of the
total share capital of UBS Group AG as of 31 December 2021 or
as of 31 December 2020 are listed in the table above.
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.
418
419
419
Financial statements
UBS Group AG standalone financial statements
Note 24 Share ownership of the members of the Board of Directors, the Group Executive Board and other employees
Shares awarded
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..2211
For the year ended 31.12.20
NNuummbbeerr ooff sshhaarreess
336611,,885533
55,,119944,,330077
6633,,552277,,224422
6699,,008833,,440022
VVaalluuee ooff sshhaarreess iinn
UUSSDD mmiilllliioonn11
55
VVaalluuee ooff sshhaarreess iinn
CCHHFF mmiilllliioonn11
55
7766
992288
11,,001100
6699
884466
992211
Number of shares
457,362
5,192,391
67,057,766
72,707,519
Value of shares in
USD million1
7
Value of shares in
CHF million1
6
56
723
786
50
640
696
11 Shares awarded to members of the BoD were valued at CHF 13.81 for the year ended 31 December 2021 and CHF 12.92 for the year ended 31 December 2020 (average closing price of UBS shares over the last 10
trading days leading up to and including the grant date). Shares awarded to members of the GEB and other UBS Group employees were valued at weighted average grant date fair value (USD 14.61 for the year
ended 31 December 2021 and USD 10.79 for the year ended 31 December 2020). Prior period has been amended to ensure comparability. For illustrative purposes, the value of the shares was converted at closing
exchange rate as of 31 December 2021 (CHF / USD 1.10) and 31 December 2020 (CHF / USD 1.13), accordingly.
› Refer to the “Compensation” section of this report for more information about the terms and conditions of the shares awarded to the
members of the Board of Directors and the Group Executive Board
Number of shares of BoD members1
Name, function
Axel A. Weber, Chairman
Jeremy Anderson, Vice Chairman and Senior Independent Director
Claudia Böckstiegel, member2
William C. Dudley, member
Patrick Firmenich, member2
Reto Francioni, member
Fred Hu, member
Mark Hughes, member
Nathalie Rachou, member
Julie G. Richardson, member
Beatrice Weder di Mauro, former member2
Dieter Wemmer, member
Jeanette Wong, member
oonn 3311 DDeecceemmbbeerr
22002211
NNuummbbeerr ooff sshhaarreess hheelldd
11,,114488,,336699
Voting rights in %
0.071
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
11,,004466,,999944
9977,,551188
6666,,774444
00
--
4499,,771144
2266,,118811
00
--
113399,,660099
115544,,008866
7744,,448811
4422,,442288
3300,,226633
44,,992200
1188,,110022
00
111177,,336655
8888,,440011
--
119988,,557788
111144,,008866
8888,,774433
6688,,445522
3333,,772222
11,,885577,,995599
0.062
0.006
0.004
0.000
-
0.003
0.002
0.000
-
0.009
0.009
0.005
0.003
0.002
0.000
0.001
0.000
0.007
0.005
-
0.012
0.007
0.005
0.004
0.002
0.116
Total
0.104
11 Includes blocked and unblocked shares held by BoD members, including those held by related parties. No options were granted in 2021 and 2020. 22 At the 2021 AGM, Claudia Böckstiegel and Patrick Firmenich
were newly elected and Beatrice Weder di Mauro did not stand for re-election.
11,,775500,,779977
22002200
420
420
UBS Group AG standalone financial statements
Note 24 Share ownership of the members of the Board of Directors, the Group Executive Board and other employees
Shares awarded
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..2211
For the year ended 31.12.20
NNuummbbeerr ooff sshhaarreess
UUSSDD mmiilllliioonn11
CCHHFF mmiilllliioonn11
Number of shares
USD million1
CHF million1
VVaalluuee ooff sshhaarreess iinn
VVaalluuee ooff sshhaarreess iinn
Value of shares in
Value of shares in
336611,,885533
55,,119944,,330077
6633,,552277,,224422
6699,,008833,,440022
55
7766
992288
11,,001100
55
6699
884466
992211
457,362
5,192,391
67,057,766
72,707,519
7
56
723
786
6
50
640
696
11 Shares awarded to members of the BoD were valued at CHF 13.81 for the year ended 31 December 2021 and CHF 12.92 for the year ended 31 December 2020 (average closing price of UBS shares over the last 10
trading days leading up to and including the grant date). Shares awarded to members of the GEB and other UBS Group employees were valued at weighted average grant date fair value (USD 14.61 for the year
ended 31 December 2021 and USD 10.79 for the year ended 31 December 2020). Prior period has been amended to ensure comparability. For illustrative purposes, the value of the shares was converted at closing
exchange rate as of 31 December 2021 (CHF / USD 1.10) and 31 December 2020 (CHF / USD 1.13), accordingly.
› Refer to the “Compensation” section of this report for more information about the terms and conditions of the shares awarded to the
members of the Board of Directors and the Group Executive Board
Number of shares of BoD members1
Name, function
Axel A. Weber, Chairman
Jeremy Anderson, Vice Chairman and Senior Independent Director
oonn 3311 DDeecceemmbbeerr
NNuummbbeerr ooff sshhaarreess hheelldd
Voting rights in %
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
11,,114488,,336699
11,,004466,,999944
9977,,551188
6666,,774444
4499,,771144
2266,,118811
00
--
00
--
113399,,660099
115544,,008866
7744,,448811
4422,,442288
3300,,226633
44,,992200
1188,,110022
111177,,336655
8888,,440011
00
--
119988,,557788
111144,,008866
8888,,774433
6688,,445522
3333,,772222
11,,885577,,995599
11,,775500,,779977
0.071
0.062
0.006
0.004
0.000
0.003
0.002
0.000
-
-
0.009
0.009
0.005
0.003
0.002
0.000
0.001
0.000
0.007
0.005
-
0.012
0.007
0.005
0.004
0.002
0.116
0.104
11 Includes blocked and unblocked shares held by BoD members, including those held by related parties. No options were granted in 2021 and 2020. 22 At the 2021 AGM, Claudia Böckstiegel and Patrick Firmenich
were newly elected and Beatrice Weder di Mauro did not stand for re-election.
Claudia Böckstiegel, member2
William C. Dudley, member
Patrick Firmenich, member2
Reto Francioni, member
Fred Hu, member
Mark Hughes, member
Nathalie Rachou, member
Julie G. Richardson, member
Dieter Wemmer, member
Jeanette Wong, member
Total
Beatrice Weder di Mauro, former member2
420
Note 24 Share 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
Christian Bluhm, Group Chief Risk Officer
Mike Dargan, Group Chief Digital and Information Officer
Markus U. Diethelm, former Group General Counsel
Kirt Gardner, Group Chief Financial Officer
Suni Harford, President Asset Management
Robert Karofsky, President Investment Bank
Sabine Keller-Busse, President Personal & Corporate Banking and President UBS Switzerland
Iqbal Khan, Co-President Global Wealth Management and President EMEA
Edmund Koh, President Asia Pacific
Axel P. Lehmann, former President Personal & Corporate Banking and President UBS Switzerland
Barbara Levi, Group General Counsel
Tom Naratil, Co-President Global Wealth Management and President UBS Americas
Piero Novelli, former Co-President Investment Bank
Markus Ronner, Group Chief Compliance and Governance Officer
TToottaall
oonn
3311 DDeecceemmbbeerr
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
22002200
22002211
Number of
unvested
shares / at
risk2
122,453
14,841
654,579
582,787
240,343
-
-
706,845
780,640
696,500
636,122
352,329
851,520
627,748
798,457
639,087
898,111
742,546
501,322
421,930
-
690,537
430,732
-
1,374,044
1,383,854
-
660,240
418,452
302,584
Number of
vested shares
2,673
TToottaall nnuummbbeerr
ooff sshhaarreess
112255,,112266
Potentially
conferred
voting
rights in %
0.008
0
226
218
82,743
-
-
617,858
236,421
165,223
22,199
0
357,064
357,621
421,491
349,834
113,715
68,253
493,977
337,062
-
331,677
0
-
950,682
770,780
-
408,897
57,856
130,097
1144,,884411
665544,,880055
558833,,000055
332233,,008866
--
--
11,,332244,,770033
11,,001177,,006611
886611,,772233
665588,,332211
335522,,332299
11,,220088,,558844
998855,,336699
11,,221199,,994488
998888,,992211
11,,001111,,882266
881100,,779999
999955,,229999
775588,,999922
--
11,,002222,,221144
443300,,773322
--
22,,332244,,772266
22,,115544,,663344
--
11,,006699,,113377
447766,,330088
443322,,668811
0.001
0.041
0.035
0.020
-
-
0.079
0.063
0.051
0.041
0.021
0.075
0.059
0.076
0.059
0.063
0.048
0.062
0.045
-
0.061
0.027
-
0.145
0.128
-
0.064
0.030
0.026
0.650
7,706,776
2,739,047
1100,,444455,,882233
0.675
11 Includes all vested and unvested shares of GEB members, including those held by related parties. No options were held in 2021 and 2020 by any GEB member or any of its related parties. Refer to “Note 28 Employee
benefits: variable compensation” in the “Consolidated financial statements” section of our Annual Report 2021 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.
1111,,335599,,334488
7,821,828
3,537,520
22002200
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.
USD million
CHF million
3311..1122..2211
31.12.20
3311..1122..2211
31.12.20
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
112299
5577
7722
00
155
69
86
0
111188
5522
6666
00
138
62
76
0
421
421
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 2022
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 2021.
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 2021 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.
422
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)
Jan Marxfeld
Licensed audit expert
423
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
All values in million, except where indicated
Financial and regulatory requirements
As of or for the year ended
Financial information1
Income statement
Total operating income
Total operating expenses
Operating profit / (loss) before tax
Net profit / (loss)
Balance sheet
Total assets
Total liabilities
Total equity
Capital2
Common equity tier 1 capital
Additional tier 1 capital
Total going concern capital / Tier 1 capital
Tier 2 capital
Total capital
Total gone concern loss-absorbing capacity
Total loss-absorbing capacity
Risk-weighted assets and leverage ratio denominator2
Risk-weighted assets
Leverage ratio denominator5
Supplementary leverage ratio denominator6
Capital and leverage ratios (%)2
Common equity tier 1 capital ratio5
Going concern capital ratio / Tier 1 capital ratio
Total capital ratio
Total loss-absorbing capacity ratio
Tier 1 leverage ratio
Supplementary tier 1 leverage ratio
Going concern leverage ratio5
Total loss-absorbing capacity leverage ratio
Gone concern capital coverage ratio
Liquidity coverage ratio2,7
High-quality liquid assets (billion)
Net cash outflows (billion)
Liquidity coverage ratio (%)8,9
Net stable funding ratio2,10
Total available stable funding
Total required stable funding
Net stable funding ratio (%)
UBS AG
(standalone)
USD
Swiss GAAP
Swiss SRB rules
UBS Switzerland AG
(standalone)
CHF
Swiss GAAP
Swiss SRB rules
3311..1122..2211
31.12.20
3311..1122..2211
31.12.20
UBS Europe SE
(consolidated)
EUR
IFRS
EU regulatory rules
3311..1122..2211
31.12.20
UBS Americas Holding
LLC
(consolidated)
USD
US GAAP
US Basel III rules
3311..1122..2211
31.12.20
1166,,229933
99,,771122
66,,558811
66,,554488
12,951
8,370
4,581
4,539
88,,449900
55,,447722
33,,001188
22,,445522
7,185
5,590
1,595
1,271
550099,,885511
445555,,444466
5544,,440055
509,024
456,628
52,396
332200,,665566
330055,,991199
1144,,773366
316,829
304,194
12,634
5522,,881188
1133,,884400
6666,,665588
33,,112299
50,269
14,430
64,699
7,719
1122,,660099
55,,338877
1177,,999966
12,234
5,176
17,410
4444,,225500
111100,,990088
45,520
110,219
1100,,885533
2288,,884499
10,824
28,234
11,,112233
880000
332233
222277
4466,,441111
4422,,666644
33,,774477
22,,776644
229900
33,,005544
33,,005544
22,,44114433
55,,446688
1,054
878
176
163
48,591
43,896
4,696
3,703
290
3,993
3,993
1,7843
5,777
331177,,991133
559933,,886688
305,575
595,017
110066,,339999
333399,,778888
107,253
335,251
1122,,332288
4466,,666600
13,175
41,376
1166..66
2211..00
16.5
21.2
1111..99
1166..99
11.4
16.2
2277..11
26.3
2222..44
2244..88
2244..88
4444..44
66..55
28.1
30.3
30.3
43.8
9.7
1144,,449900
1111,,992255
22,,556655
11,,881122
12,675
10,842
1,833
975
220099,,771188
118822,,663333
2277,,008855
172,385
144,103
28,283
1133,,000022
44,,004499
1177,,005511
112255
1177,,117766
77,,00000044
2244,,005511
14,384
3,047
17,431
736
18,166
5,6004
23,031
7722,,997799
118888,,224466
221122,,116677
63,929
154,609
150,019
1177..88
2233..44
2233..55
3333..00
99..11
88..00
22.5
27.3
28.4
36.0
11.3
11.6
5.2
8.4
92
62
148
1111..22
10.9
111122..00
135.7
8899
5522
117733
84
53
159
225577,,999922
228899,,119955
88991111
55..33
88..55
9911
6644
114433
222255,,223399
115588,,007722
11442211
1111..77
14.0
1122..88
14.9
17
11
151
3322
2222
114477
1177
1100
117700
1155,,335588
88,,996633
117711
Other
Joint and several liability between UBS AG and UBS Switzerland AG
(billion)12
11 The financial information disclosed does not represent financial statements under the respective GAAP / IFRS. 22 Refer to the 31 December 2021 Pillar 3 Report, available under “Pillar 3 disclosures” at
ubs.com/investors, for more information. 33 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. 44 Consists of eligible long-term debt that meets the conditions specified in 12 CFR 252.162 of the final TLAC rules. TLAC is the sum of tier 1 capital and eligible long-term debt. 55 Leverage
ratio denominators and going concern leverage ratios for UBS AG standalone and UBS Switzerland AG standalone for 31 December 2020 do not reflect the effects of the temporary exemption that applied from
25 March 2020 until 1 January 2021 and was granted by FINMA in connection with COVID-19. Refer to the “Introduction and basis for preparation” section of the 31 December 2021 Pillar 3 Report. 66 US
regulatory authorities temporarily eased the requirements for the supplementary leverage ratio (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. 77 There was no local disclosure requirement for UBS Americas Holding LLC as of
31 December 2020. 88 In the fourth quarter of 2021, the liquidity coverage ratio (the LCR) of UBS AG was 173%, remaining above the prudential requirements communicated by FINMA. 99 In the fourth
quarter of 2021, the LCR of UBS Switzerland AG, which is a Swiss SRB, was 143%, remaining above the prudential requirement communicated by FINMA in connection with the Swiss Emergency Plan. 1100 For
UBS AG standalone and UBS Switzerland AG standalone, the local disclosure requirement for the net stable funding ratio (the NSFR) came into force in July 2021. For UBS Europe SE consolidated, the local
disclosure requirement for the NSFR came into force in June 2021. For UBS Americas Holding LLC consolidated, the NSFR requirement became effective as of 1 July 2021 and related disclosures will come into
effect in the second quarter of 2023. 1111 In accordance with Art. 17h para. 3 and 4 of the Liquidity Ordinance, UBS AG standalone is required to maintain a minimum NSFR of at least 80% without taking
into account excess funding of UBS Switzerland AG and 100% after taking into account such excess funding. 1122 Refer to the “Capital, liquidity and funding, and balance sheet” section 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.
9
55
586
426
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.
Effective 1 October 2021, UBS Americas Holding LLC is subject
to a stress capital buffer (an SCB) of 7.1%, in addition to
minimum capital requirements. The SCB was determined by the
Federal Reserve Board following the completion of the
Comprehensive Capital Analysis and Review (based on Dodd–
Frank Act Stress Test (DFAST) results and planned future
dividends). The SCB, which replaces the static capital conservation
buffer of 2.5%, is subject to change on an annual basis or as
otherwise determined by the Federal Reserve Board.
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 2021 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 regulated 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
Risk-weighted assets and leverage ratio denominator2
All values in million, except where indicated
Financial and regulatory requirements
As of or for the year ended
Financial information1
Income statement
Total operating income
Total operating expenses
Operating profit / (loss) before tax
Net profit / (loss)
Balance sheet
Total assets
Total liabilities
Total equity
Capital2
Common equity tier 1 capital
Additional tier 1 capital
Total going concern capital / Tier 1 capital
Tier 2 capital
Total capital
Total gone concern loss-absorbing capacity
Total loss-absorbing capacity
Risk-weighted assets
Leverage ratio denominator5
Supplementary leverage ratio denominator6
Capital and leverage ratios (%)2
Common equity tier 1 capital ratio5
Going concern capital ratio / Tier 1 capital ratio
Total capital ratio
Total loss-absorbing capacity ratio
Tier 1 leverage ratio
Supplementary tier 1 leverage ratio
Going concern leverage ratio5
Total loss-absorbing capacity leverage ratio
Gone concern capital coverage ratio
Liquidity coverage ratio2,7
High-quality liquid assets (billion)
Net cash outflows (billion)
Liquidity coverage ratio (%)8,9
Net stable funding ratio2,10
Total available stable funding
Total required stable funding
Net stable funding ratio (%)
Other
(billion)12
UBS AG
(standalone)
USD
Swiss GAAP
Swiss SRB rules
UBS Switzerland AG
(standalone)
CHF
Swiss GAAP
Swiss SRB rules
UBS Europe SE
(consolidated)
EUR
IFRS
UBS Americas Holding
LLC
(consolidated)
USD
US GAAP
EU regulatory rules
US Basel III rules
3311..1122..2211
31.12.20
3311..1122..2211
31.12.20
3311..1122..2211
31.12.20
3311..1122..2211
31.12.20
1166,,229933
12,951
99,,771122
66,,558811
66,,554488
8,370
4,581
4,539
88,,449900
55,,447722
33,,001188
22,,445522
7,185
5,590
1,595
1,271
11,,112233
1,054
880000
332233
222277
878
176
163
1144,,449900
1111,,992255
22,,556655
11,,881122
12,675
10,842
1,833
975
550099,,885511
445555,,444466
5544,,440055
509,024
456,628
52,396
332200,,665566
330055,,991199
1144,,773366
316,829
304,194
12,634
4466,,441111
4422,,666644
33,,774477
48,591
43,896
4,696
220099,,771188
118822,,663333
2277,,008855
172,385
144,103
28,283
5522,,881188
1133,,884400
6666,,665588
33,,112299
50,269
14,430
64,699
7,719
1122,,660099
55,,338877
1177,,999966
12,234
5,176
17,410
4444,,225500
45,520
111100,,990088
110,219
1100,,885533
2288,,884499
10,824
28,234
22,,776644
229900
33,,005544
33,,005544
22,,44114433
55,,446688
3,703
290
3,993
3,993
1,7843
5,777
1133,,000022
44,,004499
1177,,005511
112255
1177,,117766
77,,00000044
2244,,005511
14,384
3,047
17,431
736
18,166
5,6004
23,031
331177,,991133
559933,,886688
305,575
595,017
110066,,339999
333399,,778888
107,253
335,251
1122,,332288
4466,,666600
13,175
41,376
7722,,997799
118888,,224466
221122,,116677
63,929
154,609
150,019
1177..88
2233..44
2233..55
3333..00
99..11
88..00
22.5
27.3
28.4
36.0
11.3
11.6
1166..66
2211..00
16.5
21.2
1111..99
1166..99
11.4
16.2
2277..11
26.3
2222..44
2244..88
2244..88
4444..44
66..55
28.1
30.3
30.3
43.8
9.7
5.2
8.4
92
62
148
1111..22
10.9
111122..00
135.7
8899
5522
117733
84
53
159
225577,,999922
228899,,119955
88991111
55..33
88..55
9911
6644
114433
222255,,223399
115588,,007722
11442211
1177
1100
117700
1155,,335588
88,,996633
117711
1111..77
14.0
1122..88
14.9
17
11
151
3322
2222
114477
Joint and several liability between UBS AG and UBS Switzerland AG
55
9
11 The financial information disclosed does not represent financial statements under the respective GAAP / IFRS. 22 Refer to the 31 December 2021 Pillar 3 Report, available under “Pillar 3 disclosures” at
ubs.com/investors, for more information. 33 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. 44 Consists of eligible long-term debt that meets the conditions specified in 12 CFR 252.162 of the final TLAC rules. TLAC is the sum of tier 1 capital and eligible long-term debt. 55 Leverage
ratio denominators and going concern leverage ratios for UBS AG standalone and UBS Switzerland AG standalone for 31 December 2020 do not reflect the effects of the temporary exemption that applied from
25 March 2020 until 1 January 2021 and was granted by FINMA in connection with COVID-19. Refer to the “Introduction and basis for preparation” section of the 31 December 2021 Pillar 3 Report. 66 US
regulatory authorities temporarily eased the requirements for the supplementary leverage ratio (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. 77 There was no local disclosure requirement for UBS Americas Holding LLC as of
31 December 2020. 88 In the fourth quarter of 2021, the liquidity coverage ratio (the LCR) of UBS AG was 173%, remaining above the prudential requirements communicated by FINMA. 99 In the fourth
quarter of 2021, the LCR of UBS Switzerland AG, which is a Swiss SRB, was 143%, remaining above the prudential requirement communicated by FINMA in connection with the Swiss Emergency Plan. 1100 For
UBS AG standalone and UBS Switzerland AG standalone, the local disclosure requirement for the net stable funding ratio (the NSFR) came into force in July 2021. For UBS Europe SE consolidated, the local
disclosure requirement for the NSFR came into force in June 2021. For UBS Americas Holding LLC consolidated, the NSFR requirement became effective as of 1 July 2021 and related disclosures will come into
effect in the second quarter of 2023. 1111 In accordance with Art. 17h para. 3 and 4 of the Liquidity Ordinance, UBS AG standalone is required to maintain a minimum NSFR of at least 80% without taking
into account excess funding of UBS Switzerland AG and 100% after taking into account such excess funding. 1122 Refer to the “Capital, liquidity and funding, and balance sheet” section 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.
586
587
427
Significant regulated subsidiary andsub-group information
Appendix
A
429
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 alphabetical order 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
Active Digital Banking clients in
Corporate & Institutional Clients (%)
– P&C
Active Digital Banking clients in
Personal Banking (%)
– P&C
Business volume for Personal
Banking (CHF and USD)
– P&C
Client assets (USD and CHF)
– P&C
Cost / income ratio (%)
Fee-generating assets (USD)
– GWM
Calculated as the average number of active clients for
each month in the relevant period divided by the
average number of total clients. “Clients” refers to the
number 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. At the end of each month, any client
that has logged on at least once in that month is
determined to be “active” (a log-in time stamp is
allocated to all business relationship numbers or per
legal entity in a digital banking contract).
Calculated as the average number of active clients for
each month in the relevant period divided by the
average number of total clients. “Clients” refers to the
number 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. At the end of
each month, any client that has logged on at least once
in that month is determined to be “active” (a log-in
time stamp is allocated to all business relationship
numbers in a digital banking contract).
Calculated as the sum of client assets and loans.
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.
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 volume
of client assets and loans.
Calculated as the sum of invested assets and other
assets held purely for transactional purposes or custody
only. Net new money is not measured for Personal &
Corporate Banking.
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 operating expenses divided by operating
income before credit loss expense or release
(annualized as applicable).
This measure provides information about the
efficiency of the business by comparing operating
expenses with gross income.
Calculated as the sum of discretionary and non-
discretionary wealth management portfolios (mandate
volume) and assets where generated revenues are
predominantly of a recurring nature, i.e., mainly
investment and mutual funds, including hedge funds
and private markets, where we have a distribution
agreement.
This measure provides information about the volume
of invested assets that create a revenue stream,
whether as a result of the nature of the contractual
relationship with clients or through the fee structure
of the asset. An increase in the level of fee-generating
assets results in an increase in the associated revenue
stream.
430
430
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 alphabetical order in the table below. Our APMs may qualify as non-GAAP measures
as defined by US Securities and Exchange Commission (SEC) regulations.
AAPPMM llaabbeell
– P&C
CCaallccuullaattiioonn
IInnffoorrmmaattiioonn ccoonntteenntt
Active Digital Banking clients in
Calculated as the average number of active clients for
This measure provides information about the
Corporate & Institutional Clients (%)
each month in the relevant period divided by the
proportion of active Digital Banking clients in the total
average number of total clients. “Clients” refers to the
number of UBS clients (within the aforementioned
number of unique business relationships or legal
meaning) which are serviced by Corporate &
entities operated by Corporate & Institutional Clients,
Institutional Clients.
Active Digital Banking clients in
Calculated as the average number of active clients for
This measure provides information about the
Personal Banking (%)
– P&C
each month in the relevant period divided by the
proportion of active Digital Banking clients in the total
average number of total clients. “Clients” refers to the
number of UBS clients (within the aforementioned
number of unique business relationships operated by
meaning) who are serviced by Personal Banking.
excluding clients that do not have an account, mono-
product clients and clients that have defaulted on loans
or credit facilities. At the end of each month, any client
that has logged on at least once in that month is
determined to be “active” (a log-in time stamp is
allocated to all business relationship numbers or per
legal entity in a digital banking contract).
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. At the end of
each month, any client that has logged on at least once
in that month is determined to be “active” (a log-in
time stamp is allocated to all business relationship
numbers in a digital banking contract).
Client assets (USD and CHF)
Calculated as the sum of invested assets and other
This measure provides information about the volume
assets held purely for transactional purposes or custody
of client assets managed by or deposited with UBS for
only. Net new money is not measured for Personal &
investment purposes, including other assets held
Corporate Banking.
purely for transactional purposes or custody only.
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
(annualized as applicable).
expenses with gross income.
Fee-generating assets (USD)
Calculated as the sum of discretionary and non-
This measure provides information about the volume
discretionary wealth management portfolios (mandate
of invested assets that create a revenue stream,
volume) and assets where generated revenues are
whether as a result of the nature of the contractual
predominantly of a recurring nature, i.e., mainly
relationship with clients or through the fee structure
investment and mutual funds, including hedge funds
of the asset. An increase in the level of fee-generating
and private markets, where we have a distribution
assets results in an increase in the associated revenue
agreement.
stream.
Appendix
– P&C
– P&C
– GWM
430
AAPPMM llaabbeell
CCaallccuullaattiioonn
IInnffoorrmmaattiioonn ccoonntteenntt
Fee-generating asset margin (bps)
– GWM
Calculated as revenues from fee-generating assets (a
portion of which is included in recurring fee income
and a portion of which is included in transaction-
based income, annualized as applicable) divided by
average fee-generating assets for the relevant
mandate fee billing period. For the US, fees have
been billed on daily balances since the fourth quarter
of 2020 and average fee-generating assets are
calculated as the average of the monthly average
balances. Prior to the fourth quarter 2020, billing was
based on prior quarter-end balances, and the average
fee-generating assets were thus the prior quarter-end
balance. For balances outside of the US, billing is
based on prior month-end balances and average fee-
generating assets are thus the average of the prior
month-end balances.
This measure provides information about the revenues
from fee-generating assets in relation to their average
volume during the relevant mandate fee billing
period.
Gross margin on invested assets (bps)
– 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.
Impaired loan portfolio as a percentage
of total loan portfolio, gross (%)
– GWM, P&C
Calculated as impaired loan portfolio divided by total
gross loan portfolio.
Invested assets (USD and CHF)
– GWM, P&C, AM
Loan penetration (%)
– GWM
Mobile Banking log-in share in Personal
Banking (%)
– P&C
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 loans divided by invested assets.
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. 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.
Net interest margin (bps)
– P&C
Calculated as net interest income (annualized as
applicable) divided by average loans.
Business volume for Personal
Calculated as the sum of client assets and loans.
This measure provides information about the volume
Banking (CHF and USD)
of client assets and loans.
Net margin on invested assets (bps)
– AM
Calculated as operating profit before tax (annualized
as applicable) divided by average invested assets.
This measure provides information about the
proportion of impaired loan portfolio in the total gross
loan portfolio.
This measure provides information about the volume
of client assets managed by or deposited with UBS for
investment purposes.
This measure provides information about loan volume
in relation to invested assets.
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.
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.
Net new business volume for Personal
Banking (CHF and USD)
– 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 business volume as a result of net new business
volume flows during a specific period.
Net new fee-generating assets (USD)
– GWM
Calculated as the sum of the net amount of fee-
generating assets inflows and outflows, including
dividend and interest inflows into mandates and
outflows from mandate fees paid by clients, during a
specific period.
This measure provides information about the
development of fee-generating assets during a
specific period as a result of net flows and excludes
movements due to market performance and foreign
exchange translation.
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.
Net profit growth (%)
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.
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.
This measure provides information about profit
growth in comparison with the prior period.
431
431
Appendix
AAPPMM llaabbeell
Pre-tax profit growth (%)
Recurring net fee income
(USD and CHF)
– GWM, P&C
Return on attributed equity (%)
CCaallccuullaattiioonn
IInnffoorrmmaattiioonn ccoonntteenntt
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.
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.
Calculated as annualized business division operating
profit before tax divided by average attributed equity.
This measure provides information about pre-tax
profit growth in comparison with the prior period.
This measure provides information about the amount
of recurring net fee income.
This measure provides information about the
profitability of the business divisions in relation to
attributed equity.
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.
Return on equity (%)
Calculated as annualized net profit attributable to
shareholders divided by average equity attributable to
shareholders.
This measure provides information about the
profitability of the business in relation to 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 (%)
Secured loan portfolio as a percentage
of total loan portfolio, gross (%)
– P&C
Tangible book value per share
(USD and CHF1)
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.
Calculated as secured loan portfolio divided by total
gross loan portfolio.
Calculated as equity attributable to shareholders less
goodwill and intangible assets divided by the number
of shares outstanding.
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.
This measure provides information about the
proportion of the secured loan portfolio in the total
gross loan portfolio.
This measure provides information about tangible net
assets on a per-share basis.
Total book value per share
(USD and CHF1)
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.
Transaction-based income
(USD and CHF)
– GWM, P&C
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, 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.
This measure provides information about the amount
of the non-recurring portion of net fee and
commission income.
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.
432
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Appendix
AAPPMM llaabbeell
CCaallccuullaattiioonn
IInnffoorrmmaattiioonn ccoonntteenntt
Pre-tax profit growth (%)
Calculated as the change in net profit before tax
This measure provides information about pre-tax
attributable to shareholders from continuing
profit growth in comparison with the prior period.
operations between current and comparison periods
divided by net profit before tax attributable to
shareholders from continuing operations of the
comparison period.
asset-based investment fund fees and custody fees,
which are generated on client assets, and
administrative fees for accounts.
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
Return on attributed equity (%)
Calculated as annualized business division operating
This measure provides information about the
profit before tax divided by average attributed equity.
profitability of the business divisions in relation to
attributed equity.
Return on common equity tier 1
Calculated as annualized net profit attributable to
This measure provides information about the
capital (%)
shareholders divided by average common equity tier 1
profitability of the business in relation to common
capital.
equity tier 1 capital.
Return on equity (%)
Calculated as annualized net profit attributable to
This measure provides information about the
shareholders divided by average equity attributable to
profitability of the business in relation to equity.
shareholders.
weighted assets.
assets.
Return on leverage ratio denominator,
Calculated as annualized operating income before
This measure provides information about the revenues
gross (%)
credit loss expense or release divided by average
of the business in relation to leverage ratio
leverage ratio denominator.
denominator.
Return on risk-weighted
assets, gross (%)
Calculated as annualized operating income before
This measure provides information about the revenues
credit loss expense or release divided by average risk-
of the business in relation to risk-weighted assets.
Return on tangible equity (%)
Calculated as annualized net profit attributable to
This measure provides information about the
shareholders divided by average equity attributable to
profitability of the business in relation to tangible
shareholders less average goodwill and intangible
equity.
Secured loan portfolio as a percentage
Calculated as secured loan portfolio divided by total
This measure provides information about the
of total loan portfolio, gross (%)
gross loan portfolio.
proportion of the secured loan portfolio in the total
– P&C
gross loan portfolio.
Tangible book value per share
Calculated as equity attributable to shareholders less
This measure provides information about tangible net
(USD and CHF1)
goodwill and intangible assets divided by the number
assets on a per-share basis.
of shares outstanding.
Total book value per share
Calculated as equity attributable to shareholders
This measure provides information about net assets
(USD and CHF1)
divided by the number of shares outstanding.
on a per-share basis.
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
commission income.
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.
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
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
CDS
CEA
CEO
CET1
CFO
CFTC
CGU
CHF
CIO
CLS
C&ORC
CRD IV
CRM
CST
CUSIP
CVA
D
DBO
DCCP
DM
DOJ
DTA
DVA
credit default swap
Commodity Exchange Act
Chief Executive Officer
common equity tier 1
Chief Financial Officer
US Commodity Futures
Trading Commission
cash-generating unit
Swiss franc
Chief Investment Office
Continuous Linked
Settlement
Compliance & Operational
Risk Control
EU Capital Requirements
Directive of 2013
credit risk mitigation (credit
risk) or comprehensive risk
measure (market risk)
combined stress test
Committee on Uniform
Security Identification
Procedures
credit valuation adjustment
defined benefit obligation
Deferred Contingent
Capital Plan
discount margin
US Department of Justice
deferred tax asset
debit valuation adjustment
E
EAD
EB
EC
ECB
ECL
EGM
EIR
EL
EMEA
EOP
EPS
ESG
ETD
ETF
EU
EUR
EURIBOR
ESR
EVE
EY
F
FA
FCA
FCT
FINMA
FMIA
exposure at default
Executive Board
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
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
432
433
433
Appendix
Abbreviations frequently used in our financial reports (continued)
O
OCA
OCI
ORF
OTC
P
PD
PIT
P&L
POCI
PRA
PRV
R
RBA
RBC
RbM
REIT
RMBS
RniV
RoCET1
RoTE
RoU
rTSR
RWA
International Financial
Reporting Standards
internal ratings-based
interest rate risk in the
banking book
International Swaps and
Derivatives Association
International Securities
Identification Number
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 CET1 capital
return on tangible equity
right-of-use
relative total shareholder
return
risk-weighted assets
IFRS
IRB
IRRBB
ISDA
ISIN
K
KRT
L
LAS
LCR
LGD
LIBOR
LLC
LoD
LRD
LTIP
LTV
M
M&A
MiFID II
MRT
N
NAV
NII
NSFR
NYSE
FSB
FTA
FVA
FVOCI
FVTPL
FX
G
GAAP
GCRG
GBP
GDP
GEB
GHG
GIA
GMD
GRI
G-SIB
H
Hong Kong
SAR
HQLA
I
IAS
IASB
IBOR
IFRIC
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
global systemically
important bank
Hong Kong Special
Administrative Region of
the People’s Republic of
China
high-quality liquid assets
International Accounting
Standards
International Accounting
Standards Board
interbank offered rate
International Financial
Reporting Interpretations
Committee
434
434
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
FVOCI
fair value through other
ISDA
International Swaps and
comprehensive income
FVTPL
fair value through profit or
ISIN
Financial Stability Board
IFRS
Swiss Federal Tax
Administration
funding valuation
adjustment
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
global systemically
important bank
LIBOR
London Interbank Offered
O
OCA
OCI
ORF
OTC
P
PD
PIT
P&L
POCI
PRA
PRV
R
RBA
RBC
RbM
REIT
RniV
RoTE
RoU
rTSR
RWA
International Financial
Reporting Standards
internal ratings-based
interest rate risk in the
banking book
Derivatives Association
International Securities
Identification Number
Key Risk Taker
liquidity-adjusted stress
liquidity coverage ratio
loss given default
Rate
limited liability company
lines of defense
leverage ratio denominator
loan-to-value
mergers and acquisitions
Markets in Financial
Instruments Directive II
net asset value
net interest income
net stable funding ratio
New York Stock Exchange
IRB
IRRBB
K
KRT
L
LAS
LCR
LGD
LLC
LoD
LRD
LTIP
LTV
M
M&A
MiFID II
N
NAV
NII
NSFR
NYSE
Administrative Region of
MRT
Material Risk Taker
Hong Kong
H
SAR
Hong Kong Special
the People’s Republic of
China
HQLA
high-quality liquid assets
International Accounting
Standards
International Accounting
Standards Board
interbank offered rate
International Financial
Reporting Interpretations
Committee
Long-Term Incentive Plan
RMBS
residential mortgage-
backed securities
risks not in VaR
RoCET1
return on CET1 capital
return on tangible equity
right-of-use
relative total shareholder
return
risk-weighted assets
Appendix
FSB
FTA
FVA
FX
G
GAAP
GCRG
GBP
GDP
GEB
GHG
GIA
GMD
GRI
G-SIB
I
IAS
IASB
IBOR
IFRIC
434
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
SIBOR
SICR
SIX
SME
SMF
SNB
SOR
SPPI
SRB
SRM
SVaR
sustainable investing or
sustainable investments
Singapore Interbank
Offered Rate
significant increase in credit
risk
SIX Swiss Exchange
small and medium-sized
entities
Senior Management
Function
Swiss National Bank
Singapore Swap Offer Rate
solely payments of principal
and interest
systemically relevant bank
specific risk measure
stressed value-at-risk
T
TBTF
TCFD
TIBOR
TLAC
U
UoM
USD
V
VaR
VAT
too big to fail
Task Force on Climate-
related Financial Disclosures
Tokyo Interbank Offered
Rate
total loss-absorbing capacity
units of measure
US dollar
value-at-risk
value added tax
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.
435
435
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
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.
(the SEC);
information
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 is available on the SEC’s
for more
website:
information.
to ubs.com/investors
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.
436
436
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 Securities
divisions and Group Functions; risk, capital and funding, and
and Exchange Commission
(the SEC);
information
for
balance sheet management; corporate governance, corporate
shareholders, including UBS share price charts, as well as data and
responsibility and our compensation framework,
including
dividend information, and for bondholders; the UBS corporate
information about compensation for the Board of Directors and
calendar; and presentations by management for investors and
the Group Executive Board members; and financial information,
financial analysts. Information is available online in English, with
including the financial statements.
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 on
ubs.com/presentations.
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 Executive
investor-services.html. Messages are sent in English, German,
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, filed
The annual and quarterly publications are available in .pdf format
pursuant to the US Securities Exchange Act of 1934. The filing of
at ubs.com/investors, under “Financial information,” and printed
Form 20-F is structured as a wrap-around document. Most
copies can be requested from UBS free of charge. For annual
sections of the filing can be satisfied by referring to the combined
publications, refer to the “Investor services” section at
UBS Group AG and UBS AG annual report. However, there is a
ubs.com/investors. Alternatively, they can be ordered by quoting
small amount of additional information in Form 20-F that is not
the SAP number and the language preference, where applicable,
presented elsewhere and is particularly targeted at readers in the
from UBS AG, F4UK–AUL, P.O. Box, CH-8098 Zurich, Switzerland.
US. Readers are encouraged to refer to this additional disclosure.
Quarterly publications
English.
How to order publications
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.
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, statements relating to the anticipated effect of transactions and strategic initiatives
on UBS’s business and future development and goals or intentions to achieve climate, sustainability and other social objectives. While these forward-looking
statements represent UBS’s judgments, expectations and objectives 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. Russia’s invasion of Ukraine has led to heightened volatility
across global markets and to the coordinated implementation of sanctions on Russia, Russian entities and nationals. Russia’s invasion of Ukraine already has
caused significant population displacement, and as the conflict continues, the disruption will likely increase. The scale of the conflict and the speed and extent
of sanctions, as well as the uncertainty as to how the situation will develop, may have significant adverse effects to the market and macroeconomic conditions,
including in ways that cannot be anticipated. This creates significantly greater uncertainty about forward-looking statements. The COVID-19 pandemic and the
measures taken to manage it have had and may also continue to have a significant adverse effect on global and regional economic activity, including disruptions
to global supply chains, inflationary pressures, and labor market displacements. Factors that may affect our performance and ability to achieve our plans, outlook
and other objectives also 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; (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 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 increasing 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 central bank policies 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) UBS’s ability to successfully implement resolvability and 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, or other external developments; (viii) UBS’s
ability to maintain and improve its systems and controls for complying with sanctions and for the detection and prevention of money laundering to meet evolving
regulatory requirements and expectations, in particular in current geopolitical turmoil; (ix) the uncertainty arising from domestic stresses in certain major
economies; (x) changes in UBS’s competitive position, including whether differences in regulatory capital and other requirements among the major financial
centers 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 sanctions, 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, data leakage and systems failures, the risk of which is increased with cyberattack threats from nation states and 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; (xxi) uncertainty over the scope of actions that may be required by UBS, governments
and others to achieve goals relating to climate, environmental and social matters, as well as the evolving nature of underlying science and industry and
governmental standards; and (xxii) 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 2021. 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
disclosed in text and tables are calculated on the basis of unrounded figures. Absolute changes between reporting periods disclosed in the text, which can be
derived from numbers presented in related tables, are calculated on a rounded basis.
Tables | Within tables, blank fields generally indicate non-applicability or that presentation of any content would not be meaningful, or that information is not
available as of the relevant date or for the relevant period. Zero values generally indicate that the respective figure is zero on an actual or rounded basis. Values
that are zero on a rounded basis can be either negative or positive on an actual basis.
436
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UBS Group AG
P.O. Box
CH-8098 Zurich
ubs.com